File photo. Rizwan Tabassum—AFP
Despite the worrying resurgence of terrorism from the Tehreek-e-Taliban Pakistan (TTP), the country’s topmost problem is undoubtedly a struggling economy, impacting all decisions needed to “normalize.” A bellwether of this crisis is short-term inflation, measured by the Sensitive Price Indicator (SPI), which has jumped to a record-high 41.54 percent from 38.42 percent just a week earlier.
There are various reasons for the ongoing inflationary hikes, from currency devaluation to higher taxes; market manipulation to hoarding. Until the government ended an unofficial—and ill-advised—policy of a market cap on the exchange rate, reducing the gap between the open market and interbank rates, people had taken to buying dollars off the black market, while remittances and direct investments had dried up. This had resulted in depleting the country’s foreign exchange reserves to dangerously low levels, despite stringent import controls that have yet to be fully withdrawn. Troubling businesses further is the highest benchmark interest rate in decades, even as the country struggles to overcome the devastation wreaked by last year’s unprecedented floods.
Amidst this crisis, the government that should be entirely focused on stabilizing the economy appears distracted by attempts to rein in PTI chief Imran Khan, whose politics of agitation are aimed solely at finding a means to return to power. Khan, too, has no magic wand to fix all that ails Pakistan. In fact, his isolationist worldview—while a boon for political popularity—spells more trouble for the country, which must reckon with a modern world where the size of a state’s economy matters far more than however many nuclear bombs you have in your attic.
“Taking on the world,” naturally, appeals to the suffering common man even as it weakens “investor confidence” in a state tackling politicians who promise good days ahead—if they are in power. Meanwhile, Pakistan’s import-dependent economy continues to lag, unable to escape a debt trap held hostage by global trends such as hikes to oil and gas prices. No country can hope to continue like this indefinitely. Pakistan needs “normal” governance if it has any hope of tacking the crises emerging from areas suffering economic neglect, “interference” from across the border, or from the internal breakdown of state sovereignty.