The Other Route
Can Pakistan escape Sri Lanka’s fate? This is a question that is asked frequently these days. If Pakistan restructures its economy in a prudent manner, there will not be any kind of going the Sri Lanka way.
Is Pakistan heading the Sri Lankan way? It is a question that is being echoed across the length and breadth of Pakistan’s thought landscape with a metronomic regularity. Is the allusion to Sri Lanka’s economic meltdown and concomitant political crisis correct? The answer is yes and no. Yes inasmuch as Pakistan’s economy suffers from macroeconomic instability and not because of the different etiology of the Sri Lankan economic crisis. In Pakistan the economic crisis is the handiwork of political instability and consequent lack of long term structural reforms in the economy. Pakistan’s economy needs long-term vision and fundamental structural reforms to make it more productive and competitive, instead of the present elite captured rent seeking model pandering to the comfort zone of pampered corporate elite and political oligarchy. In Sri Lanka, contrarily, it was the economic mismanagement and corruption by a political oligarchy that despite its long and stable rule hollowed out the economy through corrupt cronyism.
The loans taken by the Sri Lankan government for ambitious infrastructure projects, including development of port infrastructure and operations of famous Hambantota port, were siphoned off by the ruling oligarchy towards non-productive sectors in a non-transparent manner, leading towards failed projects and financial default. The result was a pawning of national infrastructure to foreign countries and continual economic slide. In Pakistan, however, it was a political instability begotten out of curtailed government tenures that militated against a long-term vision and fundamental structural reforms in the economy. Pakistan’s anemic economy needs an injection of fresh blood of structural reforms rather than anodyne policy prescriptions geared to the interests of rent seekers in the corporate sector and affluent elite of the country.
A three-pronged approach of structural reforms, removal of elite privilege, and human development could avert a Sri Lanka-like fate for Pakistan. According to a recently disseminated UNDP Report, the richest 20% of Pakistanis appropriate 49.6% of the national income whereas the poorest 1% have access to a paltry 7% of national resources. Due to iniquitous economic policies the middle class has already shrunk from 42% of the population in 2009 to 36% in 2019. According to the National Human Development Report 2020, the share of public expenditure for the rich in Pakistan is 37.2% compared to a measly 14.2% for the poor. The UNDP has taken note of Pakistan’s low ranking on the HDI index (Second to last in South Asia, ahead of Afghanistan only) and has recommended policy changes to reduce concessions for the elite by spending more on the poor, especially in healthcare and education sectors. The cost of the concessions to Pakistani elite comprising corporate elite, political oligarchy, feudal landlords and the bureaucratic elite, comes to a staggering $17.4 billion (6% of the national economy).
The biggest beneficiaries of the tax subsidies and financial concessions are the corporate elite that gobble up $4,7 billion in privileges, followed by 1% rich that own 9% of national income and feudal elite that, with a size of 1.1%, own 22% of total arable land in the country. Pakistan’s political economy is heavily tilted in favour of the elite that refuses to let go of its privileges that are stultifying national growth and economic development. The members of the same extractive elite are found in national parliament, business elite and land owning feudal oligarchy. The weak labour unions and unorganized worker class coupled with a weak democratic impulse in the masses, smarting under the oppressive bondage of feudal, political and bureaucratic elite, precludes the possibility of a political revolution to correct the iniquitous structure of the political economy. Perhaps a social revolution would precede a political revolution to right all the wrongs but till then the nation has to chart a course correction to avoid floundering on the rocks of economic insolvency.