

Sunday, September 14, 2008

Pakistan caught in the global recession head lights

These days are bad. The downward direction of oil isnt happening fast enough. We are still above the magic $100 marker per barrel. Lehman is about to be broken up (after a number of heavy weights in the US have already crippled). Indications are lit of Canada, Europe, China and Japan quickly sliding into recession.
....And there is Pakistan. If the crazy war on "terror" wasnt enough, we have a completely incompetent government running the show. It is pushing the already fragile economy towards a severe form of stagnation by:

  1. Imposing taxes on fuel. I know I've heard the story on how this isnt a bad thing and poor folks can be provided subsidies to offset this blah blah. The reality is that any form of subsidization to the poor is an extremely naive and broken process in the third world. Who is poor and who is not, and when there are more poor than funds; who gets it and who doesnt is all subjective and prone to corruption. Anyhow, higher than necessary fuel prices have brought about inflation in the economy here that is bringing everything to a standstill. The government can increase its own revenue by reducing its direct taxes on fuel and moving it to other processed goods which do not impact inflation.
  2. Lower locks on the stock exchange. Karachi Stock Exchange (KSE) has had lower locks active for about a month now ie there is no exit in the market for the majority shareholders. All this to please a few who think that by ducking their heads in the hole in the sand they can avoid the typhoon! This will have long term confidence concerns not easily returned.
  3. Lack of any policy on the subject of recession. I have not heard a single statement by our government on the subject other than that we will control prices or the most hollow of slogans ie "roti, kapra and makaan". We're living in the 21st century with rulers unfit to rule even in the 19th century.

I fear that even when the rest of the world will turn around and boom after this cycle of world recession, we will still be in the hole thanks to the incompetence of our President, PM and the rest of the lot in the federal government. Lack of timely decisions can lead to the worst case scenario of uncontrolled inflation, as being faced by countries like Zimbabwe. It's time to bunker in!