IT’S been a long cold winter, but as the old song goes: here comes the sun. Here in Washington D.C. a record winter is finally retreating, having given us record snowstorms and even a ‘polar vortex’, a climatic anomaly that we only see once in a generation. Finally the sun has made an appearance for the first time today as these words are written, and the cherry blossoms are beginning to bloom.
At the spring meetings of the IMF and World Bank too, the winter of the global recession is seen to be in retreat and a new spring is being hailed. “I think our spring meetings come at a good time,” said one senior IMF official in public remarks. “With the global economy recovering, with the risks reducing, it gives us a chance to have the whole international community come together and talk about how they can all cooperate and strengthen recovery and make it more durable.”
Contrast this with the gloom that has defined the mood at the spring meetings for almost half a decade now. The theme is optimistic, and whereas there is talk about the ‘remnants of the crisis’, overall the global economy is seen by most institutional observers as being in recovery.
As Finance Minister Ishaq Dar arrives in the midst of the springtime flowering, he brings with him a story of a spring all his own. Just before departing for Washington D.C. Dar met a group of Canadian business community leaders and their counterparts in Pakistan, as well as Canadian lawmakers in an event held in Islamabad.
He reportedly told those at the event that the Pakistani economy was beginning to turn the corner. He cited the clean chit of health issued to Pakistan by the IMF in its latest review, as well as renewed investor confidence, which he attributed in some measure to the appreciating value of the rupee.
The timing is important. The message given in the talk, of green shoots and a new springtime in the economy of Pakistan, is going to be his message for his scheduled series of talks in Washington D.C. where everyone is asking the same question: is it sustainable?
Few voices are now denying that some kind of a turnaround is indeed under way. The State Bank opened its last monetary policy announcement with these words: “Almost all major economic indicators have moved in the desired direction in the past few months.”
The IMF, in a conference call held at the end of March, also peppered its assessment of Pakistan’s economy with phrases like “overall economic situation in Pakistan is gradually improving” and “indicators of growth … are relatively strong” and “Inflation … better than we had anticipated” and the balance of payments had “begun to see a turn”. And so on.
But important caveats are everywhere. At the spring meetings for instance, the big question permeating many conversations is when the Federal Reserve will begin to taper off the extraordinary measures it has put in place since 2008 to support the economy. The implications of a “fed taper” are huge, and some argue the early effects are already being felt in countries like India, South Africa, Indonesia and Brazil.
A very large question mark hangs over the optimistic outlook that some are allowing themselves, and everybody is aware of this. That’s not surprising though. The times are highly uncertain, and questions remain whether the world economy has genuinely pulled out of the recession and left it behind, or whether it is in the midst of a temporary upswing of some sort which will end quickly once the encouragement from the Federal Reserve begins to abate.
Likewise, caveats abound regarding Dar’s spring. Since none of the underlying structural defects of the economy have changed — not the tax-to-GDP ratio, nor the heavy dependence on imported oil, nor the large subsidy bills, nor the circular debt, and the military just got a big boost in the last budget — since all is as it was in years past just beneath the surface, many here are asking: can it last?
Here’s how the IMF puts it as an example: “risks to the outlook remain tilted to the downside. Security concerns remain a critical risk factor … There continue to be significant risks to the balance of payments” and so on. The State Bank too has its concerns, particularly where currency management is concerned.
So here’s some advice for Mr Dar while he’s here in D.C: listen carefully to how the recovery in the global economy is being talked about, and notice how every expression of optimism is carefully tempered with an acknowledgement of the risks. Then formulate your own story with equal care: yes things have improved, but we are all interested to see how you acknowledge the risks, where you lay the emphasis when you talk about them. There is a broad consensus that Dar’s spring is real but running on borrowed time, and it’s important that he speak to that concern while he’s here in Washington D.C.
Even with the cherry blossoms blooming, everybody is wary of another cold spell that could come in suddenly. It’s been a long and cold winter, and even now people are cautious about welcoming the spring.
The writer is a business journalist and 2013-2014 Pakistan Scholar at the Woodrow Wilson Centre, Washington D.C.
Twitter: @khurramhusain
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