It is a bit dangerous and risky when governments start reading only one side of the equation while ignoring the other side that does not suit them. Today we see such a risk being assumed by the Pak government when they talk about: a stable Pak Rupee, but not about the declining exports; higher foreign exchange reserves, but not about the corresponding or perhaps a higher growth in national debt; new generation projects like the Metro, Orange Line, etc, but not about the failing public delivery standards in education and health; and last but not the least, about its services to democracy, but not a word about its inability to assemble a competent economic team.

I have time and again maintained that while it is heartening to note the recent confidence being posed in our economy by important international lenders like the International Monetary Fund (IMF), World Bank (WB), Asian Development Bank (ADB), and others, and by rating agencies such as the Moody’s and Standard and Poor (S&P), but unless we can correct the underlying malaise - by now deeply embedded in our economic system - real and sustainable economic progress (small or large) may not be forthcoming. As is quite obvious by now, the recent external credit principally received from the IMF, the WB and the ADB, has failed to revitalise the economy. What Pakistan today needs is a realistic level of devaluation, both in its currency and in the price-level of its exportable surplus. Trying to lower prices and wages in absolute terms (for example, by slashing wages) would be very difficult, as it would inflict a lot of pain on the working class where already savings’ margin is non-existent. It would arguably be better to achieve this by proactive initiatives from the government on currency rate adjustments, lowering of interest rates and in providing a working environment conducive to driving industrial synergies and efficiencies. As an example, how India and China, who today find themselves in more or less a similar position, are going that extra mile to facilitate home manufacturing and domestic industrial investment in their respective countries – Modi Sarkar has recently unleashed a plan to raise the share of manufacturing in India’s GDP to as high as 25% by the year 2020.

The trouble at home with this artificial hike in our products’ price levels is compounded on two fronts, One: sheer governmental inefficiency on economic governance and Two: to a large extent by the freely prevalent corruption in the system. What we unfortunately see today is a rapidly growing undocumented sector mainly thriving at the expense of the documented one, and a naked tolerance for the corrupt in our society instead of putting them to shame. This in economic terms means a consistent gush of unaccounted for money supply in the system that prevents the necessary devaluation of an overpriced economy and in-turn also unrealistically pushes wages and price levels to a point beyond the competitive level - A low inflation as we know helps competitiveness by allowing the wages to remain under check vis-à-vis regional/global competitors. From a regional competitiveness perspective, Ireland perhaps presents the best recent example where post 2008 financial crisis the Irish tightened their belts and underwent a drastic internal devaluation by cutting wages and driving national competitiveness, which in-turn led to lower prices for Irish goods both in absolute and relative terms. This made the Irish economy competitive again in the Euro-Zone.

Then of course there is this matter of mounting national debt, which is by now reaching worrying proportions. If not checked and provided its spending is not prudently monitored, it can lead to unsustainable levels, just as not too long ago happened with Argentina where also the macroeconomic policies being demanded by global financial lenders led to an even deeper depression. To make matters worse the rationale behind many of the key structural (liberalizing the markets) reforms is also not been explained well, either to the Pakistani public (especially the farmers) or to economists trying to understand it. Structural reforms, without first adequately preparing the home players, basically mean that large scale producers from abroad will end up trouncing the small-scale Pakistani producers. In theory, Pakistani consumers may benefit from lower prices (even if they suffer from low quality) but in practice, developing countries’ retail markets are far from being perfect, meaning, there is no guarantee that lower priced imports will actually be passed on to the consumers. However, the full story does not end here, since in an economy like ours where the financial system is not functioning well, where small and medium-size enterprises can’t get access to credit and where the government is more focused to use coercive measures to enhance tax collection from existing taxpayers than endeavouring to broaden tax base, the overall repercussions can be profoundly more grave, especially on employment generation. And this is something that Pakistan with its bulging young population can ill afford.

Lastly, to the fact that owing to some poor economic management by the PML(N) leadership, Pakistani exports are declining sharply and this in essence implies that Pakistan’s competitiveness as a manufacturing base is fast eroding. If this decline is not timely arrested the biggest sufferer will be our average worker. Developing countries basically convert the advantage of abundant and cheap labor into low cost goods, which they then export to the developed world. Loss of our export markets means that we are losing our capacity on employability to our competitors like Bangladesh, Myanmar, Vietnam, and India, all of which have incidentally posted growth in their exports. What the government needs to ensure is that economic activity per se gets generated and that profits return to a struggling organised cum documented sector, as only this can see to it that investment returns to manufacturing ventures that in-turn prop up export led growth and provide desirable opportunities for employment. The concern is that there is not much time on hand; history of global trade is full of lessons advising on how markets once lost can either simply get elusive or else extremely difficult to win back. And even if one does succeed to re-capture lost sales, the process tends to be painfully slow and time consuming!