Pakistan army steps in to repair tattered economy, experts say it's likely to fail

In a desperate attempt, Pakistan's military leadership has stepped in to tackle the economic crisis, which is fuelling protests across the Islamic nation. Pakistan's social fabric has been hit, with the poor suffering the most from skyrocketing food and fuel prices.

Pakistan's army chief General Asim Munir on Saturday held a series of meetings with 50 prominent businessmen after protests by traders over soaring prices. In Pakistan, the all-powerful army has regularly been meddling in politics, but this kind of systematic interference in economics is rather new. Pakistani economists and experts IndiaToday.In spoke to are, however, skeptical about the military leadership’s role in trying to shore up the economy.

“We are on an IMF (International Monetary Fund) programme, and it requires a lot of stakeholders onboard for success. If the army chief is willing to play this role, fine. But ultimately it is not helpful for any state institution to go it alone when there are going to be painful economic consequences,” Haris Gazdar, senior researcher at Karachi’s Collective for Social Science Research, told IndiaToday.In.

On July 12, the IMF approved a $3-billion bailout package for Pakistan, saving it from defaulting on its debt repayments. But it attached stringent conditions which forced Pakistan to cut back on fuel and power subsidies, making them pass on to hapless citizens. The condition of Pakistanis, already reeling due to runaway inflation and a nose-diving currency, has turned precarious.

Another economist, on condition of anonymity, said nothing should be expected from the military’s initiative. General Asim Munir assured the businessmen that the military leadership was making an all-out effort to bring in foreign investment worth billions of dollars.

“Nothing will happen,” he said, adding that the military’s understanding of the economy was “pedestrian at best”. The expert called General Munir’s assurances “A lot of bluster without anything substantive to back it with”.

The Pakistan army chief was also part of a panel on the economy in the government of former Prime Minister Imran Khan.

PAKISTAN BANKS ON FOREIGN INVESTMENT

General Munir told the businessmen during his four-hour-long meeting that Saudi prince Mohammad Bin Salman had assured him of investing $25 billion in Pakistan, the Dawn reported on Tuesday. The newspaper also said that General Munir expressed hope of securing investments from the UAE, Qatar and Kuwait.

Asad Sayeed, economist and researcher at the Collective for Social Science Research in Karachi, sounded ambivalent about the buzz of foreign investment in Pakistan.

“Some (foreign investment) may come through in the oil/gas exploration sector but not in agriculture or mining. We don’t see any background work done around these and there are too many interests that will create hurdles,” Sayeed told IndiaToday.In.

Asad Sayeed said Pakistan should stop chasing “magic bullets” to fix its economy.

“Rather than chasing sillver bullets, such as FDI from the Arabs or the Chinese, what is needed is structural reforms in taxation, energy, allocation of resources for export enhancement, among others," he said.

PROTESTS ACROSS PAKISTAN

Protests over high electricity charges, which started in Pakistan-Occupied Kashmir (POK) in August, spread like wildfire across Pakistan, from Karachi to Khyber.

In the last 16 months, Pakistan has seen record inflation and sky-high food and fuel prices.

The protests were of such magnitude that it jolted Pakistan's interim Prime Minister Anwarul Haq Kakar to convene an emergency meeting and seek ways to lessen the woes of the people.

But amid the outcry over soaring electricity charges, came the hike in the prices of petrol and diesel. For the first time in Pakistan’s history, petrol and diesel prices crossed the Pakistani rupee 300 mark.

Traders and businessmen then joined in the protests over high living costs.

The severe effects of this extraordinarily high inflation rate on the standard of living for Pakistanis are extremely disturbing. It has resulted in serious problems with malnutrition, a fall in the standard of living, and a discernible rise in poverty rates.

There are many obvious signs that societal structure and daily life are being impacted by financial strain.

"Teachers at non-elite schools report a spike in marital strife, domestic violence and mental illnesses. Some students have confided in school counsellors of having suicidal thoughts," Pakistani writer Moni Mohsin said in an Opinion column in The Guardian in March.

The economic crisis is also fuelling an unprecedented brain drain. Pakistan has seen a record number of over 8 lakh people leaving the country in just the first six months of the year. Of them, a lakh were highly trained professionals, including doctors, nurses, engineers, information technology (IT) experts and accountants.

REASON BEHIND PAKISTAN’S ECONOMIC MESS

Historically, Pakistan's imports have been more than its exports.

Pakistan’s economy tanked because for the last 40 years, it depended on the world to finance its deficits and did not build enough capacity for exports and substitute its imports, said economist Asad Sayeed.

“In other words, it lived off geo-political rents. For good or for bad, these rent avenues have now dried up,” added Sayeed.

Pakistan, with an eye on India, has also spent heavily on its defence sector. Will a cut in that help?

“There are already cuts in real terms, but it is hard to see massive cuts in any element of government spending which is dominated by emoluments to employees,” said Haris Gazdar.

Pakistan’s economic crisis has been decades in the making. But its human cost is just emerging. According to accounts on social media, high prices of essential items are forcing children to drop out of schools and families to cut back on food.

But is the intervention of the military leadership a good sign for Pakistan and its people?

“It is not wise for the simple reason that the failure to improve things will bring all the blame on the army rather than the politicians or the civil bureaucrats,” said the Pakistani expert who didn’t want to be named. “Also, because the army’s understanding of economic issues is pedestrian at best and all it can be termed good at is in preserving its own rents.”

The military leadership, along with the politicians, has been blamed for cornering a lion’s share of the financial aid that had been reaching Pakistan. Now, ironically, it is the same leadership that is trying to sew together an economy which is in tatters.