August 17, 2010

The Last Remnants of Our Economy

What you're witnessing here today, now, are the last remnants of a broken, battered and rundown economy. Everything that made it run, complete it's cycle, however way that it did, is gone now.
And we thought there was no bigger villain than the US. 
But wait, isn't it the only one bending over backwards 
to help us? (Source:
And that is the sad, sorry state of affairs. No doubt people will call me a pessimist and decry me for not sowing the seeds of hope in an otherwise downtrodden and rundown nation of 180 million, but this is how the state of affairs is. This is of course my personal view and I am entitled to it just like you are to yours, but a look at some cold hard facts numbs the senses. In short though, there are extremely tough, trying, and painful years ahead of us Pakistanis.

Companies such as Nestle for instance, and Unilever, respected and reputed to be diligent and dutiful about paying their taxes and contributing to the social development index of this country (false impression but I'll deal with that later) are finding it increasingly difficult to maintain their level of profitability. Of course they have the backing of finances that are stronger than many countries' economies combined but that is missing the point by a whole margin. Take Nestle for example. All of its primary products are made from milk; milk that comes from cows which are great demand right now because a lot of them got swept away in the floods. So you see the cycle? Well not the cycle per se because it doesn't exist anymore, but the generalized comparison that I'm trying to draw here?

The whole cycle of economy has run amok. There is no cotton to export to earn revenue, no wheat or rice to feed the people. Whole swathes of farmland exist no more because the land has been utterly and completely devastated and rendered useless for (foreseeable future) farming. What does the government do? It does nothing, but wait; there is a magic solution which is so brilliant it will blow everyone's minds: Borrow money from the IMF. That might sound plausible but in the non-utopian world, let me paint a picture of what that's really going to do. We have already borrowed and paid back so much money from the IMF, or were/are in the process of paying back loans to the IMF, to define complete new case studies for future generations. The one thing that has been witnessed with increasing ferocity over the years is the fact that IMF enforced solutions hardly ever work. Some of you would say they work brilliantly in achieving quite the opposite of what was intended and I would be hard pressed to fault you, but what we must realize is that the primary objective of the IMF is loan recovery. So it gives us money, tells us to slash subsidies because they're useless, tells us to jack up prices because that will allegedly assure better market resource utilization and division, and that will ensure the government's kitty gets filled, and also, that the bad boy (IMF) gets it's money back with ridiculous amounts of interests. A win-win situation for everyone, except for the poor hapless citizens of this state who have ended up paying double the amount for about every single commodity on this planet without getting the quality that should come with that price. The electricity woes being a prime example.

So what can we expect from the IMF this time round? Well for one, since we have seen absolutely zero percent of indigenous resource mobilization it would be fair game to expect the IMF to mobilize resources from it's own coffers; gleefully, I might also add. Then, it would demand that the government slash, and in most cases, downright cancels the development budget allocation and well, there really isn't an argument against its case. But the problem is with loans comes the added responsibility of paying them back, and that, as we've seen in recent times, can turn out to be a little problematic. The inflation rates will spike tremendously, and since we basically don't have any money to pay back, and aren't expected to have any money to pay back for many years to come, the axe will obviously fall on expenditure for all sorts of causes, leading to stunted growth and well, what more can I say.

This isn't really an anti IMF post because if it wasn't for the IMF, we would probably have asked India to take us back by now. But being the proud warriors neigh citizens of Pakistan, that will be considered blasphemy and there is a chance I will be stoned to death now. But the fact remains, creased foreheads and lined faces will only increase as the Pakistanis continue to do one thing that they are notoriously famous for: Endure.