The ongoing sit-in on Constitution Avenue by the Pakistan Tehreek-e-Insaf (PTI) and Pakistan Awami Tehreek (PAT) is taking a serious toll of the economy. Figures released by several federal ministers including Finance Minister Ishaq Dar vary between 500 to 800 billion rupees during the last 17 days with the business community of the country concurring with these estimates and warning that the toll is rising with each passing day that the political crisis is not resolved. The Finance Minister pointed out that the bulk of the loss - 350 billion rupees - was on account of the stock market, or in other words it was in portfolio investment, which is the most susceptible to political turmoil yet this too has major macroeconomic implications.
Transporters from Karachi port to upcountry areas are reluctant to take any consignments through Punjab for delivery not only in Punjab but also in Khyber Pakhtunkhwa (KPK) for fear that their trucks may be attacked by angry mobs of PTI and PAT workers. While the consignments may be insured yet most of the trucks are not and the transporters have refused to take the risk. Thus, for example, palm oil importers have been unable to move the product to Punjab and KPK during the past two weeks or so, creating shortages that would soon begin to bite the common man.
Inventories are rising throughout the country and until and unless they are offloaded soon stockpiling would make any additional output/import uneconomic due to shortage of storage facilities that would automatically lead to workers layoff.
No federal ministry is open for business to the general public including the Ministry of Finance and Commerce and therefore business activity remains stalled. And finally the daily wage earners in Islamabad are suffering especially those who were engaged in the Metrobus project as that has come to a complete standstill.
Recent data released by the Federal Board of Revenue indicates that tax collections have exceeded targets for August by over one billion rupees, however, the implications of rising inventories and inability to transport to up-country areas would have major implications for revenue collections in weeks to come. The business community has expressed serious concern over their failure to meet with their foreign clients due to the sit-ins maintaining that they could lose existing clients if they divert their orders to competing businesses in other countries. Once a client is lost it is very difficult to get him back, exporters are warning.
The rupee-dollar parity has also declined as a consequence of the political uncertainty, which implies that imports would become dearer though exports may receive a boost as Pakistani products would now be cheaper than before. However, blocked roads and other transport-related issues would limit the favourable impact of the rupee-dollar parity.
Imran Khan's call of civil disobedience that includes non-payment of electricity bills is also a cause of serious concern as power sector recoveries remain low; and any further rise would automatically lead to a worsening of the power crisis.
While no one challenges the right to protest in a democracy yet the continuing sit-n for over two weeks is exacting a heavy economic toll from the general public and one hopes that the two protagonists begin to move towards resolution of the crisis. Imran Khan would do well to heed his own advice to the government in the matter of the Taliban namely to first negotiate prior to using force. At the same time the onus of concessions in negotiations is on the greater power, which in this case is clearly the government. One can only hope that better sense prevails on both sides and the existing stalemate is breached promptly.
Tuesday, September 2, 2014
Pakistan: The economic cost of the two sit-ins
The ongoing sit-in on Constitution Avenue by the Pakistan Tehreek-e-Insaf (PTI) and Pakistan Awami Tehreek (PAT) is taking a serious toll of the economy. Figures released by several federal ministers including Finance Minister Ishaq Dar vary between 500 to 800 billion rupees during the last 17 days with the business community of the country concurring with these estimates and warning that the toll is rising with each passing day that the political crisis is not resolved. The Finance Minister pointed out that the bulk of the loss - 350 billion rupees - was on account of the stock market, or in other words it was in portfolio investment, which is the most susceptible to political turmoil yet this too has major macroeconomic implications.
Transporters from Karachi port to upcountry areas are reluctant to take any consignments through Punjab for delivery not only in Punjab but also in Khyber Pakhtunkhwa (KPK) for fear that their trucks may be attacked by angry mobs of PTI and PAT workers. While the consignments may be insured yet most of the trucks are not and the transporters have refused to take the risk. Thus, for example, palm oil importers have been unable to move the product to Punjab and KPK during the past two weeks or so, creating shortages that would soon begin to bite the common man.
Inventories are rising throughout the country and until and unless they are offloaded soon stockpiling would make any additional output/import uneconomic due to shortage of storage facilities that would automatically lead to workers layoff.
No federal ministry is open for business to the general public including the Ministry of Finance and Commerce and therefore business activity remains stalled. And finally the daily wage earners in Islamabad are suffering especially those who were engaged in the Metrobus project as that has come to a complete standstill.
Recent data released by the Federal Board of Revenue indicates that tax collections have exceeded targets for August by over one billion rupees, however, the implications of rising inventories and inability to transport to up-country areas would have major implications for revenue collections in weeks to come. The business community has expressed serious concern over their failure to meet with their foreign clients due to the sit-ins maintaining that they could lose existing clients if they divert their orders to competing businesses in other countries. Once a client is lost it is very difficult to get him back, exporters are warning.
The rupee-dollar parity has also declined as a consequence of the political uncertainty, which implies that imports would become dearer though exports may receive a boost as Pakistani products would now be cheaper than before. However, blocked roads and other transport-related issues would limit the favourable impact of the rupee-dollar parity.
Imran Khan's call of civil disobedience that includes non-payment of electricity bills is also a cause of serious concern as power sector recoveries remain low; and any further rise would automatically lead to a worsening of the power crisis.
While no one challenges the right to protest in a democracy yet the continuing sit-n for over two weeks is exacting a heavy economic toll from the general public and one hopes that the two protagonists begin to move towards resolution of the crisis. Imran Khan would do well to heed his own advice to the government in the matter of the Taliban namely to first negotiate prior to using force. At the same time the onus of concessions in negotiations is on the greater power, which in this case is clearly the government. One can only hope that better sense prevails on both sides and the existing stalemate is breached promptly.
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