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Javed Hassan

@javedhassan

Oct 16, 2021

Most countries have faced at some point in their history critical tests which define them. But in few do the intelligentsia show such pusillanimous despair and despondency as in Pakistan. In few do the most privileged abandon the vast majority with such casual disdain.

The decent, god-fearing, hard working & generally tolerant masses remain voiceless yet hopeful. They have neither foreign qualifications, offshore assets, posh club membership, or a portfolio of assets in the country. Since they have little, the cannot afford but remain hopeful.

In most countries the intelligentsia provide the vision of hope in its bleakest hour; give voice to the gentle aspirations of the people; and harness their boundless energy towards a better future. Here the best and the brightest wallow in hopelessness.

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Javed Hassan

@javedhassan

Oct 12, 2021

When Henry V positioned his army for battle on a recently plowed field (that turned to bog when it rained), bounded by woods the limited the advantage of numbers that the French enjoyed, he knew the terrain favoured his army and disadvantaged the opponent.

The subsequent battle led to abject defeat for the French a fair chunk of their aristocracy perishing under rain of English arrows.

As is the choice of battlefield in war key to success, in politics the setting of the agenda for battle lies real political mastery.

PTI successfully for the first three years made reforms it’s agenda and despite the the pain the public has to endure, they were after three years beginning to see the benefits of the tortuously difficult task of about structural change.

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Javed Hassan

@javedhassan

Oct 12, 2021

As one said a few months backs and repeatedly since, stock market can be throwaway cheap but without new liquidity it’ll keep getting cheaper. As soonest the IMF program was put on hold a downward trajectory was inevitable down. PE can be as attractive as you want but if there’s

no confidence in the overall macro direction the market will tank, and that it has promptly done. The idea of a providing procyclical stimulus to an already sharply recovering economy was bound to lead to overheating and ever expanding trade deficits. To delay tariff hikes only

exacerbates the the problem by not dampening demand and further expanding circular debt. Net result will be larger tariff hike than would have been required earlier. Not increasing the rates and maintaining negative real rates only help fuel the consumption driven overheating

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Javed Hassan

@javedhassan

Oct 10, 2021

Pakistan is stuck on a declining trend of productivity growth rate, and with that sustainable GDP growth rate is also declining - c6% in 70s to now not much more than 4%. This is lower than the regional average. This’ll continue to be so as long as it resolutely refuses to reform

At the heart of the matter is the relentless and ever increasing allocation of resources to some of the most inefficient and globally uncompetitive industries. The bulk of the private sector investment is almost entirely incentivised to capture rental income provided by the state

Almost every industry, save a few like IT or rice/maize, are dependent on tariff protection or subsidy. Few invest their resources - many sit on huge piles of cash - to improve their productive capabilities such that they can compete globally. And GoP incentivises them to do so

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Javed Hassan

@javedhassan

Sep 22, 2021

There are simple home truths that seem to elude those drumming the beat of growth at any cost. One, our debt levels are such that we need to be generating primary surpluses to avoid further sinking into debt trap. Two, we don’t have the reserves to service both CAD and ext debt.

Any level of growth (c4%) that aggravates those two very basic constraints in our economy is essentially overheating. We can play verbal gymnastics and fine tune the semantics till the cows come in, but the only way out is maintain growth at that level that does not worsen either

So we either control aggregate demand to be inline with our output capacity or just resign ourselves to an even larger IMF bailout program not too far out in the distant future. We can all try to be clever about it but when the $s run out there’s not many other alternatives

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Javed Hassan

@javedhassan

Sep 21, 2021

If we accept the definition of insanity as “doing the same thing over & over again and expecting a different result”, the asylum wud be filled with Pakistani economists & policy makers. Repeatedly we’ve pursued growth through pro cyclical stimulus. Each time with the same result

There can be no real sustainable growth comparable to that seen in countries like China or Vietnam without deep structural change. Any attempt to buy growth without creating the endogenous capabilities will result in fits of boom and bust. The country has to understand it can’t

continue with the old ways of trying to create industries by subsidies and protection, isolated from the dynamic forces that continually spur innovation in businesses and transform sectors internationally. Neither the consumers nor the state should bear the burden of a few

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