IT’S a misnomer to attribute economic security to one particular institution or allocation of budget and resources. Economic security is synonymous with our people’s welfare and development to me.

All economic policies and actions should be driven in one direction alone, that is, the prosperity and welfare of our people. Without our people’s security and well-being, no economic security can be achieved. Therefore, economic security and people’s welfare are one and the same thing and inextricably connected.

The risk to Pakistan’s economic security emanates from a host of constituencies, including debt accumulation and lopsided wealth distribution, international politics and trade, unexploited and misallocated resources, climate change, and weak governance structures.

Today’s global economy is more interconnected than ever, running on internationalised financial markets and globalised supply chains managed by multinational corporations moulded by trade agreements and international economic organisations — all underpinned by a hitherto unseen free flow of information.

Actions and events in one part of the world have rippling consequences in many others. Against this backdrop, ensuring economic security is no longer merely an option but an imperative to safeguard our national interest.

By fixating on macroeconomic issues, policymakers often lose sight of the microeconomic challenges, which are more impactful at the individual level

Across the world, economies at various stages of their development journeys are facing the dilemma of public debt rising in tandem with private wealth, and that also concentrated in a few hands — over $42 trillion in new wealth has been created since 2020 until mid-2021, with $26tr, or 63 per cent, of that being amassed by the top 1pc of the ultra-rich.

It suggests that the pace at which wealth is being created has sped up, and so has its concentration, as the world’s richest 1pc have stashed around half of all new wealth over the past 10 years. This is very alarming development, particularly for the countries like Pakistan, where the rent-seeking, subsidised industries are resulting in sovereign debt accumulation, which has snowballed in recent decades.

This debt stacking is fundamentally a consequence of the confluence of structural deficit and the cyclical nature of economies. The structural deficit remains across the business cycle because the level of government spending exceeds the taxes collected, regardless of whether there is a recession. This demands a paradigm shift in the way we conceptualise and enact economic policies.

A re-thinking of the balance between monetary and fiscal approaches — informed by comparative, historical, and transnational perspectives — is essential. A phenomenon not just confined to Pakistan but true across the globe — the economic policies set up over the past 10 years may not be relevant now in the fast-changing world realities. Perhaps a progressive social agenda of inclusivity and tolerance based on the redistribution of wealth is the need of the hour.

Geopolitical uncertainties, exemplified by China’s elaborate foreign-policy footprint and its mercantilist industrial policy, have precipitated an implied, and not so implied, economic conflict with the USA.

On the other hand, the war between the world’s largest and fifth largest wheat exporters (Russia and Ukraine) and the increasing prevalence of “bottleneck” export products (goods having few suppliers but substantial market share, estimated by World Trade Organisation to comprise 19pc of global trade now) necessitate a swift transition from “import substitution” to “import indigenisation” for the developing world.

Although the interests of the multinational private sector lie in sustaining global supply lines, political risks invariably creeps-in, and suppliers aren’t bound to play with the strict rules of the game, leaving countries like Pakistan, who are dependent upon imports for their essential food and energy items, vulnerable to a very high politico-economic ethical risk.

Proactive nations like Japan, Australia, and India are observed have passed legislation designed to mitigate these risks, underscoring the urgent need to successfully navigate the intricate global political risks in the Asia Pacific region. This has also evoked the G7’s renewed attention to collective management of economic and supply chain risks since 2021.

Challenges in our region exist well beyond international politics and trade dynamics. Majo­ri­tarian Commu­nalism in the region (South Asia plus Gulf Coope­ration Council countries) impacts over two billion people. In the Gaza Strip, the Palestinian death toll has crossed 15,000, with the majority being women and children and almost 1.6 million people have been displaced since 7th October. Nearly 742,000 internally displaced persons are now sheltering in 151 UN installations.

Concurrently, the under-exploitation of available resources, natural reserves and databases, coupled with the imminent threat of climate change, exposes us to further economic security risks.

These facts underscore the necessity for recalibrating our existing free trade agreements, which are no longer just a matter of political considerations, as they’ve evolved into a vital aspect requiring a clearer quid pro quo that aligns with tangible and intangible benefits, notably climate compliance benchmarks, and development of the local industry to achieve economic security.

Shifting our focus to Pakistan’s internal landscape, a weak governance system marked by (among other things) a deficient public-private partnership (PPP) framework, insufficient specialised institutions, and a lack of independent regulators demand urgent rectification.

Establishing a formalised social security and protection system is not just a policy option but an essential prerequisite for fortifying our economic resilience against these challenges.

Population dynamics reveal a delicate balancing act is required in modern policy design. With high birth and death rates, Pakistan stands at the 161st spot out of 192 states on the Human Development Index. At around 66 years of life expectancy at birth, two-thirds of the youth bulge population is a ticking time bomb if not corrected and channelised well.

Human development, especially in the contexts of health (stunting, pandemics), education (skill development, basic quality), and gender inclusion (work environment, pay gaps), needs to become a major driver of policymaking in the economic security context.

The need for a decisive stance has become apparent. By fixating on macroeconomic issues, policymakers often lose sight of the microeconomic challenges, which, arguably, are more impactful at the individual and economic security levels.

As such, immediate attention is required to alleviate constraints on access to finance caused by regulatory hurdles and bureaucratic inefficiencies. The key lies in embracing risk-taking ventures in sectors like agriculture, technology, exploration and production, including mining and logistics, eschewing the traditionalist cultural and social mindset barriers that cause risk-aversion and rent-seeking — instead setting the stage for sustained and real economic vibrancy.

Support for social entrepreneurship must come from the government, be it in the form of PPP framework development, investments in health, education, and climate, liberalisation and privatisation frameworks, promoting research and development, or through the direct provision of early capital for startups.

Pakistan’s economic security demands not a passive acknowledgement but a series of active and decisive responses. The interplay between macroeconomic policies, governance reforms, and the promotion of entrepreneurial endeavours will determine the trajectory of national development in the rapidly evolving global landscape.

The determinants of economic security exist at the convergence of global trends and national considerations. It is time to transcend mere observation and undertake bold, strategic actions under a balanced approach to fortify our economic foundations and safeguard our people and nation’s prosperity.

The author is President and CEO of The Bank of Punjab

Published in Dawn, The Business and Finance Weekly, December 4th, 2023

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