As Pakistani cricket fans, many of us are used to seeing calamity in slow motion. It’s usually when batters aren’t able to find gaps and the required run rate edges up, triggering a collapse of the batting order and the dream of winning fades as you helplessly stare into despair. This is what our economy also currently feels like: the disaster is right in front of us and it’s not possible to look away.
Like always, this crisis is also manifesting in the form of an extremely unstable external account, where the existing forex reserves aren’t sufficient to cover even a month of imports.
Meanwhile, exports and remittances have declined year-on-year for two months, and there is virtually no meaningful foreign direct investment in the near future, even if the International Monetary Fund (IMF) thinks otherwise.
Unsurprisingly, that has created panic everywhere, from average folks like you and me to those overlords idly sitting in government offices. Except apparently, Ishaq Dar, who finds it wise to jeopardise the IMF programme.
It’s like Rahat Ali sledged Shane Watson after dropping him, and with that, Pakistan’s possible ticket to the semifinal in the 2015 cricket world cup. Fortunately, the former left-arm medium pacer had more sense than the honourable finance minister on how to conduct himself, even if both were (are) fairly sloppy at their actual job.
Anyway, let’s not digress and turn back to the topic. In the past, whenever we had similar episodes, the blueprint was pretty similar: devalue the rupee, impose restrictions on imports, particularly luxury goods like chocolates, remove subsidies on a few items, and try to get some bilateral and multilateral funding. Sure, these were bandaids, but you lived to see another day, even if it caused a little inconvenience.
This time, the panic is so much that it’s halting the very engine of the economy. News of businesses struggling to open letters of credit for raw materials is familiar to everyone, as is the shortage of dollars in the open and interbank market.
How does the State Bank think tech-enabled companies will acquire new users, if not through paid digital marketing that requires the now suspended direct carrier billing?
Now, it has come to haunt the still nascent digital economy. For example, a few weeks back, the State Bank of Pakistan effectively suspended direct carrier billing (DCB) — the payment channel allowing you to pay for services directly from mobile airtime — after discovering the misutilisation of a facility meant for personal IT services on the part of telcos.
With this, it essentially blocked how a majority of Pakistanis pay for their apps, from Spotify subscriptions to those coins on Candy Crush. According to sources in telco, the total spend on Google Play from the country is around Rs590 million a month, with DCB accounting for 70-80 per cent of it.
Perhaps you could make a case that it’s still possible to listen to songs on YouTube and just play those games without making purchases. But what exactly do people earn for if they can’t even indulge in the most basic forms of entertainment?
For a moment, let’s even concede to the argument and keep intact the ban on foreign apps, which inevitably leads to dollar outflows. What about Pakistani products, such as Islam360 or the streaming platform Tamasha, which are driving forward the country’s digital economy? Should people stop using them too? After all, whatever the developers earn, they have to pay Google its share, which again requires remitting funds abroad.
It’s already extremely difficult in Pakistan for developers to monetise their apps as the ad rates are extremely low. That leaves subscriptions as the primary revenue stream, where DCB is the most popular payment channel. As if this wasn’t enough, now the iron curtain is coming for tech companies paying for digital marketing via Google, Facebook or other platforms.
According to a report by ProPakistani, Meta’s sales partner in the country, Dial Zero, has been unable to send ad payments to the social media giant due to clearance-related issues. Even small business owners who pay via their own credit cards are reporting declined transactions. Now, is using marketing to expand your business a luxury too?
How does the State Bank think tech-enabled companies acquire new users, if not through paid digital marketing? Or should they put up billboards on Shahrae Faisal for 10x the money and 0.1x the customers for the sake of national interest?
Statista puts total digital advertising spend from the country at $106 million for 2022, a number that’s coming on the back of thousands of companies and close to half a million workforce. Every month, we see 70+ new e-commerce entities being incorporated, while a far higher number operate without registration.
Many of them are small brands promoting home-grown goods, from t-shirts to cheese, thus promoting the “Made in Pakistan” brand. There is one thing they all have in common: an overwhelming majority of their sales come from social media channels.
Maybe we do need to cool down an overheated economy and this is just the price to be paid (it’s not), but what about exports? Don’t we desperately need dollars right now? And weren’t IT services the lowest hanging fruit — the messiah to take Pakistan out of this mess? Guess what? Those proceeds require companies to first spend some money on marketing, which brings in leads and then converts them into clients.
At this point, the government machinery should probably just shut down the economy in one go instead of killing it with a thousand cuts. Why not just block access to all fuel, ban medicine and food imports and let the Malthusian catastrophe do its job since the men in power are ill-equipped to do theirs? That ought to eliminate all our problems.
Published in Dawn, The Business and Finance Weekly, December 19th, 2022