Author: Kanwar Muhammad Javed Iqbal

Senior Research Fellow at Institute of Sustainable Development (Formerly SDC), reachable at kanwar@sdc.org.pk

Short-term policy narratives induced terrorism factor and instability of economic performance in Pakistan which further aggravated by exercising ad-hoc methods without clear futuristic vision, overall undermined mainstream approaches to ensure primarily the responsive political participation, social inclusion, transparency and accountability, alleviation of poverty, eradication of corruption, ensuring green growth and sustainable governance.

Unity of the Pakistani Nation is quite visible against terrorism and almost all stakeholders are contributing significant role to overcome this major challenge with a clear counter-narrative, however, situation is opaque on corruption and other governance challenges without which green growth and sustainable governance cannot be ensured.

The success of the Pakistan Super League (PSL) 2017 final in Lahore has been witnessed by the planning of the International Cricket Council (ICC) to send a World XI team to Pakistan during September 2017 for a t20 series, showcased national determination and efforts against terror elements. It would help in returning international cricket to Pakistan as big mileage achieved so far in current peace context, but, a lot needs to be done for a long-term and sustained perspective indeed.

Apart from policy measures, corruption and injustice are not only among main causes for terrorism but also for instability, and also important factors towards green growth and responsive political participation for sustainable governance prospects. Corruption corrodes economic performance which always supersedes and predominantly acts as independent variable among others for sustainability.

Since 1980s, high degree of depreciation of Pakistani currency and inflation outlook have been observed due to short-term policy narratives and ad-hoc methods, rendered the challenge of economic performance to the nation at large.

Looking at the exchange rates, linked with British Pound, notified in Gazette of Pakistan dated 13th October 1950, 1 US Dollar was equal to 3 Rupee, 4 Anna and 11 Pies. Until 1982, Pakistani currency depreciation was observed too slow to raise serious concerns which have been noticed today.

In 1982, the then Government of Pakistan adopted ‘Managed Float Currency Regime’ and experienced high level exchange rate fluctuation. Economic performance variable was observed poor in tangible form of depreciated currency, and was probably reached beyond intervention, as per provision of this dirty float regime, level of the Government of Pakistan to smooth or manage fluctuations or to manage a desired exchange rate.

If 1982-1989 to be considered as transitional period to stabilize newly adopted Managed Float Regime, and scrutinize the period from January 1990 to date, then the governance periods are classified into three categories i.e. Democratic Period from January 1990 to September 1999, Dictatorial period from November 1999 to February 2008 and Post Dictatorial democratic period from April 2008 to date (i.e. data till February 2017, as shown in bar chart below).

As on January 1990, the open market lowest exchange rate with US$ was PKR 30.02 compare to highest PKR 55.55 observed in during the governance period marked till September 1999, while PKR 51.89 was the figure after take over by President Musharraf and was PKR 44.28 during April 1998 (before nuclear tests). This decade was observed with approx. 73% currency depreciation, approx. 48% before nuclear tests, though economic performance was acclaimed very high by the democratic leadership of that decade.

During dictatorial governance period, exchange rates were PKR 51.89 (lowest), PKR 65.24 (highest) and PKR. 63.67 (at end of the period). Currency depreciation was observed at a very low ratio i.e. approx. 22.7%. During the democratic governance period from 2008 to 2013, exchange rates were PKR 63.67 (lowest), PKR 98.85 (highest), PKR 98.27 (at end of the period). Currency depreciation was observed at a very high ratio of approx. 54.3%. During the current democratic governance period from June 2013 to February 2017, exchange rates were PKR 98.27 (lowest), PKR 108.32 (highest), PKR 105.85 (February 2017). Currency depreciation is observed at a very low ratio of approx. 7.7%.

Approx. 66.2% currency depreciation reported during the democratic period from April 2008 to February 2017 (Post-dictatorial governance regime), which is almost touching the highest depreciation during Pre-dictatorial governance regime i.e. 73%. The Post-dictatorial governance regime marks highest depreciation, if nuclear tests period is excluded from Pre-dictatorial governance regime.

The two period observed with low ratio of currency depreciation are Dictatorial (November 1999 to February 2008) and Period from June 2013 to February 2017. Probably, both periods may be having similarities in terms of currency exchange rate management by taking maximum advantage of dirty float regime. But, on other hand, corruption aspect is not similar in both periods as the dictatorial period, though being considered opaque and unaccountable, but was largely witnessed progressive, transparent and progressive one, whereas, post-dictatorial governance regime has been criticized due to increase in corruption, inflation and poverty etc., and decrease in economic performance. The 2008 was termed a disastrous year for the Rupee after the elections and until August 2008 due to huge current and trade accounts deficits, had been built up since the credit boom in Pakistan post 2002.

Panamagate is very critical issue in the history of Pakistan and its closing point would determine a path towards the challenges of corruption and injustice. In an already impacted political scenario due to Panamagate media trial, any decision by the Superior Judiciary would be no longer favorable for PML-N as the ground level dynamics are largely changed from what are being perceived at the level of top tier leadership, though it has managed a large piece of cake in formation of local governance in Punjab.

Critically noticed that the majority of the representatives of local bodies are not satisfied with the kind of legal arrangement made for their roles and responsibility, especially in Province Punjab. It is pre-mature stage to comment on any new arrangement, but, the result of upcoming General Election may give birth to a democratic government with different possible scenarios, based on which the future of true economic performance would be reflected. It is also observed that the masses would reject PML-N at large in case if any injustice reflected in the decision of the Superior Judiciary.

Probably, the fluctuation in currency exchange rate would be managed through special methods, in a dirty float regime, in case if PML-N succeeds for another term from upcoming General Election. But in alternate scenario, as being anticipated (provided if free, fair and transparent election held), the economic performance variable would more likely reflect huge current and trade accounts deficits similar to one observed in year 2008 and exchange rate would reach to a projected figure between PKR. 120 to 130 against US$, perhaps due to prevailing transparency and accountability issues in the system.

In a nutshell, responding the challenge of instability to economic performance / green growth and ensuring sustainable governance, Pakistani nation needs to get united for a long-term policy narrative against corruption and injustice like its determination for terrorism.