Tabahi ka nuskha hai (it’s a recipe for disaster); tabdeeli ka tohfa (gift from a party that promised ‘change’); picture abhee baqi hai meray dost (more is yet to come, my friend); mar jaen tau achha hai (it’s better to die). These are just a few responses from the members of a WhatsApp group as people vented their helplessness shortly after someone posted in that space the finance ministry’s order increasing the oil prices on Saturday morning.

As you scroll down further you find an opposition parliamentarian complaining that she couldn’t cook breakfast that morning because there was no gas in the pipes. The conversation becomes much more intense (or does it?) among the consumers posting news of the increase in power prices alongside a federal minister’s statement predicting the resolution of the almost two-week-old standoff between the Imran Khan government and the powerful military establishment over the appointment of new chief of the Inter-Services Intelligence, with many insisting that the ‘party is already over for the ruling party’. That may be stretching things a bit too far but the prime minister and his party are surely in for a ‘winter of massive discontent’.

Indications are that the PTI government’s pro-cyclical growth strategy has already started unraveling even before taking off

The ‘growth party’ that started six months ago with the induction by the premier of Shaukat Tarin in place of Abdul Hafeez Sheikh is now being wound up — slowly but surely — as the country moves back into the International Monetary Fund programme (IMF) after a ‘recess’. The gamble of using Pakistan’s ‘enhanced leverage’ over Washington and other western capitals after the US pullout from Afghanistan and the Taliban takeover of the war-ravaged nation has failed to help Islamabad secure the expected concessions from the IMF and cash from Americans — at least until now. In order to secure more multilateral dollars as well as the IMF endorsement to show off to the international investors for raising fresh debt to keep the economy afloat, Shaukat Tarin has agreed to do what he said would kill growth and unleash inflation: raise the base electricity prices by Rs1.39 a unit.

Addressing a news conference, energy minister Hammad Azhar said the decision was taken during a meeting with the World Bank management. Justifying the decision, he said the increase in power rates had been necessitated by the expensive power projects contracted by the previous government — much beyond the country’s needs. “Yet, we have not increased tariff as much as the international lending institutions insisted,” he said.

The government’s defence of the power tariff increase seems rich, considering its claims and the impact of its economic policies over the last three years. The IMF wanted a Rs3.35 per unit increase in March but the government did not allow it and instead increased only Rs1.95per unit.

The remaining Rs1.39 per unit increase was delayed till now.

The SPI (Sensitive Price Index) inflation reading for the last week shows that the index, which monitors price movements of 51 essential items on weekly basis, has soared by 12.66 per cent in one year. The new energy price increases will further fuel inflation in the country, putting more financial stress on the low-middle-income households that have seen their real wages shrink rapidly under the PTI administration. Quite unsurprisingly, the government is again trying to divert the attention of people from their increasing cost of living to its unproductive, meaningless actions against the sugar mill owners. But these gimmicks seldom pay off.

“People will not have gas to burn, and money to buy electricity and put food on the table this winter. Will they care if Imran wins or loses his battle over the appointment of ISI chief?” remarked a pro-PTI corporate executive on social media.

With Islamabad back into the IMF fold in the next several days or weeks, we may see the electricity rates go up again and again in upcoming months along with the government raking up loans through euro bonds and sakuks to shore up its foreign exchange reserves and support the home currency that has already depreciated to more than 171 to the dollar and is forecasted by Fitch Ratings to go down to 180 a dollar in 2023.

Both the central bank and the finance ministry have already moved to slow down the pace of economic growth engineered in the last one and a half years through their expansive monetary and fiscal stimulus as rapid import growth brings new pressures on current account imbalances. The SBP has repeatedly boasted of its ‘historically high’ debt-based foreign exchange reserves in recent months. But practically the stocks are good only for three months of imports — like at any given time in the past.

Indications are that the PTI government’s pro-cyclical growth strategy has already started unraveling even before taking off. The reemergence of imbalances in the country’s macroeconomic framework is forcing the policymakers to retract their steps and knock at the IMF doors. Like its predecessor, Imran Khan’s PTI too has expectedly failed to prove that it can forge and sustain growth with pro-cyclical policies and trade deficits without actually tackling the longstanding structural issues facing the economy. The ruling party cannot say it wasn’t warned — well in time and repeatedly.

Published in Dawn, The Business and Finance Weekly, October 18th, 2021



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