Panama leaks and the economy

Too much of a bad thing

Surely the N-league has enough brain power to realise that the uncertainty from the Panama leaks can damage not just the ruling party but also the country’s economy. In addition to the Mian family’s own business/financial acumen, there’s always the founder of Darnomics and, of course, Wharton grad Ahsan Iqbal. And it’s strange, to say the least, that they can erect fortunes out of nothing, introduce one economic novelty after another and present grand programs of prosperity (Vision 2020, etc), but they can’t see how their strategy of survival is in fact hastening their – and the economy’s – decline.

Investors avoid uncertainty like the plague. Much of the N-league knows it because the party is dominated by the monied industrial class. Yet in reacting to the Panama leaks incident, its only strategy seems dragging the build-up to the investigation as much as possible. True, that brings the election within sight, but it also paralyses the economy. Some say Nawaz will have to go; others say there’s no way he’s going; while another group says that the first family has contradicted each other so many times that it is already neck deep in trouble.

It bears remembering, of course, that the economy has just achieved an unimpressive 4-point-something percent GDP growth – far less than projected – and exports and taxes still contribute as little to the kitty as they did before the present electoral cycle. With the economy slow and the government’s survival in question, not many sharp investors would like to park their money in Pakistani markets. The state bank has tried to do its bit by slashing the interest rate to another record low. But this is not the first time they have taken such an unprecedented step; yet the benefits are yet to follow. Whatever easy money was available was easily gobbled by the government because of its addiction to borrowing. And now that the IMF program is over and the government needs to spend ahead of the budget, it’s not too hard to imagine where the increased solvency is likely to go. The leaks are clearly already harming the economy.