IN October this year, a World Bank report commented on the impact of the anti-government protest drive by Imran Khan’s Pakistan Tehrik-i-Insaaf, insisting that “political events following the mid-August long march and sit-ins have affected the economy”.

But the report stopped short of making any guesses about direct or indirect losses to the economy caused by the protests, but pointed out that it had slowed down the reform momentum under the balance-of-payments loan agreement with the International Monetary Fund.

“The political volatility (has) raised questions about how much the business-prone and investment-friendly image that Pakistan was carefully building has been tarnished and how quickly the reforms momentum could be recovered,” the bank said.

Economic policies grow out of political vision — economist Ali Kemal

Indeed, the political instability created by the PTI protests had delayed the launch of the Sukuk bond, implementation of the privatisation agenda and the adjustment of energy prices. More importantly, the IMF also delayed the release of the loan instalment of $550m, momentarily bringing pressure on the exchange rate.

The government flagged the report to support its view that Imran Khan’s protest was damaging its effort to turn the sliding economy around and bringing investment and creating jobs in the country. Its ministers blamed the protest in Islamabad for the cancellation of a visit by China’s president and the delay in the signing of agreements that the government hoped will bring multi-billion-dollar public and private Chinese investment to Pakistan.

But since then, most of these ‘losses’ have been recovered and reforms have been put back on track.

“You can find the footprints of politics in every sphere of economic activity,” says Lahore-based financial analyst Shahid Zia

“There is no doubt that political uncertainty and volatility affects the economy in many ways. Governments delay economic decisions, especially the tough ones, to ward off political fallout, while businesspeople put their investment decisions on hold,” argues Salman Shah, who worked as finance minister under Pervez Musharraf.

“Inside the sphere of political economy, you have to make many adjustments. When you’re forced to make major compromises and delay the implementation of crucial [but politically unpopular] decisions because of political uncertainty or volatility, the economy and the people have to pay a heavy price for that,” Shah pointed out.

“It is always very important to take the right decision at the right time to grow the economy, create jobs, attract investment and reduce inequality.”

It is difficult to measure the losses to the economy caused by political uncertainty, but many businessmen say the protests didn’t do much damage to business.

“I think the only direct losses that businesses suffered was when the Punjab government locked down the entire province for several days to prevent the protestors from reaching Lahore, impeding the movement of goods from one city to another and delayed our overseas shipments,” said an auto vendor who spoke on the condition of anonymity.

“It is always the violent protests and the shutter-down strikes that affect business. Since political protests have by and large remained peaceful, the impact on businesses has been minimal,” he added.

Others agree, but say politically volatile conditions could cause massive indirect losses to the economy, some of which are unrecoverable. “Continued political uncertainty in the country is bad for the business and economic outlook, and increases the cost of doing business,” a home textile manufacturer from Faisalabad said.

“Our foreign buyers are already reluctant to come here because of terrorism. Now, the protests and calls for shutdown in major cities, however peaceful those may be, are adding to their worries about the reliability of Pakistan as a supplier. It is only a matter of time when indirect losses convert into direct losses,” he concluded.

Economist Ali Kemal says politics and economy are inseparable. “Economic policies grow out of political vision. Hence, we see politics influencing economic decision-making everywhere. The government’s decisions to protect the [inefficient] car industry, subsidise electricity prices and support agricultural prices etc are all political in nature,” he said.

Shahid Zia, a Lahore-based financial analyst, says: “You can find the footprints of politics in every sphere of economic activity”.

“It is because of the political clout of the large lobby of growers that the provincial governments are reluctant to tax agricultural income; no political party can afford to alienate them. If successive governments have balked at the idea of bringing traders in the tax net, it is because they possess the power to pull down shutters and paralyse life.

“The powerful textile manufacturers can influence policymakers to get gas even in winter for their factories because they have political clout. The small industry has to close down because of gas shortages as they cannot approach the people who matter in the government.”

Published in Dawn, Economic & Business, December 29th, 2014