People against the system

A LOT will be written about the specifics of the budget, but this year I have something else in mind. This budget marks nearly a quarter of a century of consecutive, virtually uninterrupted IMF programs that Pakistan has been in. This means that for 25, or a quarter of a century now, we have had a near-constant flow of austerity as national economic policy, with the exception of three short bursts of short-lived growth in between. They were even fueled by debt-creating external inflows.

Maybe we can take this story further back. But the year 2000 is a good cut-off point because it also saw the implementation of a tough IMF Support Agreement, the same as it is today, after months of a troubled programme. The outlines of that program, as well as every one that followed, were the same. So the wheel has come full circle from that point – a short, sharp standoff, followed by a longer, more sustained Extended Fund Ease, and today, we stand at the same point we were in the summer of 2001.

A quarter of a century of successive IMF programs and their austerity measures have left the country deeply scarred. Twenty-five budgets have come and gone between then and now. However, as then, the weight of our foreign debt, the narrowness and rigidity of the state’s revenue base, its weak and dilapidated system of government, its growing population of undereducated and malnourished youth, and worsening social indicators have all taken an impact.

Today, economic policy in Pakistan consists of trying to meet the IMF’s targets to pass the next review. Everything else is fluff. The only thing that matters in the budget are things like the targets for the primary deficit, revenue, the size of the PSDP, the assumption of external financing in the resource envelope and perhaps a look through the various items where the constraint will come from. of expenses. There is not now, nor has there been in the last 25 years, any budget that seeks to fundamentally change something.

Today, economic policy in Pakistan consists of trying to meet the IMF’s targets to pass the next review. Everything else is fluff.

The results are there to see in the Economic Survey released earlier this week. Take a quick look at social indicators. Here’s what you’ll find.

In the 1980s, there were 1,084 people per primary school in Pakistan. Today, this figure has increased to 1500. Likewise for secondary schools. In the 1980s there were 14,161 people per high school, but by now, that figure has exceeded 50,000. And the picture is even bleaker for secondary schools. In the 1980s, there were 17,833 people per high school in the 1980s, but that number has risen to 68,413.

This is an example and a crude measure because it is only looking at the number of schools per population. For a more complete picture, one obviously needs to look at the number of primary schools available for the number of children of primary school age, and then look at how these are distributed across the country to measure access and then to to evaluate the quality of education. being given. None of these figures are available in the Economic Survey unfortunately.

But for now, a raw view will do because the larger point remains the same. The number of children who need to be served with primary and secondary education has increased, but the ability of the country’s education system to serve this need has declined. Half a century later, the country is not only struggling to maintain its debt burden and raise the resources needed to pay for its government, it is also struggling to educate its next generation and equip them those with the most basic skills needed to be productive citizens of a modernizing country.

The situation is no different in the health sector. In the 1980s, for example, there were 147,926 people per hospital in the country. By 2023, this figure had risen to 188,000.

Now consider this. These numbers should move in the opposite direction. We have to say that the rate of improvement is not good enough in social indicators. Instead, we’re seeing them get worse, year after year, decade after decade.

This endless cycle of austerity followed by credit-induced boom followed by austerity has left a terrible legacy. The worst thing it has done is turn people against the system. Whenever the system thrives, the rich reap the benefits. Every time it crashes and austerity starts, people are forced to bear the costs. This budget is no different. Nor is it the stabilization story the government is busy congratulating itself on. It’s just a repetition of this cycle.

The system consists of the alliance of state and capital upon which our larger social order rests. It supports stability and provides the livelihoods that support everyone here. But it is predatory in nature, curtails opportunity outside a small elite group, and survives by appropriating income that should have flowed to the poor.

The whole system is animated by a massive channeling of wealth from the poor to the rich. This flow continues during periods of prosperity as well as during periods of austerity. And the tax system is designed to facilitate this flow, while much of the country’s property rights regime is designed to facilitate the acquisition of wealth by the poor and pass it on to the rich.

We are now in the third or fourth such cycle since 2000. It is difficult to be precise because the period is marked by three episodes of artificial, credit-driven growth, the end of which resulted in a shock of system, the costs of which fell almost entirely on the poor.

The Minister of Finance spoke about the difficult decisions that must be made to correct the deficits plaguing the system. For the real tough decisions, talk to the poor and lower middle class and find out how they’ve coped with the record inflation of the past three years.

The writer is a business and economics journalist.

khurram.husain@gmail.com

X: @khurramhusain

Published in Agim, June 13, 2024