Pakistani politicians do not stand out for their long memories, unfortunately. But, then, neither does the public. Not many really even remember the break-down of that famous PTI dharna of â€™14, for example. Sure, nobody can easily forget the â€˜Go Nawaz Goâ€™ frenzy. And itâ€™ll take some time, even for the average Pakistani, to really get that â€˜third umpireâ€™ thing out of the system. A few PML-N loyalists still mention how the Chinese president had to postpone not just his Islamabad visit, but also the landmark CPEC announcement, due to Imran Khanâ€™s antics. But does anybody really remember the oil card that Dar sb played so well? Back then international Brent crude had just fallen through the floor, triggering a major realignment of international oil market as well as the intercourse between big players. For one thing, it stopped the American shale oil revolution dead in its tracks. For another, it delivered more than a slap on the wrist of major producers who, like Russia, play their oil muscle for greater diplomatic and political leverage. But net importers scored a windfall without, practically, lifting a finger. Pakistan, which imports a good 80pc of its oil needs, was just such a case. Only Pakistan was also choked because the capital had been brought to a standstill by the opposition. Just then, the government reduced oil prices â€” which resulted in softened prices across the board â€” and took credit for the initiative.There was no mention, of course, of the international chain of events â€” which Pakistan had nothing at all to do with â€” that caused the dramatic Brent collapse. The average Pakistani, not really known for his high IQ or expanded knowledge base, thanked Islamabad and took the reduced inflation at face value. Why would the international community care for high prices in our markets? Would be the usual refrain.There was an added advantage. Sure, more financial elbow room for the masses took much of the sting out of the dharna, but the advantage of low oil didnâ€™t just stop there for the government. Few would remember, of course, how the government took credit for â€˜controlling the deficitâ€™ in subsequent months, winning a pat on the back from the IMF as well in the process. Things seemed going well. Oil remained low for a year and a half. The dharna became a thing lodged deep in the past. And with just a year and something till the election, little could go wrong really as far as the economy went. But, just then, the oil market began turning again. Brent crude is already up roughly 40pc in the last half year.
And that, naturally, is causing considerable anxiety in major importers just like Pakistan. Count on Dar sb to no longer claim any control over the international oil market, in stark contrast to his claims when the dharna was at its peak. Now, periodically, he must advocate petroleum price increases. And he wonâ€™t have to guess long just how that would rub much of the public. If he could reduce the prices then, why is he raising them now? Some have already started asking.
To Dar sbâ€™s frustration, the reverse cycle is at play now. Itâ€™s one thing to contend with public opinion. But itâ€™s quite another when the deficit begins going into red with just a year till the next big election. All this cycle Nawaz Sharif staked economic uplift, etc, as the basis of his policy to turn Pakistanâ€™s fortunes around. Everybody in Islamabad took credit when the Fund praised the way the deficit was handled not too long ago. Yet nobody mentioned how external factors, well beyond Pakistanâ€™s policy reach, were mainly responsible.
Now, with oil on the rise, the deficit is coming under pressure once again. Also, with no IMF programme, and election campaigning demanding increased public expenditure and an expansionary fiscal policy, the kitty is going to come under immense pressure. This is when the government typically borrows more; even for its day-to-day functions. And, of course, when the government borrows from the money market, thereâ€™s precious little left for the private sector to borrow and invest; further slowing down the economy.
The finance ministry is still trying to put a people friendly gloss over the tragedy â€” by getting OGRA to demand a steep rise every few days but accepting only partial increases, etc. But how long is that really going to work? Even if they raise a rupee and absorb another, thereâ€™s only so much pressure they can keep away from the people if Brent continues to climb.
With the US president, in Washington far, far away, announced a one trillion dollar infrastructure expansion program for the United States the other day, oil rallied in markets from Tokyo to Brussels to New York, putting blinding pressure on deficits of net importing countries like Pakistan. People used to Dar sb taking the sting out of inflation for them are, once again, waiting for the miracle of Darnomics.
Unfortunately, Pakistan continues to depend on external factors as far as its revenue and deficit are concerned. It is still dependent on factors influencing oil, for example, and how much it can get every year in remittances, for the economy to function smoothly. It has paid little or no attention to reforming exports or taxes, so policy initiatives at home can affect the fate of the people more than outside events that the country has no influence over. As it goes into another election, the N league has given the country more roads than it had some years ago, but its basic vulnerabilities have not changed any. And that, more than anything, betrays policy loopholes that have just not been overcome, but also given precious little attention.