A Pakistani economist who lost his job with the government five years ago because of his faith has put the country’s economic indicators before the world and in an analysis that may upset many in Pakistan, he makes a direct comparison with arch-rivals India and Bangladesh.
Citing the statistics of Pakistan’s post-pandemic recovery, notable Pakistani-American economist Atif Mian claims that the country’s economy is in serious trouble.
“Pakistan’s economy is going off the rails,” Mian tweeted on microblogging platform Twitter on Wednesday.
A dive into recent data suggests that Pakistan's economy is going off the rails
First, exports … there was a global surge in exports post-covid, but around 2nd quarter 2022, Pak exports drop off relative to India and Bang – the gap is now over 20%
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— Atif Mian (@AtifRMian) April 5, 2023
Mian, who served as one of the members of Pakistan government’s Economic Advisory Council in 2018, but was removed out of pressure because of being an Ahmadi, one of the persecuted minorities in Pakistan.
To back the veracity of his claims, he compares export data of Pakistan with India and China.
Mian measures the relative movement of exports (in %) from January 2021 and concludes that between January and July 2022, Pakistan’s exports had started deteriorating.
According to his analysis, the difference between export levels of India and Pakistan had widened to 20 per cent by the end of January 2023.
In simpler words, compared to what India was producing above the January 2021 period, Pakistan was producing about 20 per cent less. So if in January 2023, India was producing about 60 per cent more than its exports in January 2021, then in Pakistan, the same was less than 40 per cent.
“This happened despite the large currency devaluation and all “efforts” to boost exports given the severe balance of payment issue.
What’s going on? The export drop likely reflects serious supply-side disruptions in the economy,” Mian added in the subsequent tweet.
In textbook economics, when the value of a currency depreciates, or when foreign currency can buy more of local currency, it should bolster a country’s exports. However, in the case of Pakistan, where its currency has depreciated by more than 75 per cent since January 2021, the export figures are in fact coming down, as Mian shows.
The same is with the country’s imports, he said.
Imports also show the same pattern – now you want some import compression due to bop pressure (like Bangladesh), but not so drastic and not at the expense of exports (again, thanks to those who designed the import controls)
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— Atif Mian (@AtifRMian) April 5, 2023
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Inflation mounting
Mian also cited Consumer Price Indices to measure inflation in three countries — Pakistan, India and Bangladesh.
According to his calculations, since January 2021, India and Bangladesh’s consumer prices have been relatively stable and by January 2023, they were still below 200 (that means prices hadn’t doubled).
However, in Pakistan, the CPI went ‘off chart’ because the value was so high. The CPI Index, compared to January 2021, was about 600 points higher in January 2023.
“All this shows up ultimately as rapidly rising inflation – see Pakistan’s price level below relative to Ind/Bang. It is off the charts, and extremely dangerous … millions are falling back into poverty. Large deficits and constricting supply is a recipe for hyperinflation”, he said.
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Role of PTI-PDM
Mian also linked his previous tweet dated in July 2022 highlighting the role of Imran Khan’s Pakistan Tehreek e Insaf (PTI) in bringing the country to this situation. In this fresh Twitter thread, he called out the new Pakistan Democratic Movement regime that came to power after ousting Imran Khan in April last year.
“Most notably the inability to get into an IMF agreement due to extreme gov mismanagement. I’ve spoken in the past about PTI’s role in bringing the country to this situation. But what the PDM gov has done is on another level,” he tweeted.
“It removed the Central Bank governor with no plan in mind, started in-fighting against its own Finance Minister, and ultimately replaced him with a close relative of the Prime Minister – competence be damned. What followed has eroded any remaining confidence in the system. Think of gov messaging and policy as reserves were going to zero and exchange rate toward 300 to a dollar: ‘we can prove ER is 200’(really!?).” he added.
“This is how a country loses credibility, a feeling that either nobody is in charge, or those in power have no idea what they are doing,” he said.
Mian reminds how broken the fundamentals of Pakistan’s economy were.
“I’ve said before that Pakistan’s *nervous system* is fundamentally broken – that combination of administrative and political structures that guarantee a certain level of confidence in the economy. The country must begin to build a functioning nervous system … somehow,” he ended his Twitter thread saying.
(Edited by Anurag Chaubey)