The metaphor of the boiling frog seems to capture quite aptly how Pakistan’s economy has been driven into abject despair over the past few months. The myth goes that a frog, if dumped into boiling water, will struggle, jump out and escape, but if placed in tepid water that is gradually brought to a boil, it will ignore the danger till it dies. The story illustrates the dangers of not acting against threats that are building up slowly over time. In the example illustrated by the metaphor, the “creeping normality” of slowly warming water ultimately proves deadly for the frog.
In Pakistan’s case, our financial managers’ inability to act against the creeping normality of eventual default has brought us to the edge of a gruesome fate. The political question, of course, is: what timeline do we put on this period of inaction? Those familiar with the trajectory of Pakistan’s economy would argue that we were always doomed to be where we are now.
A country that consumes far more than it produces, and finances its growing deficits with more loans rather than increasing its capacity to produce, was always bound to end up where we are now. There is no denying the fundamental soundness of that argument.
Yet, there is also no denying the fact that we may just have avoided this painful reckoning had it not been for the disastrous antics of our current Finance Minister Ishaq Dar. Just why Nawaz Sharif and his daughter, Maryam Nawaz, chose to impose him on the country in the midst of a raging crisis defies understanding.
Their party, the PML-N, had spent three odd years condemning and criticising the PTI government, describing its leaders as unfit, inexperienced and having no grasp on Pakistan’s economic realities. One would have assumed, given the self-confidence with which it launched into those tirades, that the N-league’s “more experienced” finance team would have the answers to Pakistan’s predicament when it took over last April.
It seemed for a short while that it did. Mr Ismail, for all his faults, seemed aware of the looming danger and struggled proactively — and ultimately, successfully — to revive the International Monetary Fund (IMF) programme.
Yet it was clear even then that not many within his party agreed with his approach.
In swooped Mr Dar with a snake oil pitch. He discredited Mr Ismail’s rationalist approach, which involved continuing to build trust with the IMF, and instead started running after foreign benefactors to convince them to part with billions of dollars from their wealth without having any convincing reason why. And, just like that, back into the now simmering water we went.
Even when the help from friendly countries that he kept promising repeatedly failed to materialise, Mr Dar refused to budge from this line. The ninth review of the IMF’s bailout programme for Pakistan has subsequently remained pending since October. Though the prime minister managed, after much pleading and assuring, to get an IMF team back to the table last month, the finance minister once again failed to deliver the goods.
It is now March; the economic crisis is roiling, and he still has only promises to offer. It was particularly galling to note that last Thursday — as troubling news was piling in from each segment of the economy — the finance minister tweeted that same promise he had made so many times in previous weeks: “good news soon, God-willing”.
Last Wednesday, several ranking finance ministry officials had “confided” in reporters from various publications and media outlets that the IMF had been “shifting goalposts”, which is why a deal had been so hard to reach.
Their indignation was quite something to behold: it appeared that the finance ministry had gone into full conspiracy theory mode. “This is a situation akin to 1998,” officials insisted, referring to a period of punishment Pakistan had experienced after testing its then newly acquired nuclear bombs. “The IMF really does not care about the poor”, they whispered. “Foreign capitals are conspiring to force our economy into meltdown.”
The government ended up formally acquiescing to all of the conditions the finance ministry officials had been complaining about over the next two days. Mr Dar was back on TV screens on Friday, rubbishing all talk of default, criticising Imran Khan for destroying the economy, promising a deal with the IMF and appearing just as oblivious as ever to the danger the economy is in at the moment.
Will we default? Will a much-needed lifeline materialise in time? Mr Dar would have us say “inshallah” and move on.
The views and opinions expressed in the preceding text are those of the author(s) and do not necessarily reflect the positions of the Coverpage.