My earliest political memory is about a news headline announcing another crisis in Pakistan. A culture of reading the newspaper at home — we used to get everything from Dawn and Newsweek to Ummat — meant that there was rarely a dull week. Many years later, the story continues, with Pakistan facing in my view the greatest threat to national cohesion since 1971.
The economic crisis is driving angst among a young, increasingly urbanised population that is connected to the rest of the world through their phones. To stem the tide, the country’s ruling elite needs to restructure the economy. Given the paucity of time and the depth of challenge, there is only one option — shock and awe.
A sinking ship
Numerous governments over the decades have tried their hand at stabilising this rapidly sinking ship. Recurring crises, however, have made Pakistan a global basket case, with the lowest economic growth rate among a group of peer economies — Morocco, Indonesia, Bangladesh, India, Vietnam and Nigeria, to name a few. Compounding this problem is inflation, which has been the second highest, on average, among the same group. Pakistani citizens are sliding behind their peers, and they can see this play out, quite literally, on their phones.
This kleptocratic economy, hollowed out by a rent-seeking elite that prefers to either stash its wealth in unproductive plots or siphon it offshore, needs a shakeup. Changing things at the margins — providing more subsidies for exports, cheaper credit to industries, or offering amnesties to formalise capital — is not working, and is never going to work. There are too many interests and too many distortions to do this bit by bit.
What is needed is bravery and decisiveness by a government that is only here for a short time and needs to find a way to combat Imran Khan’s dominant narrative. Competing on Khan’s turf, which revolves around big rallies and a sustained dominance of the news cycle, is folly. What this government needs to do is showcase it can make tough choices and alter the status quo.
The need of the hour
The process should be kicked off with three big measures: rationalising energy prices, including petroleum and diesel, in a staggered manner, while simultaneously doing away with the policy of a prime minister setting these prices; aggressive privatisation of state-owned entities at fire-sale prices, if necessary; and fundamental reform of agriculture markets starting with wheat and sugar.
These steps will surely increase inflation, hurting millions of ordinary citizens, but their pain can be eased through direct benefits. To do this, the government must immediately mine digital identity data linked to things such as cars, travel, and property. In addition, digital identity data should simultaneously be used to open zero-balance bank accounts for ordinary citizens. Based on the mapping exercise, direct transfers to ordinary citizens must be exponentially expanded, providing direct relief to millions of households.
This amount can be financed by savings generated through the steps outlined above. Pakistan provides over $17 billion a year in benefits and subsidies to the few, at the expense of the many. Redirecting these resources over time to ordinary citizens is not only an economically sound decision, but also the morally correct one.
In addition, focusing on ensuring that citizens get direct benefits during these trying times in an election cycle may deliver electoral gains. The strategy of efficient service delivery is what has made India’s BJP’s a dominant force.
In his book The New BJP: Modi and the Making of the World’s Largest Political Party, author Nalin Mehta narrates how a senior BJP leader in Uttar Pradesh recounted that while “Hindutva is like the elephant’s teeth,” efficient service delivery through welfare payments is “the wheel that makes it all run”. Local engagement by the BJP to ensure that citizens down to the village level receive direct benefits from the government has led to increasing levels of support for the party, especially among women and economically marginalised communities.
These reforms may inflict near-term political costs and up the pressure on the government, given that no reform is without an initial phase of pain. However, this can be easily navigated, especially if government legislators proactively engage at the local level to ensure constituents are signing up for zero-balance bank accounts and getting the benefits they deserve.
Critics may allege that this is merely an expansion of patronage and that there will be leakages. This concern can be easily addressed by digitising and automating the approvals process for recipients. This is not rocket science and the government has the tools to do this at scale. There may be data issues at the start, but these can be resolved along the way.
Such a strategy will provide the current government an alternative narrative to offer citizens in the run up to the elections. The direct relief offered to the many, while pursuing robust economic reforms that set the economy on the right trajectory, can bring about the political and economic stability Pakistan so desperately needs.
Without this, there is likely to be a lot more pain and turbulence for the entire country. While Pakistan’s is nowhere close to the tragedy unfolding in Sri Lanka, the island-nation’s descent into chaos should serve as a warning call. When elites fail to decisively deal with successive crises, the situation becomes more and more complex, and eventually births a firestorm that wipes decades worth of progress.
Given the rapid evolution in the globe, including the emergence of a multipolar geopolitical system and a tightening global monetary environment, Pakistan needs to get its act together, fast. Shock and awe reform is the only plausible way to emerge on the other side of this crisis in better shape. The Sharif government and its allies should not let this crisis go to waste.
Header illustration: JeremyCulpDesign/ Shutterstock.com