Dawn Editorials (with Summary and Vocabulary)

DAWN EDITORIALS

January 13, 2024 (Saturday)

Day’s Vocabulary

• Panacea.     a solution or remedy for all difficulties or diseases
• Plethora.    a large or excessive amount of (something)
• Contemplation.  the action of looking thoughtfully at something for a long time
• Query.          a question, especially one addressed to an official or organization
• Saddled.      put a saddle on (a horse)
• Coffers.       a strongbox or small chest for holding valuables
• Inciting.     encourage or stir up (violent or unlawful behavior)
• Moniker.    a name
• Gloat.           contemplate or dwell on one's own success or another's misfortune with smugness or malignant pleasure
• Threadbare.          (of cloth, clothing, or soft furnishings) becoming thin and tattered with age
• Prognosticating.           foretell or prophesy a future event
• Rejuvenation.      the action or process of giving new energy or vigor to something
• Trance.       a half-conscious state characterized by an absence of response to external stimuli, typically as induced by hypnosis or entered by a medium
• Stringent.  (of regulations, requirements, or conditions) strict, precise, and exacting
• Stifling.      (of heat, air, or a room) very hot and causing difficulties in breathing; suffocating
• Acute.          (of a bad, difficult, or unwelcome situation or phenomenon) present or experienced to a severe or intense degree
• Poised.        be or cause to be balanced or suspended
• Excruciating.       torment (someone) physically or mentally
• Ensuing.     occurring afterward or as a result
• Weariness. extreme tiredness; fatigue
• Doling.        distribute shares of something
• Ostensibly.            apparently or purportedly, but perhaps not actually
• Exasperation.      a feeling of intense irritation or annoyance
• Seemingly.            so as to give the impression of having a certain quality; apparently
• Solvency.   the possession of assets in excess of liabilities; ability to pay one's debts
• Bloated.      (of part of the body) swollen with fluid or gas
• Profligacy. reckless extravagance or wastefulness in the use of resources
• Bludgeoning.       beat (someone) repeatedly with a bludgeon or other heavy object
• Predatory. relating to or denoting an animal or animals preying naturally on others
• Rentiers.    a person living on income from property or investments       
• Complacent.         showing smug or uncritical satisfaction with oneself or one's achievements
• Tackling.   make determined efforts to deal with (a problem or difficult task)
• Perennial.  lasting or existing for a long or apparently infinite time; enduring or continually recurring
• Peril. serious and immediate danger
• Throttled.  attack or kill (someone) by choking or strangling them
• Thwart.       prevent (someone) from accomplishing something
• Mockery.    teasing and contemptuous language or behavior directed at a particular person or thing
• Breakneck.            dangerously or extremely fast
• Redundant.           not or no longer needed or useful; superfluous
• Draconian. (of laws or their application) excessively harsh and severe
• Heed.            pay attention to; take notice of
• Shenanigans.      secret or dishonest activity or maneuvering
• Bravado.     a bold manner or a show of boldness intended to impress or intimidate
• Vying.          compete eagerly with someone in order to do or achieve something
• Rampant.   (especially of something unwelcome or unpleasant) flourishing or spreading unchecked
• Bereavement.      deprived of a close relation or friend through their death
• Dwellings. a house, apartment, or other place of residence
• Exorbitantly.       (of a price or amount charged) unreasonably high

Foreign aid is no panacea

Summary

• It is difficult to determine the exact amount of foreign aid Pakistan has received since 1950, as there have been both official and unofficial aid inflows.
• It is unclear whether foreign aid has been of economic benefit to Pakistan. There is no concise criterion for gauging the effectiveness of foreign aid, and no proper technical evaluation has been carried out for most foreign-funded projects.
• Based on criteria from MIT and economists Mark Millikan and Walt Rostow, Pakistan does not meet a single criterion for foreign aid effectiveness.
• Pakistan has been saddled with huge external liabilities from foreign aid, with more dollars flowing out of Pakistan than coming in.
• Pakistan has taken on external debt it never required, due to both donors and government agencies.
• The author calls for a critical evaluation of why Pakistan needs foreign aid and what the outcomes have been.

Article

Every year brings forth a plethora of books on various topics. As far as economics is concerned, one of the interesting releases of 2023 was Didac Queralt’s Pawned States. Analysing foreign lending to developing nations since the 19th century, he concluded that a reliance on foreign credit had resulted in persistent economic and political instability.

What made this interesting was the fact that last year, this writer undertook an inquiry into the role of foreign assistance to Pakistan and its various aspects. The task is now complete, with the findings to be published soon by PIDE. And like Didac, the findings call for some serious contemplation.

It proved to be a difficult task. Covering various aspects of foreign aid meant sifting through either highly scattered or non-available information. Both government officials and donors like to pretend that everything is ‘out there’, but that is simply not the case.

Anyways, the first important query related to how much aid has Pakistan really received till now. Specifically, of the ‘committed’ aid since 1950 ($200 billion plus), how much aid did Pakistan really receive? Surprisingly, no one knows. The research, accumulating data from various sources, concluded that the received amount is anywhere between $155 to $157bn.

But even this figure does not tell the exact quantum of foreign aid that Pakistan received. Why? Because there have historically been ‘off the books’ inflows (especially under military rule) that have never been officially recorded. For example, a recently declassified US document revealed that President Carter authorised $2bn for Pakistan (with an equivalent matching grant from Saudi Arabia).

Nowhere in official documents do we find mention of this inflow. Similarly, during a Congressional hearing in 2007, a senior fellow from the Woodrow Wilson Institute revealed that off-the-books aid to Pakistan was equivalent to the officially provided aid ($7bn plus).

Pakistan has been saddled with external debt which it never required.

Therefore, there is no concise estimate of how much aid has really flown into Pakistan’s coffers.

The next — and the most important question to address — was to gauge whether foreign aid has been of economic benefit to Pakistan or not. The vast literature on this subject comes up with a mixed conclusion. We do not get any clear-cut answer, partly because they either deal with only a specific aspect, and a majority of these studies use econometric methodologies that are unclear in terms of causation and the ‘net’ result of inflows. The major shortcoming of these studies, arguably, is that none of these seem to be based on criterion/a for gauging the effectiveness of foreign aid.

Things turn more complicated considering that no proper technical evaluation (cost-benefit analysis) has ever been carried out of majority of foreign-funded projects which have been a regular feature since the 1950s (1,268 projects being the average number in the last decade, being executed across the breadth of the country). But there exists little literature in terms of its outcomes, especially in the long-run.

Luckily, though, history came to the rescue. To cut a long story short, aid provision by industrialised nations did not start as some unquestioned charitable provision born out of humanitarian considerations. Rather, from moulding ‘developing’ nations into their own growth models to forcing them into their own spheres of influence, the underlying factors varied, often inciting deep, long-drawn debates over the raison d’etre of aid provision to poor countries.

These debates produced two interesting works: a report by MIT and another by economists Mark Millikan and Walt Rostow. In these, we find a clear statement of criterion (used by this study) to gauge effectiveness of foreign aid by a receiving country.

Briefly put, foreign aid would be useful if it does not create future liabilities, is not ‘source-tied’, leads to sustainable development as well as sustainable economic growth, raises the domestic marginal savings rate leading to higher capital formation (lessening dependence on external capital), higher capital formation in turn being complemented by a development programme that helps expand economic capacity to absorb additional capital.

This is as clear a criterion for gauging foreign aid’s effectiveness as there can be, and our research finds that Pakistan does not meet even a single criterion despite substantial doses of aid inflows. Sure, marginal improvements do occur, and one may witness spikes in selected years (gross capital formation, for example). But in sum aggregate, there is nothing to celebrate.

In all these years, Pakistan’s economy instead finds itself saddled with huge external liabilities and has had to pay a steep cost (detailed in the paper). Take, for example, the net flow number (dollar inflow vs outflow): in the 21st century, the number stands in excess of negative $50bn, meaning more dollars flowing out of Pakistan than coming in (as is likely to be the case in the near future).

Perhaps astonishingly, Pakistan has been saddled with external debt which it never required in the first place, a situation for which both the donors and successive governments (especially bureaucracy) is to blame. An example would suffice. A government department happily lapped up a $400 million loan under the fancy moniker of ‘capacity building’.

The loan was totally wasted, with no indication of any improvement. Despite this failure, another $400m loan for the same organisation was agreed upon in 2019 (it remains unutilised till now), and a further $300m loan was agreed upon just recently. You can bet that all these loans will not bring any major improvement in the said organisation’s working.

Let me conclude by suggesting that the research is not aimed as some ‘anti-donor’ agenda; rather, it brings forth the critical need to query why we need all the foreign loans and what is the outcome. Unfortunately, I find that in sum aggregate, the outcomes for the country and its people are not something to gloat about. Surprisingly, the threadbare economic manifestos of parties don’t even mention foreign assistance as a policy question.

This needs to change for Pakistan’s sake.

2024: Rocky year ahead

Summary

• Despite some positive economic indicators, the overall outlook for 2024 is challenging.
• The public is struggling with inflation, unemployment, and poverty.
• The country is facing a financial crisis and may need to seek another IMF bailout.
• There are deep-seated structural problems that need to be addressed, such as political instability, corruption, and government inefficiency.
• The writer calls for urgent reforms and strong leadership to address these challenges.

Article

The most challenging year in recent memory has closed with some indicators prognosticating a nascent economic rejuvenation of sorts. So, what lies in store in 2024? Are the gloomy days now behind us that a possible rising tide from improved growth prospects will lift all boats?

The public at large cannot be expected to go into a trance on being informed that we have achieved both a primary and current account surplus. For them the fallout of back-breaking inflation and stringent austerity under the IMF programme has been a stifling of growth and economic opportunities.

And that these factors combined with supply chain disruptions caused by administrative restrictions of imports have amplified the market manipulative powers of a minority class, eroding the purchasing power of large segments of the population.

For them, unemployment rates and poverty levels are rising. And, although growing, these rates would have been higher but for the annual remittances of $30 billion and the informal sector which have kept the wheels of the economy somewhat running.

However, many in the lower-middle income group hovering around the poverty line, if unable to take on multiple jobs, have been pushed below it, while significant proportions of the middle-income group have been coping by adjusting their lifestyles or by running down available savings or by liquidating assets. A disturbing development is the loss of morale of the limited available quantity of the skilled. They are articulating their loss of faith in the future of the country by seeking any opening for an exit.

Meanwhile, an annual requirement of $25bn and reserves well below recommended levels are placing our ability to service external obligations increasingly at risk. The problem has become so acute that it may be too difficult to even deal with it through a reshuffling of maturities.

The country, therefore, appears poised to be invited into the IMF’s parlour for the 24th time. The second round of stabilisation and austerity will, with the depletion of these buffers, be more excruciating. A worrying outcome of the ensuing weariness could be the worsening of the already fragile social cohesion.

Our ‘friends’ have lost patience with us and are no longer agreeable to doling out lifelines.

Our “friends” have ostensibly lost patience with us and are no longer that readily agreeable to doling out lifelines without a change of our behaviour, while multilaterals on whose benefactions we live from year to year are, although coming so lately and equally to blame, openly expressing their exasperation at our repeated abandonment of commitments on reform.

Although our creditors are seemingly pondering over whether they should lend their names to our quest for international banker generosity so that we can live to borrow another day, they do not appear to be in the mood to pull the plug on our life support system, just yet.

A view fairly widely aired is that for pushing the economy onto a higher and sustainable growth path and attaining solvency much remains to be done to address the fundamental structural issues.

The list of these concerns is lengthy. It broadly includes political instability and unprecedented polarisation; the general state of uncertainty; policy unpredictability; a corruptible rule of law; bloated governments with their unproductive expenditures running wild; the huge footprint of the state in the economy (through profligacy, bankrolling loss-making inefficient SOEs and obsolete and excessive regulation) bludgeoning the fiscal accounts; different organs of the state crumbling with mechanisms of checks and balances in disarray (if not dysfunctional); a distortionary and predatory tax regime; lack of a sensible exchange rate policy; a system that continues to protect and support powerful “rentiers” at the expense of the economy’s competitiveness; unaffordable pricing of energy (because of the generous terms and conditions accorded to IPPs and continuing governance issues of DISCOs); lack of trade with our neighbours and high transaction costs of cross-border business; the restrictive regulatory environment and its cost (especially for investment whose rate now places us in the 130s among 151 countries); a country image unattractive for potential FDI; poor work culture/ethics and the weak quality of human capital.

It has been argued before in these columns that while the fiscal correction demanded by our donors is important, it is the quality anchored in the composition of the correction that is more important. The effort to achieve it must begin from the expenditure side of the fiscal equation.

Today, resources are being increasingly absorbed in the maintenance of state operations and not even maintenance of assets. By reprioritising expenditures, decentralising functional distribution and organisational structures of different tiers of government based on the principle of subsidiarity, we can modernise governance systems, thereby reducing opportunities for rent-seeking and corruption, improving resource allocation, reducing management costs and enhancing administrative and work capacities and efficiencies.

To conclude, we can only be complacent in tackling the above referred perennial fault lines (by continuing to embrace a ‘business as usual’ approach) at our own peril. The emergency for embarking on the long-overdue associated reforms is upon us, since the state’s domestic and global credibility has been severely damaged.

Since these problems have been accumulated over decades, the task ahead is a massive and long-drawn painful one, requiring a leadership (not visible to the naked eye today) with the vision and capability to distribute this pain equitably, based on the ability of the different economic groups to bear the burden of the required adjustment.

This would test the forbearance and determination of any leadership to stay on course, raising the obvious question whether the government likely to be assembled after the election will be able to fabricate the changes that will endure the test of time.

Digital Policy

Summary

• Pakistan's digital policies have been inconsistent and harmful.
• Caretaker governments have introduced policies and legislation without a mandate to do so.
• Multiple political parties have passed laws that restrict internet access and freedom of expression.
• These policies have caused economic losses and hindered Pakistan's development as a regional and global player.
• The state has prioritized surveillance and control over investment in digital infrastructure and services.
• The government has invested in surveillance technology and filtering technology to control information and target political opponents.
• This has come at the expense of consumer protection, online safety, connectivity in underserved areas, payment gateways, ease of doing business, and the start-up ecosystem.
• There is little hope for change in the upcoming elections.
• There is a lack of political will to address the problems with Pakistan's digital policies.
• The author believes that the country will continue to suffer as a result of these policies.

Article

In a recent address, caretaker Minister for IT and Telecom, Umar Saif, spoke about payment gateways for freelancers to receive payments at ease in Pakistan. He spoke of a communication world, new advancements, satellite communication and forward-looking space policy. On Jan 7, barely a week into the new year, network disruptions were reported and access to social media websites and apps throttled to thwart a PTI election fundraiser.

It is not the first time this has happened and is unlikely to be the last. So what stars are we reaching for exactly?

The present caretaker set-up is pretending as though it has the mandate of an elected government and is introducing policies and legislation like they are here to stay. The outgoing PDM government made a mockery of parliament by bulldozing bills and laws at breakneck speed. The PTI, when in government, chose to make parliament redundant and instead legislated via ordinances. Prior to them, the PML-N introduced legislation such as the Prevention of Electronic Crimes Act 2016, with complete disregard towards what a consultative democracy should be, reducing parliament to a numbers game.

What change or promise can the average citizen or any sector in the country expect or be hopeful for with the upcoming elections? In and of itself the elections are important from a constitutional and democratic standpoint, but it’s about more than procedures, numbers and faces. Does the policy change?

Civil society & industry have cautioned against regressive measures.

PTI led with claims about Digital Pakistan and instead introduced draconian social media rules — ones that expanded existing PTA powers to cut off network access and restrict content. Network throttling was specifically written into the language of the rules by permitting PTA to “degrade services.” Today, PTI is a victim of its own policies.

To date, Pakistan does not have privacy legislation, a data protection law. The PML-N is touted as being “good for business” and yet leading the PDM government, it introduced a data protection bill which, had it been enacted, would have thwarted the digital economy. The party already has the stain of Peca on its hands.

Time and again civil society and industry have cautioned against ad hoc and regressive measures. Recently, the Telecom Operators Association wrote a letter to the PTA, underlining the adverse impact on business caused by the disruption. When the e-safety and data protection bills were introduced by the PDM government, the Venture Capital Association of Pakistan and the Asia Internet Coalition, among others, voiced their concerns about how Pakistan would be isolated as the contents of the bills would lead to global services being withdrawn from the country. Rights advocates emphasised the privacy and expression violations, just as they did when Peca was introduced. Losses in the billions have been reported as a result of network disruptions in an already struggling economy. But no heed is paid.

The switch-on/switch-off shenanigans, knee-jerk policy and regressive lawmaking reposes little trust locally and internationally, robbing Pakistanis of opportunities the private sector has worked hard to create, with little or no state support, and in spite of the constant hurdles.

The state’s investment over the years in this sector instead has been in surveillance tech and filtering technology — with taxpayer money — to be able to control information and gather dirt on targets to use for political machinations. Consumer protection, online safety, connectivity in underserved areas, payment gateways, ease of doing business, start-up ecosystem, investment — much lip-service is paid to these but in reality little is done to sustainably achi­e­­ve and advance aims in these areas in a mea­ningful manner.

The revolutionary zeal and bravado when persecuted is often short-lived, simply posturing for attention and vying for an opportunity to crack a deal. And then ensues the same cycle of repeating with political opponents what was experienced and condemned not a moment ago. No lessons are learnt other than power grab.

But what is written into policy and law is rarely reversed, in fact made worse by each successive set-up. The consequences fall upon every citizen and sector that become collateral as a result of these “policies”. Peca is proof of this.

So long as Pakistanis remain hostage to vested interests who can’t see beyond their narrow aims, citizens and the IT and telecom sector will keep bearing losses. Pakistan will continue to lose out as a regional and global player because those who run the country have anything but the best interests of the country and its people at heart.

Social breakdown

Summary

• Inflation is having a significant negative impact on human relations.
• Families are struggling to support each other financially, leading to increased feuds and strained relationships.
• Neighbors are less likely to contribute to rituals and support each other in times of need.
• The cost of living crisis is forcing families to make difficult choices.
• Some families are selling their homes to pay off debt.
• Others are moving in together to save on expenses, which is leading to overcrowding and privacy issues.
• Parents are having to choose which children to send to school, and girls are often the ones who are kept at home.
• Education is being impacted by inflation.
• The cost of school fees is rising, leading to increased demand for madrasahs (which are still relatively affordable).
• Low-income families are struggling to afford even basic school supplies.
• Some students are opting for online work to earn foreign currency to pay for their education.
• Dietary habits are also being affected by inflation.
• Many people can no longer afford to eat fruits or meat.
• Borrowing food from neighbors is becoming less common.
• The most significant impact of inflation is on human relations.
• If not addressed, this will make already vulnerable segments of society even more vulnerable to exploitation.

Article

Due to a variety of factors, inflation is rampant, and many economists do not see any relief in sight. There is a need to understand more about the impact of the cost of living crisis on various aspects of human life rather than just the purely economic aspects. Based on discussions with community activists, educationists, social scientists and staff of the Urban Resource Centre, the following few paragraphs are a glimpse of the impacts and tradeoffs low-income and middle-income groups face in the midst of this crisis.

The most significant impact of skyrocketing prices has perhaps been on human relations within the family and in the neighbourhood. Because of inflation, familial support on rainy days is dwindling, and the less well off can no longer rely on the perceived-to-be-better-off relatives for food, money and financial and material contributions during marital and bereavement customs, as the latter cannot afford such support anymore. As a result, family feuds have increased, and relationships with immediate family members are suffering.

The frequency of altercations between family members living in shared dwellings has also increased. Cases have also been reported where a house has had to be sold to pay off the accumulated electricity bill, resulting in the dispersion of otherwise cohesive family units. Shopping for joy and impulse buying customs are dying fast. In low-income neighbourhoods, because of inflation, people are reluctant to contribute to rituals that used to be participated in wholeheartedly. Earlier, in the case of deaths, neighbours provided food to the bereaved household for the first three days. Now, this grief-sharing mechanism is becoming challenging to maintain. It was an excellent mitigation mechanism which has fallen victim to the financial crisis.

A few cases of families coming together under one roof to collectively fight the rising cost of living have also been reported. Because of this increase in density, a new set of social problems has surfaced. The living space has been reduced, earlier enjoyed independence is lost, shared kitchen space is contested, the noise pollution by TV and other gadgets has increased, and increased demands on an individual’s privacy have been placed. The parking of vehicles due to the reduced share of spaces is another bone of contention. The phenomenon calls for redefining poverty as a lack of ownership of a dwelling and associated spaces.

Inflation has cast a shadow on every sphere of life.

Because of inflation, parents now have to choose between their kids when deciding whom to send to school and whom not to. The axe usually falls on girls; most of the time, they are the ones whose schooling is put on the back burner. School fees have been increased exorbitantly and, as a re­­su­­lt, demand for madressah education has in­­creased. Even though madressah fees have also increased, they are still affordable in relative terms. Families struggle to afford basic stationery for school. In the name of affordable and ‘English-medium’ education, many ‘private’ schools have mushroomed in low-income neighbourhoods. Though they employ highly contested quality standards, lower-income groups prefer them over government schools because they believe that public schools have incompetent or absentee teachers and below-par student facilities. With a rise in transport fares and travelling costs, parents are also leaving far-off residences to move near their children’s schools on rent.

On the other side of the coin, the number of students opting for the Cambridge system of education continues to rise, even though for these students, too, it is becoming challenging to afford the fees and related expenses. Thus, many young students have started working online, where they freelance and earn in foreign currencies.

Inflation has had an impact on dietary habits as well. The consumption of fruits is now a luxury, borrowing salt, spices and other food items from neighbours is a dying tradition, mutton is a distant dream for most, and boiled eggs in winter have become a luxury for many low-income groups.

High inflation has cast a shadow on every sphere of life, from the curtailed operational timing of the household refrigerator to cutting down on grocery items, reduced socialisation, compromises on the quality of food items, and loss of savings. And yet, the most significant impact is on human relations. If not addressed in a timely manner, this will make already weaker segments of society further vulnerable to exploitation.

The above-mentioned narration on the subject is, admittedly, not a comprehensive picture of the impact of inflationary pressures on the everyday lives of the masses and needs further, intellectually robust investigations.