- Something will eventually have to give
It is slowly becoming quite apparent that most of what the PTI had promised to deliver will simply not be possible as the macroeconomic fundamentals turn from bad to worse. One of those ambitious promises was creating 10 million jobs, but with large scale manufacturing contracting by 3.3 per cent in July on a year-on-year basis, there will only be an increase in unemployment, not employment. Indus Motors, one of the country’s three biggest auto manufacturers, after months of reducing production days, has had to shut down all its production for the remainder of this month due to a fall in demand. Because its competitors too are unable to justify the same high cost of production due to their dependence on imported parts, they will follow, which will only add to the unemployment number. Meanwhile the SBP is continuing with its policy of monetary policy tightening with the discount rate, although unchanged at 13.25% in the latest MPS, more than double what it was one and a half year ago. Prime Minister Imran Khan on his part has tried to get the SBP to reconsider its policy but given how the man heading it is a former IMF employee and the Fund has explicitly demanded autonomy of the central bank as one of its conditions for the latest bailout package, it is unlikely Mr Khan will be able to get him to listen.
The PTI’s dream of building five million homes at affordable prices will also remain unfulfilled. Firstly, the sort of capital required for this project is not available with the government; it is broke. And financing the project is also a tough sell to the banks that require guarantees that the government simply cannot provide in order to justify the risk they will be taking, not to mention the mark-up the latter will be paying over the years at such a high rate of interest plus premium. There is an extent to which the PTI can blame its economic troubles on the previous governments while misrepresenting the real condition of the economy through press conferences, tweets and talk shows. It is time to get to work, reassess policies and reshuffle the finance team because clearly the current combination is falling short. Continuing with more of the same will only make matters worse to the point of no return. Something will have to give.