These pearls of wisdom come from a well-known journalist, and a friend, and my first thought thereafter was that, if this is what our leading opinion makers sincerely believe, no wonder we are fished; and he is definitely not the only famous media celebrity who sincerely believes this nonsense. Except that, I completely agree with his last sentence, since nobody understands the economy, and most everyone is convinced that because of the bomb we are immune to financial crises for some strange reason, the economy definitely does not factor in during elections. Frankly, if having electricity 24/7 at homes is a condition precedent to get votes from the populace; it really does not bode well for the system referred to in normal parlance as democracy!
In brief, to borrow from a popular quote with a bit of modification since friends don't call friends stupid: it matters my friend. One of the primary reasons why economic forecasting is not an exact science, and why the majority of economists failed to predict global financial crises repeatedly, is that an economy is a complex system. Ever hear about the butterfly effect? How the flapping of a butterfly's wings a thousand mile away can cause a hurricane; except every time a butterfly flaps its wings it does not result in a hurricane and not every hurricane has its origins in a butterfly flapping wings. A hurricane can come from anywhere, and just because you can't predict when, where and how does not mean there won't ever be another hurricane.
Similarly, predicting the exact day and hour of a financial crises is, "like trying to hit a bullet with a smaller bullet whilst wearing a blindfold, riding a horse", from the movie Star Trek. Economic collapses come in stages, over years, or decades, and include times when all is quiet on the western front; and they don't come with a bang or fanfare, they are more synonymous with a whimper. Before you know it, they are on you.
Unfortunately, it appears that we are already entering the eye of the storm; based on certain budget numbers. During 2008-9, the country's debt servicing for the year amounted to approximately Rs 847 billion which was 69% of total federal revenue receipts; leaving sufficient funds to cover the defence budget of Rs 311 billion. For the year 2016-17, Pakistan's debt servicing, including some payments on account of contingent liabilities, were approximately Rs 2.39 trillion which was 91.5% of total federal revenue receipts; the left over balance barely covers 20% of defence costs. For the record, at the end of June 2009, Pakistan's total debt and liabilities stood at Rs 8.7 trillion, today they stand at Rs 23.9 trillion. I am sorry my friend, the economy matters, and we are paying through the nose for our past consumption; our largesse. The fact that people don't understand the implications is why we continue racing towards the cliff.
The idea that we can go any time to the IMF for help is equally ludicrous; every time you knock on their door, they will want more than a pound of flesh. Why do you think we have a serious trade deficit? Opening our market, collapsing our tariffs, easing forex regulations and protecting copyrights were part of the conditionalities of the IMF assistance; acquiring our prime assets is still on their agenda. To clarify, let me flip the situation. Hypothetically, if we had not borrowed excessively to spend on politically popular projects or to fund outlays which we could ill afford, and did not owe in excess of Rs 20 trillion in debt with no idea how to pay it back, would we have allowed another country perpetual access to the length and breadth of Pakistan that easily; notwithstanding the best friend narrative. If we cannot even produce our own electricity, is there any doubt on where we stand financially? Who in their right mind willingly gives their ports, their roads, their power generation, their lands, their industry even their stock exchange to another country?
And this is notwithstanding the popular view today that the IMF might not be very cordial this time around since we seem to have managed to land ourselves on the wrong side of the world's only super power.
Unfortunately my friend, the economy matters, and it matters the most; and I have no idea how the bomb gets us out of this mess. Frankly, it would be pretty useful if the electronic media and all the brilliant journalists get their heads out of the sand and start projecting the worries about the economy, rather than focusing on trivial pursuits.
(The writer is a chartered accountant based in Islamabad. Email: [email protected])
Copyright Business Recorder, 2017