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Potash War: Double edged sword for Lithuania and Belarus

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As per the recent proclamation made by the Lithuanian government, the Belarusian potash will get banned across the country from February 1, 2022. How will this termination of potash transit affect the economies of Belarus and Lithuania?

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Belaruskali’s potash fertilizers are very significant exports for the country as they are the vital source of foreign exchange earnings for the latter. According to the National Statistical Committee reports, in 2020, Belarus earned 2,410,311.5 thousand dollars by exporting potash fertilizers. This amounts to 8% of the total volume of Belarusian exports and about 4% of the country’s GDP (60.3 billion dollars). Lithuania plays a crucial role in Belarusian potash exports because the bulk of Belaruskali’s products are shipped through the port in Klaipeda, Lithuania. That’s why the Lithuanian government’s decision to refuse transit access to Belarusian potash from February 1, 2022, will hit the latter’s economy.

Losses will not affect Belaruskali:

Usually, Belarus receives 2-3 billion dollars from its potash exports, but Lithuania’s recent termination of the transit agreement will result in the loss of 80% in the expected receiving. This will eventually decrease the GDP growth by 1-2%. Moreover, Katerina Bornukova, academic director, BEROC(Kyiv), analyzed that the losses will be incurred by different domains simultaneously, ranging from the Chemical industry, wholesale trade, Belarusian railways etc.

Much depends on Russia’s position:

The vulnerable Belarusian position has made it turn their eyes towards Russia, Belarus’s last and ultimate saviour. Therefore, it has become quite crucial for the latter to search for other alternative routes for the transhipment of potash after the closing down of Klaipeda port of Lithuania. But contrary to it, Russia hasn’t made it stand clear on the matter and still refrains from taking anyone’s side openly. Moreover, Vladimir Putin stated that Russia would become an opportunist in international fertilizer trade and make money by taking advantage of the market conditions.

In addition, Putin also had a meeting with the CEO of Uralchem, Dmitry Mazepin, on January 13, but its conclusions are not revealed but it can be averred that if anything positive happens in their talk, it will add to the problem of Belarus. Uralchem holds 80% shares of Uralkali and is the biggest competitor of Belaruskali. Moreover, the current baffling of Russia between Lithuania and Belarus is a cause of concern for the latter because Russia has not made any announcement or an official statement of helping Minsk in getting out of the current crisis.

On the other hand, the market is getting flooded with several apprehensions by politically exposed people. Pavel Slyunkin, Analyst of the European Council on Foreign Relations, firmly believes that Belaruskali should now go for the northern Russian ports for potash exportation because all other ports are occupied in the region Uralkali. Depending on the future political scenario, it may get possible that an agreement is reached between Belarus and Russia, which will free some Russian ports specifically for Belarus only, costing millions of euros.  

In Counter reaction, Igor Udovitsky, owner of the BKT terminal, Klaipeda, has advised Minsk to file a lawsuit to prove the illegality of the termination. The decision of the Minsk arbitration council will be binding on all competing parties and courts, so Lithuania will need to restore transit access.

Do Belarus and Russia redirect Potash?

In August 2021, the head of the Belarusian Ministry of Transport, Alexei Avramenko, stated the readiness of Belarus to use the ports of the Leningrad region and Murmansk for the exportation of potash in the Asiatic region if, shortly, Lithuania refuses to provide transit access. The ban imposed on Belarus from February 1, 2022, has led it to seek Russian help, but still, Russia has not come out clearly on this matter. It hasn’t stated whether it will help Belarus or not? And if it happens then, such a reorientation will need time to rectify the problems associated with the transhipment. Moreover, some additional time will also be required to get done with all the legal aspects about how the export and transhipment will take place, keeping confidential the identity of the companies involved in these operations. The secrecy will protect the companies from any European and American attack, analysed by Sergey Kondratyev, Deputy Head of the Economics Department of the Institute of Energy and Finance Foundation.

 There are several hurdles too in this reorientation to take place. The distance increased from Klaipeda to Russian ports will also enhance the payment amount of the wagon’s operators for the transhipment, which will adversely affect the profit of Belarus from the sale of potash fertilizers. The distance to Ust-Luga is 55 times longer, to Murmansk – 3.3 times, said Vladimir Savchuk, Deputy Director-General of the Institute for Problems of Natural Monopolies (IPEM). Moreover, in Russia, there is a shortage of port facilities for the export of fertilizers, due to which Russian companies themselves use the ports of the Baltic countries. That’s why Belarus will need to purchase the slots booked by Russian companies in the Russian ports. Sergey Kondratyev added that this wouldn’t be a matter of expense for the Belaruskali because tens of millions of euros a year is not a very big figure for the company, keeping in my mind the scale of their business.

“Belaruskali and Uralkali may join hands again: Igor Udovitsky

However, the journey of Belaruskali from Belarus to Russian ports will not be an easy one; it will have to cross several odds like Uralkali and other counterparties. To attract buyers, Belaruskali will be expected to provide heavy discounts. That’s why there is a severe apprehension by Igor Udovitsky, a Lithuanian businessman, that Belaruskali will have to make “many compromises” with Uralkali, which may also result in the unification of the two shortly. Earlier, both have worked together but cut off the ties after the 2013’s scandal in which Uralkali reproached Belaruskali potash workers for dumping.

Time for experimentation

Moreover, Belarus can also go for different experimentations after the Lithuanian termination of potash transit, for ex: supplying potash fertilizers to China. The same thing also happened in 2020 when the Belarusian potash company supplied potash fertilizers to China via the Northern Sea Route, unlike the previous routes following Baltic ports and Suez Canal. Therefore, assumptions are hanging around that Belarus is again likely to supply potash to China through trains, which will increase transportation costs. But the hikes in potash fertilizer prices can easily bear the additional costs. Katerine Bornukova added that now everything rests on the availability of trains, which will not compensate the volumes supplied through Lithuanian Routes. Moreover, intelligent China is looking forward to take advantage of sanctions imposed and bargain heavily in signing a new contract with Belarus in the wake of the expiration of the previous one that ended last December.

Direct and indirect losses

Sergei Kondratyev has also drawn attention to the direct and indirect losses Belarus will face. Of course, direct losses are tens of millions of euros due to snatching of the transit access, but the leading cause of concern would be the indirect losses. The sanctions imposed by the EU and the termination of transit by Lithuania have worsened the condition significantly. The termination has left Belarus with Russia as the only option available for the transhipments of potash, due to which the latter missed the opportunity of demanding more attractive offers from Moscow. 

Indirect losses per year can reach 80-100 million euros which will act as a financial suppressor to the economy of Belarus. Furthermore, European Union sanctions have made Belarus tranship its export cargoes only through the ports of Russia. This is facilitated by the poor relations with Ukraine and the Baltic nations staunch support to the EU sanctions. Sergei Kondratyev also emphasized that the value of Russian ports has increased because that’s the only route left for the Belarusian potash export. The companies responsible for the operation of this route may demand more attractive conditions from the latter, considering their risks. 

Lithuania’s perspective

Apart from Belarus, Lithuania will also suffer badly with this termination. It will lose the status of a great transit power after the departure of Belaruskali, which it maintained even after a significant part of Russian cargoes in the 2000s. Moreover, the country is itself not sure whether the Belarusian potash will cease to be transported in the country after February 1, 2022, as the Lithuanian Transport Minister, Marius Skouodis, himself expressed his dilemma on the same. As per him, the effective ceasing can only be done after the sanctions imposed by the EU. Finally, the country’s bad relations with China will result in transhipment losses and confine it only to the domestic needs of the Lithuanian economy, which is very small.

The Central Bank of Lithuania has calculated losses

Amidst the sanctions issue, The Central Bank of Lithuania came up with an estimation that a halt in the Belarusian commodity flow will result in a 0.9% decrease the country’s GDP in three years.

The same opinion was shared by Swedbank Chief Economist Nerijus Mačiulis and Ione Kaländene, Head of the Research and Analysis Department of the Entrepreneurship Development Agency Versli Lietuva. Former believed that due to the loss of transit, gross domestic product growth in 2022 will be slower. But the slowdown in growth will be slight and amount to 0.2-0.3%. Therefore, the planned growth of the economy easily compensates for the short-term fall. He stated that loss would be shared by different state-funded institutions like the Latvian railways’ company, the port of Klaipeda and several other companies. Of course, the state budget will lose some of the income, but there will be no significant macroeconomic effect. 

And Lone Kalandene opined that although the volume of transportation of Belaruskali fertilizers in Lithuania is vast, the losses incurred will be easily compensated because the leading carrier companies are state-owned. This will result in a little more burden on the state budget but will shield the Lithuanian economy.

Klaipeda port will face difficulties.

Algis Latakas, the head of the port, held the view that the ceasing of the transit of Belarusian commodities would incur heavy damages for both the port companies and the port authority, which cannot be compensated quickly. That’s why he asks for an assistance to be provided to both port companies and port authorities.

Igor Udovitsky, a Lithuanian entrepreneur, also believed that the sudden termination of the transit access would result in billions of euros, direct loss to Lithuania as 1 million tons of potash transit passes through Lithuania and the port of Klaipeda every month. As per his calculations, the loss of the contract with Belaruskali will result in total damage of more than 1 billion euros. He also mentioned the calculated loss on his Facebook page. Until now, the port of Klaipeda has been the leader in cargo transhipment in the Baltic States and was among the top 5 most efficient ports in the Baltic basin. 

The status which Klaipeda achieved in the backdrop of the industrial crisis in Latvia and the shortage of cargo in the Eastern Baltic will become challenging to achieve again.

The head of the Association of Lithuanian Marine Loading Companies, Vaidotas Šilejka, also supported Mr Igor Udovitsky and expressed the irreplaceable position of Belarusian fertilizers for Klaipeda. According to him, the port will lose about 10 million tons of cargo per year which will undoubtedly shake the entire port of Klaipeda and the enterprises operating on its territory. On losing such a significant amount of cargo, port companies will need more than a year to reorient their activities as there are no alternatives available at the moment. Furthermore, the termination will also have wide-ranging implications in different domains and pose geopolitical challenges and changes in the global macroeconomic trends.

The audit and consulting company Ernst & Young also estimated that in 2019, due to the transhipment of Belarusian cargo in the port of Klaipeda, the country’s budget was replenished by 155 million euros (this is 1.4% of all revenues). At the end of 2019, 14.1 million tons of Belarusian cargo (30.5% of the total cargo turnover) were transhipped at the port, in 2020 – 15.6 million tons (32% of the total cargo turnover). In addition, the processing of Fertilizers of Belaruskali amounted to 25.5% of the annual transhipment in Klaipeda. According to preliminary reports of the Port Directorate, in 2021, commodity flows from Belarus accounted for about 30% of all cargo.

Latvian Railways are waiting for fines and reduced profits

 This political manoeuvring of the Baltic countries will cost Lithuania also dearly. Stopping the transit of Belaruskali will be a severe problem for Lithuanian Railways as well because it was a valuable customer of the latter. The company may lose more than 20% of the commodity flow.

At the end of 2021, Mantas Bartuška, who was the head of the Latvian Railways at that time, said that the company would lose 60 million euros of annual revenue and the entire logistics chain as a whole – more than 100 million euros.

Former Lithuanian Prime Minister and Chairman of the Democratic Party of the Seimas of Lithuania Saulius Skvernelis believes that the damage to the Lithuanian economy from the rupture of the contract for the transit of Belaruskali fertilizers through the territory of the republic may amount to “from one to several billion euros.” He also said that Lithuanian Railways would have to pay a fine of 600 million for breaking the contract with Belaruskali.

Commenting on Skvernelis’ statement, Sergey Kondratyev said: “600 million is a very, very large figure. There is a possibility that Lithuanian Railways will try to somehow protect itself from this fine by challenging it in court, for example, or by obtaining protection from the government.”

Suppose the problem persists longer for 2-4 years. In that case, Lithuanian Railways will have to make a severe reduction in the scale of its activities: lay off personnel, reduce investments, and perhaps even have to consider the conservation of certain sections of tracks that will not be in demand.

“We don’t know how far things can go. Therefore, for Lithuanian Railways, the effect of stopping transit may not be felt right here and now. Yes, there will be fewer cargoes, but the company has a margin of financial strength to hold out for a while. But on the horizon of 2-3 years, losses can be tens of millions of euros, if we are talking about profits, and hundreds of millions of euros if we are talking about revenue, taking into account not only Belaruskali, but in general all Belarusian transit, including imported cargo. This could be a very serious blow for Lithuanian Railways, after which it will probably be difficult for the company to recover or, at least, play in the same weight category,” Kondratyev said.

In general, the overwhelming majority of experts agree on one thing – the “transit war” will not bring victory to anyone, and ordinary people will become “victims” in the geopolitical confrontation of states.

The negative economic consequences of stopping transit are apparent both sides will suffer equally. It will equally affect both the economies, both private and public companies as well as both the business leaders and ordinary workers.

As a social scientist anybody can conclude that both will have to come on negotiating table to broom out the dust of distrust. Sooner they will do it, better would be for both. The popular former Prime Minster of India, Mr. Atal Bihari Vajpayee remarked, “You can change your friend but cannot change your neighbour, you can change your history but cannot change geography”

PhD research scholar in Russian and central Asian studies, JNU. My research area is Russia specifically and my series of articles are on its way to get published.

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G7 & National Mobilization of SME Entrepreneurialism

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Image source: twitter @G7

While G7 shares their wisdom, some 100 additional national leaders are also desperately trying to get their economics in order. Visible damages are the lack of productivity, performances and profitability across the national SME sectors, reducing exports, growth and job creation sharply. With little or no specific economic solutions on hand, the economic development teams are open to new ideas. Critically needed, to catch up the lost decade, a generational transformation urgently required; such new challenges demand hyper speed, global-age style execution so what’s stopping all this?

The four transformational stages: National economic development teams must first come to the big realization, that today, a wide-open world is always open for high value goods and services produced. Study the global patterns of high value consumptions. Therefore, hardcore upskilling exporters and reskilling of manufacturers must become top priority over popularized abstract crypto-sci-fi-economies.

The absence of constant learning and constant disruptions must stand up to the global age demands of global age competitiveness. Fact: The world can easily absorb unlimited exportable ideas in unlimited vertical markets. Fact: The well-designed innovative ideas are worthy of such quadrupled volumes. Fact: The entrepreneurial and dormant talents of a nation are capable of such tasks. Fact: The new global age skills, knowledge and execution are now the missing links.

On the other hand, the majority of nations with existing postures of comfort are already flooded with massive innovations, but still ignoring lack of massive commercialization, due to lack of entrepreneurialism. Over certification and degrees but seriously lacking entrepreneurial directions or surrounded with empty incubators and exhausted accelerators as real estate projects. Sometimes, too many economic development programs but often without a mega punch of pragmatism.

Round-table discussions are good starting points; without debates, the silence only sinks economies.

What can nations do? During recent decades, Western economies of the free world on the midsize business economies were too slow to understand ‘soft-power-asset-management’ , the art of imagining things over ‘hard-asset-centricity’ where staying deeply stuck to old routines on old factory floors was rewarded. This is like when bicycle makers, restricted to dream about ‘drones’ or flying cars. Some 100 millions small and large plants around the world are badly stuck in old groves of decades old mentality, unable to transform to the meaning of global-age, unable to rapidly optimize to grow to new heights with new global age thinking and execution.

Bad globalization planning did the rest of the harm. Imagine all that wasted potential, talent and machinery, infrastructure under the dead weight of old mentality still logged into hard-assets… deeper studies are critical. If facing the truth is not a problem, study China and their SME optimization as an excellent strategy. 

The error of mind: The term “SME” is a grave error, a misnomer created by job seeker mindset, as there is nothing small about a baby elephant. It will become an elephant in time. It is all about creating a big new company, active within a big economy of million small medium large businesses within a nation.

National mobilization of entrepreneurialism is a systematic entrepreneurial driven methodology to uplift 1K to 100K SME entrepreneurs with in a region, sector or a nation, into advancing and up scaling their enterprises by upskilling for better exports, reskilling for smarter manufacturing and understanding innovative excellence to enable standing up to global-age competitiveness of today.

A simple fact, like turning an ‘on’ and ‘off’ light switch; economies without digitization are as if without electricity, without upskilled frontline teams on tasks as if without a bulb. Just like all other professional requirements, this expertise calls for advanced and regimented training and skills to deliver and manage such major national tasks. Evaluate frontline economic development teams as a prime objective to create new thinking.

First, the philosophy: National mobilization of entrepreneurialism on digital platforms of upskilling for innovative excellence are not new funding dependent, they are deployment hungry and execution starved, so what’s stopping ? Hidden in the differentiation, deeper understanding of “extreme-value-creation for creating local grassroots prosperity economies” and the “extreme-value-manipulations for creating hologramic-debt-based economies” and this is where the future challenges are hidden.

Second, the new mastery: As the cycle of laborious-work are getting replaced by smart-work while smart-work getting replaced by smarter machines, the ‘Masters of Robots’ will be the new smart unlearners, the ‘Slaves of Robots’ will be the deniers of change.

Thirdly, the critical observations: Why has the immediate replacement of the old education system around the world with new global-age transformation has become so necessary? It is a liability on national productivity, it is a burden of debt on the emerging youth of any nation and it is rotten from the inside damaging business innovation and economic philosophies in the silence of the day.

Meritocracy is only painful when refusing change. Therefore, national mobilization of entrepreneurialism is only possible when job creator mindsets deliver bold narratives. Nothing happens when silence dominates. Discover advanced level thinking, create bold open debates, and explore Expothon and such ideas on Google

The unmasked SME economy: Nations with deeper upstanding of creating, developing and managing systematic growth to Micro Enterprises, Micro-Manufacturing, Micro-Trades & Micro-Exports, have a distinct advantage to quadruple exportability. Uplifting entrepreneurialism is not an academic exercise but revolutionary cycles led by entrepreneurial mindset capable of harmonizing various types and layers of mindsets. Acquire your own mastery

Old-order is no-order: Emergence of new thinking, everything almost broken, and everything procedure or policy for sale, therefore, everything ready for change; new vision, new mobilizations, new deployments and new talents openly challenged. The visible damage points to chasms and voids need of urgent fixing, bold narratives a must. Expect a change, create a change and become change. Discover new pillars of economics.

The five new dimensions; The political science is now transforming into becoming the real economic science. The power of a nation is neither the hard nor the soft power but the real value of economic power? The economic power now measured by national skills of citizenry to become productive, or slide towards fake-crypto-tyrannies. The national leaderships expected to create economic development as their prime mandates and save their own sovereignty on the global stage. The rest is easy. 

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Change in the Paradigm of War from Physical Warfare’s to Economic Front War-Zones in 21st Century

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Some realist critics in the realm of International Relations believe that in the 21st Century, wars tend to be dominated by military power and armaments. On the other hand, Skeptics of Realism believe that New Fronts, however, are more immersed in economic struggles in the form of Tariffs, Protectionist Policies, Hostile Infrastructure Initiatives, and the Utility of Economies to undermine the enemy’s economy and accomplish Geo-Political Objectives. This Paradigm Shift can pose an ominous hazard to the peace of the International Financial System and the Developing Economies of the Third-World countries, Particularly South Asian Economies.

As discussed, new War Fronts deepened in Economic Zones and Economic Infrastures; it is pretty perceptible that economic sanctions as a tool of war by even the most Powerful States are a new variant in the Warfare Literature. USA unfettered Sanctions on Iran and North Korea are a clear manifestation of the Military Presence and Conventional tools to execute Wars in the enemy countries’ meltdown in the 21st Century. Following the International Political Economic Theory of Classic Mercantilism which focused on the Tariffs and Taxes, The Rising Waves of Protectionism to contain the rise of Other Countries reveals that Wars have become economy-oriented.USA Policies during Trump Era revealed that both USA and China contained each other by restricting economies through tariffs and taxes on each other Economic activities to destabilize the markets. 

As it is clear that the World is moving from the Conventional War-Zones to Economic-War Zones, the Rise of Economic Infrastructure Initiatives can be observed that different nations use to enhance their powers. It is a modern way to corner hostile countries through the development and infrastructure abilities.OBOR is a Chinese initiative to connect Europe and Asia through the One Road, One Belt Project. The development of this project will put China in a position to own the Euro-Asian Region by expanding and making other states too much dependent on Chinese Economic Activities. In response, the USA, with Eleven Countries, developed the Trans-Pacific Partnership to secure the Sea-Lines and Sea-Routes to corner the Chinese Hegemony in the Region. In this way, the Global Powers shifted their Policies of Conventional Warfare from Physical Military Presence to Economic-Zones. The Development of Economic Infrastructure is a hallmark of establishing the hegemony and domination in the region.

The reasons above that World is Invalidating the Realists Perspectives in which Military-Driven Strategies are developed to Secure the Nation-Interests can be substantiated with the Liberalism Perspectives that Focus on Global-Actors to regulate the world through economies. In the Indirect War of US-China, the USA used to undermine the Chinese Strategy to Combat the USA not by the Military Presence but with the help of Economic Obstacles.USA pressured Pakistan in 2019 through IMF to reveal the documents of CPEC, which is the Chinese Project to Increase her Infrastructure Initiatives in the Euro-Asian region. The USA tactically tried to undermine the CPEC, which could be a monumental loss for the Chinese Economy. Moreover, the Traditional Foes, Pakistan and India, constantly destabilize each other through economic proxies. For Instance, India attempted to block Pakistan through FATF; this attempt was to contain and restrict Pakistani Power Dynamics.

The world is shifting from the conventional standards of Warfare’s to economic zones with an Increasing Quest of States to capture the economic zones having natural resources, which is further clarification for the financial nature of Warfare. As the South Chinese Sea area has more oil, minerals, and natural resources, China is attempting to dominate this resource-rich area to counter the threat of the USA in the region.

The other options of Increasing Economic-War-Zone front lines are discernible in provoking the capacities of World Powers to dominate Sea Lanes of Communication for further economic strength. World Trade Routes are dependent on sea-Lines for Trade and Exchange. In conventional Warfare, the enemy country used to show Power Display through the naval powers. Still, in the 21st Century, the Paradigm shifted in the form of blocking sea lines and Sea-Routes for those countries which are hostile to each other. This evolutionary nature of Warfare can be observed when Iran, after getting economic sanctions from the USA, attempts to mine the Strait of Hormuz and Block the Trade Route by halting the Sea-Lines for Communication. Technically Speaking, Sea Routes are Economic. In Nature block, these routes are considered to open new War-Fronts in Economic-Zones.

Now we will discuss the reasons for shifting from Warfare to Economic Front Lines; after WWII, the constitution of World Organizations like IMF, World Bank, and UNSC evolved the International norms that made the military combatants difficult in the global arena. As the Military Powers Grow with the Stable Political Systems and the Stability of Political networks in any country is dependent on the Economic Stability, which is further dependent on the connectivity and interdependence in the globalized world. With time rising dependence of nations’ states on each other curtailed the threat of Physical Warfare. Countries are economically dependent on each other; any halt in economic relations due to causal relations of Physical Wars and Military Presence could destabilize the whole nation with more stagnation. So the nature of Modern Warfare is Economic in Nature, and Countries use Economic Tactics to contain the Enemy, which declined the Threat of Physical Warfare in the 21st Century.

Coming to the Possible Solutions; The Regional Actors should orient their policies so that the nationalist and cultural interests shouldn’t invalidate the economic claims of the nations. The Economic Policies shouldn’t be used as the game tactics because they could have lethal consequences on the Ordinary People battling economic nations. Moreover, the hegemonic powers should redesign their policies for the greater good of global countries, which are primarily dependent on the economies of First World Countries in the 21st Century.

To conclude the preceding discussion, It needs an hour to reconsider and reinvigorate the Specter of economic wars lest they should undermine the development of Multilateralism and Cooperation that has been attained in the 21st Century as the economic warfare zones have more inclination to collapse the world order which can be viewed in the form of North Korean Famine which emerged due to more Sanctions and Tariffs because of Indirect USA battle against North Korea on the matter of Nuclear-Deal. The Global Powers should pivot over the rising threat of economic warfare so the world could save from aversive policies.

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Economic woes of Pakistan: Who is the villain?

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Economics, politics, and personalities are often inseparable – Charles Edison. So is the case of Pakistan, which has witnessed a strong synergy between economy, politics, and personalities in the past few decades. The reflection of the strength of any country depends on its economic status, which has now become a huge challenge for Pakistan to cater. Despite being a resourceful country, Pakistan has remained in a perpetual crisis-mode. Poor governance and political instability, among other factors, has contributed to widespread poverty and stagnant economic growth. It is the burning need that polity prioritizes converting Pakistan’s geostrategic location into an asset. The key for this is good economic governance and economic stability which can only be achieved through economic synergy between institution and all political stakeholders.

The world has witnessed foreign conspiracies in many countries. One of its components is economy. The point which is significant for us to ponder upon is whatever we are facing today in terms of economic crisis is somewhere limited with foreign hatched conspiracy or with our inability to cater the balance between exports and imports, our inability of controlling the soaring dollar rate, or our inability to expand our tax base. I think, later one is a more relevant fact. According to Pakistan Bureau of statistics the annual inflation rate in Pakistan increased to 13.8 % in May 2022. It is the highest inflation rate since January of 2020. Increased levels of inflation with low levels of employments have added to grievances of a common man.

We have learned a lot about the new terminology through domestic media that is “Charter of Economy”. But is it viable? What are the cardinals of this charter? Although the common understanding is that charter of economy seems to be the sustainable way out as it talks about a broad political consensus among major political parties on how the economic policy should look like, yet it is utopian idea given the extent of political turmoil Pakistan is currently facing. Thereby, the current government must push Pakistan towards path of sustainable and inclusive economic growth, meanwhile dialing down its confrontational rhetoric. The political stakeholders must set aside their political differences at this time of grave economic crisis and realize that political infighting comes at a greater cost which is mostly paid by ordinary Pakistanis.

Fixing two or more economic variables on macroeconomic chessboard is not enough to fix the current problem. In a diverse country like Pakistan where the society is profoundly connected with everyday politics and desperate for change, it is important to have a creative, functioning, and reliable governance system which can pursue an economic policy consistently and wisely. Pakistan needs a consensus at the civil society level as well as on the political level. At grass root level, Pakistan must translate its demographic power into substantial social progress. Reducing grievances of people will make them less prone to the information warfare Pakistan is facing. On national level, serious structural reforms are needed to put the economy back on track. Politicians must understand that IMF’s mission is not growth and development of the state, it’s responsibility of the government. IMF merely helps the state in its balance of payment problems.

Furthermore, to achieve macro-economic stability, few immediate corrective measures need to be taken that includes reducing subsidies, halting artificial depreciation of rupee against dollar by restoring confidence in market, broadening tax net, and formulating set of interventions in agriculture, energy, services sector to boost the economic growth. Pakistan’s federal and provincial governments should also improve production and investment in private sector. Entrepreneurship must be encouraged. Provincial governments must cooperate in this regard. Parliamentary committees must be created to overlook the economic policies and these committees must be held accountable to parliament. Moreover, government must ensure that the economic growth is inclusive of all classes of the society, as John green has rightly said: “Economic growth means nothing if it’s not inclusive”.

Stabilizing economy should not be a matter of party affiliation, but a common ideal ground for all political actors. This vicious cycle of political instability is now creating further more polarization. There is a dire need for strengthening the federation and providing high level political and policy guidance to the political actors.

That brings us to the bottom line, the villain is ineffective economic governance. Beneath the intense ongoing political tug of war, the fundamentals of economy fabric of Pakistan remain the same, however, the prospects are always there to come out of the crisis. Political reconciliation is need of the time and a prerequisite for economic recovery of cash-strapped Pakistan. The preliminary steps would no doubt be difficult, but they are not impossible. Structural reforms followed by Political reconciliation and charter of economy is the way forward for Pakistan economy otherwise facing a Sri Lanka type situation is not out of possibilities.

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