Welcome all to this special session on Pakistan, its economy and its political future.
It gives me really very great pleasure to introduce Dr. if that smile, whom I'm sure you all know,
has had a distinguished career as an economist and as a member of more than one Pakistani government.
He was federal minister of Finance in 2018 and again in 2022.
Before that, he was advisor on Finance, Revenue and Economic Affairs.
Chairman of the Pakistan Board of Investment. And prior to his return to Pakistan.
In those capacities,
he was an economist at the IMF and has done a Ph.D. in public finance and political economy from the Wharton School at the University of Pennsylvania.
So eminently qualified to speak of this subject.
Subject. I would like to thank the Pakistan program for co-sponsoring,
along with the Asian Studies Centre and the Oxford Centre for Global History, which is the overall sponsor of the seminar.
This is the second seminar in a series on Global Order.
The first one was held at Nuffield College and the speaker on that occasion was Wadah Khanfar,
the founder of Al Jazeera, who spoke on the decline of American activity in the Middle East.
So this is a seminar series that deals with the larger problems of global ordering and its future by looking at specific cases.
So we are delighted today and please join me in welcoming Dr. Amir.
Smile. Thank you, Professor Furstenberg and the Asia Society.
Central Asian Studies. Asian Studies Centre. And and for inviting me an organising distraught thank you and thank you all of
you for coming here and giving me a chance to speak to you and interact with you.
What I'll do is I'll run through a presentation in about 30, 35 minutes, and then we can try and answer some questions.
And I'd love to hear your comments on this, because what I'm trying to do is actually to write a book.
And so I'm basically going to give you the outline of the first two chapters and let's see what happens.
And then if you guys can let me know if it's worthwhile or not.
You know, here's the road map for the presentation.
I will first. Argue or try to make a case that Pakistan is an elite captured state.
After doing so, then I'll try to argue that in a state like Pakistan, what is important is the maintenance of the status quo and not.
This is not a state that is looking for social justice or a state that is looking for growth, economic growth that lifts all boats.
And because it is state that is looking for status quo maintenance of the status quo.
Therefore, the governance has become very ineffective in Pakistan over the years.
And some of the reasons that we'll discuss and then I'll try and give you some examples of why the governance is ineffective.
Then we'll talk a little bit about Pakistan being in severe economic crisis and not just an economic crisis.
And here I'll also speak a little bit about Sri Lanka,
about why I think they also came under a lot of pressure and because of the recent events, Bali crisis, as some call it.
And I think that's where I'll stop. I will not go to the pillars that I think that we need to.
Some pillars that will underpin the subsequent growth.
But I will suggest that the crisis that Pakistan is going through in and the further crises that we will go through
political as well as economic crises present to us an opportunity to do something about the structure of the state.
So let's start with the elite control thing.
And I spoke to I gave a TED talk before I became a minister this time around in 2021, when I talk about Pakistan not as an Islamic republic,
which Pakistan fashions itself as but as the 1% republic, because Pakistan is controlled by,
you know, 1% of Pakistanis and ill defined elites in a minute.
But let me start with this example of one plus one plus eight, and we will talk about examples of true in education, politics, military and business.
But let me start with education. There's a school in Lahore called Aitchison College.
Half of Pakistan's judiciary currently right now, more than half of our judiciary come from this one school.
60% of Imran Khan's cabinet used to come from that school.
At any given point, I mean, it would be fairly surprising if, you know, four out of ten cabinet members are not from that school.
There are 200,000 schools in Pakistan and one school, which only is a boys school, is giving you half of your judiciary and half of cabinet members.
So that tells you, you know, the importance of network,
the importance of elite control and importance of being part of that network so that you can then progress in life.
There is another school in that adjacent colony ground.
It just in 150 acres, which is called Aitchison Colony School.
This is a school for the children of the drivers and gardeners and the helpers who work in the school and then for their children.
And not one kid from that school ever goes to become a Supreme Court chief justice or justice.
There's another school in Karachi called Karachi Grammar School, where half the rich people of Pakistan come from.
Almost all the top bankers. Karachi based lawyers, professionals, they come from that school.
The current chief justice comes from, you know, not difficult to guess, you know, Aitchison School, Lahore.
The next chief justice will come from Karachi Grammar School.
So that's the whole of, you know, these two schools.
Now, if you add another few schools, the three American schools the got it got it in Potrero that got it.
Got it and that's it. So you have maybe 20,000 kids whose parents today control all of Pakistan, who father, in all honesty, control all of Pakistan.
And these 20,000 kids in these different schools will go on to control all the important positions in Pakistan.
And when you give me exceptions, those are exceptions, really, that prove the rule.
But let's generalise this a little bit more. 2% Pakistani children, schoolchildren go through the A-level and all level stream of education.
97%, 98% of the others go through the Pakistani system, which is the metric and intermediate.
But so this is about 40,000 or 45,000 kids who will get a lawyer who will do 11th this year.
And that's about 2% of all the kids. Right. We have 65 million kids of school going age and he has 40,000 kids who do A-levels.
And you can be absolutely sure that every single good job will go to these poor kids.
These are the only ones who are actually prepared for college in the world.
You know, best colleges in the world who are the they're the only ones who are actually given a good education,
who are not dependent on rote memorisation and who can actually compete in the world, in today's world.
What about the other 97%? Well, I mean, I'm just saying to in 98, 97, two and a half percent and 98%.
But actually, half of our kids don't go to school. Half of Pakistani kids of school going age are not in school.
The World Bank estimates that 75% Pakistani children have what is called literacy poverty, which is to say that a ten year old child cannot read.
Age appropriate two sentences. That's 75%.
That's World Bank's estimate. Recent estimate. The report was released, I think just this month.
The Afghan university did a study for 50 of 15,000 kids across Pakistan.
The average child got 27 points in math and 31 marks in science.
So the average Pakistani child fails both math and science. 67% of Pakistanis, they say, are illiterate, but really they're not.
I mean, you know, because if you look at 75% poverty, illiteracy, they can't really read and write.
So of the 65 million kids and more than 20 million are out of school, another 10 million are in madrassas.
Madrassas and half go to school. Only 45% get to 10th grade.
Only 45% get to 10th grade. And so you have these very elite kids, the 1% Pakistanis.
Then you have 10% middle class Pakistanis who can do, you know, O-levels, A-levels, upper middle class Pakistanis.
You know, if you look at LUMS and ABBA and Alcon University, the three best universities in Pakistan,
by any measure, an overwhelming majority of the children are from all level 11.
And yet only 2% Pakistanis go to these schools, go to the system.
So so so we have actually the best opportunities are for the elite.
The second best opportunities are for the middle class. And then there are the 90% Pakistanis, the poor Pakistanis.
60% of Pakistanis have family income for a family of six of less than ₹35,000 a month.
That's less than, I think, £100 a month, that 60% Pakistanis.
So the 90% Pakistani we've added but these are others, you know, their hunger doesn't matter.
Their, you know, living condition doesn't matter, their health conditions doesn't matter.
The illiteracy doesn't matter because they're not people like us,
which is a phrase that Pakistanis use in education is not the only obviously elite controlled area.
But we start with that. And how do we get keep this?
We can't keep this by the English language. The ability to speak English or inability to speak English essentially divides
Pakistanis into middle class and elite and non-military class Pakistanis.
You know, the other Pakistanis, the lesser Pakistanis, the poorer Pakistanis.
And that you know, that gatekeeping. And that's the best thing about English rates in Pakistan.
And that gatekeeping continues. The government talks about, you know, medium of instructions.
And then we have papers and papers written about this.
But even today, you know, we are teaching kids in languages they don't really understand.
So English access, gatekeeping, you know, gatekeeper for elites.
And so this elitism starts early on at school.
And then if you look at politics, politics, of course, is dominated by feudal families or, you know, rich families or elite families.
And it continues. There's hardly a politician you can think of, really, except for maybe a fan who did not come from an elite background.
And these things go to families. I give the example just to be neutral of a foreign.
He in 1934 started a movement called Academic Garb Movement.
Then his son, one of his sons, became governor of NWFP.
The other son was Vali Khan, who became head of National Awami Party.
Bhutto then banned the National Army Party in jail of a legion.
So the rechristened the party as National Democratic Party, and that was headed by his wife in family.
And then after Ali Khan's that, his son became president of his party.
It's now called Awami National Party. And this the revolution became president third generation.
And now, after a year, we already know that the next president is going to be a million different.
So for generations in that family, and that's repeated everywhere, that industry in 1970s maybe will hark.
The Pakistani economist and former finance minister did an analysis where he found that two thirds
of industrialists and fourth fifth of our banking assets were controlled by only 22 families.
That was a small Pakistan. The population was much less, I think, one fourth of what it is today.
So since then, we now we should be able to come up with 80 families that control this much.
Since then, Bhutto doesn't regard Ali Bhutto nationalised Pakistani industry.
They did a lot of, you know, stuff. We have these rules against monopolies.
We have these rules. Why, you know, companies have to go to stock market and load their stocks and look at what happens
today of the top ten private banks in Pakistan that controlled 68% of deposits.
Habib Bank is the iPhone Foundation. UBL is set on Workers Bank.
Even having a bank are the same family, which is the Habib family.
Originally the richest Pakistan's Muslim commercial bank is Munya Allied Bank bankers.
Mukhtar you all know Askari Bankers.
Faisal Bank is Faisal Bank, and it's by a Saudi Prince bank, followed by a UAE prince and Misan by a Kuwaiti family.
So they are the three or four Pakistani families that control most of the big Pakistani banks.
38% control of listed companies is again by ten groups.
Daoud Group, which was the two richest groups, Denver Habib in 1974,
Habib then Daoud still the two richest Pakistani groups are have even though they controlled 9% of Pakistani industrial assets to bars.
Lucky segment people controlling the 5.1% the Lakhani two cigarettes are now folded a
sold out are do 4.1% house of a we have just 2.4% here as well as the big banking areas,
the Shiraz, these do motorcycles that are not part of the cement.
And if we, you know, again, 2.4% in one shot who also owns M.S. with us, 1.6% and the other is 1.3%.
So I go to cycle who were also there in 1973.
So things have really not changed much. And if Table, for instance, has come up, people are also part of the elite, just not part of the first 22.
And and what happens is that because of this, you know,
there is not even professionals who can come up to the elite because the families just control this and, you know, they just run it.
The concentration of wealth in Pakistan has not changed. I was giving a talk yesterday and somebody said, you know what?
There was one counterexample to my thought. And then when you said that malaria is of barrier down, you know,
started from a non middle class emotionally, you know, background and that's rose to the top.
I said, yes, that's true. So I will give him that. But but that's an exception that proves the rule.
And then military and bureaucracy. And as we were talking prior to coming here,
the one thing that military and bureaucracy do is that they they recruit their young officers from middle classes,
not from the 1% elite that children go to Cambridge, in Oxford and in America like you guys have.
But but the middle classes, that's where the army and bureaucracy officers are recruited from.
But they live a very separate life from the lesser officers, the lesser employees of the government, the soldiers.
You know, it's a very different life. And then once if you're retired as a general, you also become part of the elite, also rich and also powerful.
And if you retired also as a bureaucrat and you've been, you know, kind of smart about this, you know, you also are part of the elite forever.
So so this is these four groups.
And they go up to other groups, the old mother, religious clergy and the media.
And these six groups are the elite group that control Pakistan.
And what happens is that not everybody can directly exercise control, but they can have blocking coalitions.
So the ultimate, for instance, are not able to drive an agenda and get something done.
But they can stop almost everything if they want to, you know, so that they are part of the blocking coalition.
And I define and, you know, elite group as part of an interest group that can block, you know, the powers that be to do something.
So, you know, people if you're trying to change something, you know, they can block this.
Interest groups are not a new phenomenon or a novel phenomenon to Pakistan.
Of course, you know, everybody in the world has interest groups and you have parliaments,
which works as a clearinghouse for different interest groups.
Different groups interact with each other and you sort out and you have different coalitions.
For instance, today in India, there's a coalition of Hindutva extremist as along with,
you know, Gujarati and Marathi businessmen and other businessmen. But these coalitions can change in Pakistan.
This coalition and every coalition has to have the military within it.
You know, winning every winning coalition has to have a military within it.
These coalitions cannot remain static. And because of the the importance and power of these interest groups,
Parliament does not become power because the interest of army in the politics and other institutions in politics, Parliament does not become powerful.
It's not really doing the job of a clearing house amongst interest groups.
And so you don't really have a lot of you don't see a lot of change in Pakistan.
And as a result, interest groups hold on to their own privilege.
I'll give you one example right now before I move.
That we have five airlines in Pakistan for our private sector airlines and one government airline per year, Pakistan international airlines.
This year, PIA will lose about ₹90 billion and BA has lost money every year of its existence.
Supposedly, it made money two years in 2003 or 2004.
But I know this. I've been a director of CIA, that those were also gimmicks.
But really this sort of lose money every year. And yet we continue to have a government airline for no reason at all.
The aid doesn't pay money to civil aviation. Its dues pay doesn't pay for fuel to Pakistan state oil.
And it just creates a lot of mess. It's not safer than other airlines.
It's not better than other airlines. Its fares are not cheaper than other land.
But we do have a venue because the 12,000 employees of Paladin block and then sometimes they will, you know,
make coalitions with one of those fixed forces that I talked about to to to sustain themselves and stop from privatisation.
The salaries of these employees is about 20 billion and yet we're going to lose 90 billion.
So we are actually better off just giving them salaries. And then we still have 70 billion, but we still run.
Pia So that just tells you that, you know, people just don't give up on their privileges.
So my thesis is my argument is that we have three Pakistans.
One is the Pakistan of the elites, the very rich elites, the 1% elite, the top military, the top bureaucrats, the top rich people and stuff like that.
Most children, you know, go to the best schools and have the best options and who will go on to become rulers of Pakistan?
Then there are the 10% middle class Pakistanis who still, you know, have connections of this.
You know, they can do safaris and this and that upper middle class, comfortable life.
And then there is the 90% Pakistanis, the poor, the downtrodden, the drivers, the masses, the jockey are the guards, you know, who really?
For whom having three meals a day is a struggle, a lifelong struggle for whom recessions really are a way of life.
I mean, it's not a temporary thing. You know, they're they're living at the edge of, you know, this poverty.
And I'll we'll talk about that in a minute when we talk about ineffective governance and all that.
And so in this next walk in this Pakistan where you have these elite control,
so if you are a Habibur Daoud or a tiger, what you really want is maintenance of the status quo.
People don't measure their utility or their happiness in absolute terms, the measured in relative terms.
So you want to know that you're the richest Pakistanis.
You know, you don't really care where the richest Pakistanis are, richer than richest Indians, origin, Bangladeshi, the richest Americans.
They want to be just the richest Pakistanis, so they don't really care about it.
If you're the richest Pakistani, you don't really care about growth and you certainly don't care about social justice.
If you're a rich, elite Pakistani from any of the military bureaucracy, you know, political, feudal families,
you are more interested in this maintenance of status quo than and maintenance of your own privilege, which is bound to the status quo.
Then you are for change, which will result which could result in growth.
And that would be better for everybody, but which would also result in growing a different section of society.
And it could be worse for you.
So then, because of just society not going for growth and not going for social justice, we get a very ineffective government.
And Pakistan is in this predicament today in all these crises.
And these are not unique to Pakistan, the international, you know, crisis of commodity supercycle, what happened in Ukraine,
Russia war and the price of oil and all of that that has happened to a lot of countries along, you know, doesn't happen to every country.
But other countries have dealt with this better.
But Pakistan was not able to hit. I'll just say that, for instance, when COVID came and tourism you know, tourism decline,
Sri Lanka was disproportionately hurt because it really relies on tourism.
But Pakistan was not really heard that much,
and neither was Pakistan particularly hurt by more hurt by the commodity prices going up or oil prices going up.
But we've not been able to face it because we had a very ineffective government.
Pakistani government is truly very ineffective. And so all of all Pakistanis know that that population, Pakistani population is growing really fast.
And Pakistani governments have been trying for 30 years to try and control population growth, at least 30 years that I know of.
The governments have been trying to control population growth.
We have a ministry for the entire, you know, controlling government and population growth.
And yet an average Pakistani woman has fertility rate 1.8 times that of average Bangladeshi woman and three times that of an average Sri Lankan woman.
We have up until the last census we were growing at 2.4%.
Now we are still growing at 2.1%, one of the largest, highest, fastest growth population, growing population in the world.
We can stop the population for now. We try to make a virtue out of necessity and to talk about demographic dividend.
But the fact of the matter is that Pakistan has 5.5 million babies every year, 5.5 million babies every year,
which means even if 2 million babies are not going to have to go will not go to school and all that.
You still need 3.5 new school admissions every year.
If there are if there is one teacher for 70 kids, you still need 50,000 more teachers, you need 50,000 more classrooms.
And then when they grow up, you need so many more jobs, you know, a couple of million more jobs.
And we are obviously not resourced.
And we why do you have this kind of ringtone but anyway.
But that's anyway.
But and the government of Pakistan knows this and we are trying for 20 years, 30 years to try and do population control.
And look where we've got if you normalise this in 1960, Pakistan, India,
Sri Lanka and Bangladesh, Pakistan's population is five times what it was in the 1960s.
That is. So that guy is going to be twice in India and Bangladesh about three times.
So and look at the share of our population. We are now 3% Pakistanis are now 3% of the world's population.
While over 10% was alerted. And Pakistanis, every ten child with a latrine in the world of the Pakistani,
every three out of 100 people are Pakistanis, but ten out of 100 illiterate but good to the Pakistanis.
So Pakistani population is overtaking Sri Lanka as Bangladesh population and we are obviously growing so much faster than the rest of the world.
So we are obviously not able to do this. So in spite of our trying very best to try and control population, we have completely failed.
We have tried also to stem the tide of terrorism in Pakistan.
If you ask me why Pakistan is the way it is today in terms of lagging behind Bangladesh and India in economy, and there are many other factors.
But the single biggest factor in Pakistan today is terrorism.
The fear of terrorism in Pakistan drives foreign investments away, and there is no foreign investment that comes to Pakistan.
The only foreign investment that comes to Pakistan is the one that foreigners need to sell to Pakistani.
So if you want to sell mobile telephony services to Pakistanis, you have to set up jihad or telephone or whatever.
Then you come and invest in Pakistan.
If you want to sell cars to Pakistan and you have to some cars in Pakistan, then Toyota, Honda will come and assemble a plant in Pakistan.
And even then they don't invest. They actually ask Pakistanis to invest, but nobody invest in Pakistan when they want to send shoes to America.
So they will set up a plant in Vietnam. They would set up a plant in Cambodia.
They will set up a plant in Ethiopia, but they will not set up a plant in Pakistan.
Pakistan is not a preferred destination for any investor anywhere in the world.
And so we only have 30 billion of exports in 1992.
Pakistani and Vietnam's exports were the same thing, about 12 billion or so.
Today, our exports are 30 billion. This year probably won't even get to 30 billion.
Vietnam's exports are north of 300 billion. In 1999, Pakistan was doing .18 percent of the world's export.
Today, we are doing .13 percent of world exports. So our export as a percentage of world has gone down.
Everywhere. Everywhere you see that Pakistan is going down.
And the paper that you sent me this morning, Professor Mullick, showed that in the last since 2012, Pakistan's import restrictions have gone up.
And you can see just as import restrictions have gone up and exports have gone down as a percentage of GDP,
and from 2012 to now, our exports as a percent of GDP have gone from 8.16% to 16% to 12%, or in fact, a 9.8%.
So terrorism is really hurting Pakistan.
And we've we've lost 65,000 soldiers in this war against terrorism.
And I mean, this this number, I think 400 is still April.
And it's, again, rearing its head back.
But unless and until you make Pakistan a normal country with essentially no fear of terrorism and no fear of, you know, law and order issues,
it's difficult for me to see how we get foreign investments in Pakistan and foreign export and foreign buyers to come to Pakistan.
It's impossible to get a foreign buyer to come and visit our factories in Pakistan, and so we can't export.
When I was growing up in Karachi in the 1970s, almost every foreign airline, European airline, would come to Pakistan.
You know, Italian airline, British Airways, just not be able, in fact, dohc.
Some of you may know the KLM and Air France and all of the Lufthansa,
all of these guys would come, Philippine Airlines would come, Japan Airline would come.
Now, nobody comes to Pakistan. Nobody wants to actually have the crew stay overnight.
In Pakistan, there's only one European airline, British Airways, I think that comes to point when nobody else comes.
And so, you know, that tells you that how the world sees Pakistan.
So nothing should be more important for economic growth.
Nothing should be more important for fighting extremism in the society than to, you know, get rid of terrorism.
But we have not been able to do it. I understand the very severe problem, very significant problem.
But this is another failure of our governments. I mean, I don't unfortunately have full data.
But look at where Sri Lanka is, look at where Bangladesh is and look at where we are in education.
Bangladesh today has been able to control its population primarily because it has educated women.
And if Pakistan were to educate its women, it would actually be able to reduce its population growth as well.
And if you educate the women, especially if they've done 10th grade, then it turns out that their propensity to work outside home also increases.
And if today, for instance, Bangladesh exports a lot more than Pakistan, it's not a good government there in Bangladesh,
it's an authoritarian government, corruption, rape, very hard, difficult place to do business.
It's, you know, very resource poor country. And yet it's doing so much better than Pakistan because there are women who are
working outside the home for stitching garments and selling to the rest of the world.
Whereas we are not, you know, no women work in Pakistani garment sector, for instance.
Education. I want to also talk to you about. The fact that we spent ₹2,000 billion on education.
And we have nothing to show for it. In the first ten years of Pakistan, we had seven prime ministers.
India built five Indian Institute of Technology.
Every Pakistani prime minister warns that it explodes from double and quadruple in the next five years.
Nobody understands that.
You know, you really need a, you know, group of engineers, computer engineers and, you know, applied mad guys who understand how to do this dispute.
Mad guys understand how to do this. Nobody pays attention to educating our kids, but they want it to export.
You can't do it exports. You can't do exports of computer stuff unless and until you have educated workforce.
But we've not been able to do that. Before you look at this graph and I mean, just tell you the numbers today.
Today,
the number is that 40.2% of Pakistanis children under the age of five were stunted and 17.7% of Pakistani children under the age of five are wasted.
Now, look at 2013, 27% of stunted and 9.4% harvested from 2013 to 2018.
The government worked hard, but nonetheless another 5% become stunted and another 4% become wasted.
And today, as I said, 40.2% or 40.2% are stunted and 17.7% wasted.
Now, what does that stunting, investing mean? Let me just define that for you.
When a five year child is considered stunting, if his height, his or her height is nought according to the age.
And this is primarily because you've not given enough nutrition or enough food
throughout the life of the child so that his height has not come up to his age.
A child is wasted when his weight is less for his height.
And this primarily happens when, you know, in the first three or four years of his life, he got enough food, so his height was okay.
But last year, some economic catastrophe happened. Maybe the parent lost a job or maybe there was a health catastrophe,
or maybe there were floods in the town and that child was not able to get enough food last year.
So his weight actually shrunk. So 58% of Pakistani children are either stunted and renew stunted.
Your mental growth development also stops or, you know, 58% Pakistani.
They're stunted or wasted. The government of Pakistan, there's no controversy here.
There is no politics here. There is no interest groups here.
These are five year old kids. Nothing stops the government for being effective and do something about this.
They can't. And they've been trying for the last 20 years.
That just shows you how ineffective this government is.
And when I said this government, I mean all governments of Pakistan, we've seen every government in Pakistan in the last two, three years.
All the major political parties have been in government. This century, we've seen martial law.
We've seen People's Party, we've seen PTI. We've seen Muslim League. We've seen PDM.
We've seen hybrid. We've seen semi hybrid. The one thing we've not seen is any improvement in the life of an ordinary Pakistani.
So at some point, you have to understand that it is governance in Pakistan that really is ineffective.
And why do we have to look at this? If you have so much stunting and wasting, then obviously you'll have greater infant mortality.
We have 50 children out of 1000 who die in Pakistan in the first year of birth.
And we have 44 kids out of a thousand who die in the first four weeks, 30, 40, not 44.
Lesotho has 44 children out of 1000 who die in the first four.
That's the worst in the world total. The second worst is Pakistan and South Sudan combined both jointly, Pakistan and South Sudan.
Both have 40 kids out of 1000 who die in the first four weeks of poverty.
And one reason we have children with low birth weight is because 42% Pakistani women have iron
deficiency deficiency that can go away with a couple of injections and slightly better diet.
But we can't do it. We can't seem to do that. So we have one of the highest infant mortality rates in the in twice as much
of India and Ghana at five times as much as four times as much as Sri Lanka.
This is worse than most countries in sub-Saharan Africa.
And so we have one of the worst human development indices in the world, and there is no politics here involved here.
And yet really simple in effectiveness. This is my favourite example to give a circular that is something which is it's a misnomer really.
It's actually accumulated power sector losses, accumulated and non-paid power sector losses.
In 2006, there were 84 billion. This is the first time people heard of circular debt, that 84 billion was the accumulated power sector losses.
2008. When Musharraf left, there were about ₹100 billion.
And then People's Party came in. The power sector accumulated losses of 100 billion, and People's Party worked really hard to try and curtail this.
And after five years when they left, it were 504 billion.
And when PML-N came to the government, we said, Well, people's party people are incompetent, they're corrupt, they don't know what they're doing.
We know exactly what we are doing. So PML-N worked really hard at it and after five years circular, that went up to ₹1,100 billion.
And then Imran Khan came along with manna from heaven.
And then Imran Khan says, Of course I am not corrupt.
And I have this team of heroic people and will set everything right.
And two years we will get rid of circular debt.
And Imran Khan's team worked really hard for four years and circular debt went up from ₹1100 billion to ₹2350 billion.
So again, this time PDM governance is way brown and of course it's incompetent.
You know, he doesn't even know what he's talking about. We're going to fix it. So the PDM government comes in after this year.
I promise you it will be about 2700 billion. So every single government has come tried really hard too.
And I know this because I've been in the sector and I've worked very close with people and whether in our party or in opposition parties,
every one of these ministers I've been a personal friend of mine, I promise you, they're all great.
We tried to work and worked hard at this and yet they've not been able to do it.
The problem's only getting worse. And the structure that, you know, there is no solution to this problem.
And now we used to just have accumulated losses in the private sector, in the power sector.
Now we have accumulated losses in the gas sector to ₹1,500 billion.
Then we have extremism is a problem in our society.
We sometimes have. You know, unsavoury behaviour.
I'll just say that toward minorities, especially among these and other minorities.
And the Government is trying to register madrassas that how many murders are there in Pakistan and let's try to register the estimated there,
about 40,000 mothers so they don't even know what madrassas teach. The only the only been able to register 12,000.
They tried to bring madrassas in the mainstream the failed into a still to this
day Pakistan government has no control over the syllabi taught in these models.
Then we come to state owned enterprises and this is my favourite graph.
Now this is space losses this year.
Every year it has lost money from 2013 onwards.
And it's actually the graph, just the data from 2013 lost money except for two years every year, I think in the last 40, 50 years.
And this is going to lose 90 billion. And yet we can't privatise the law of Pakistan.
Pakistani privatisation law is so complicated that if everything goes right, it will take you 461 days to privatise any entity.
But the best example is the bank called Small and Medium Enterprise Bank.
That bank has been losing money since 2007. Every year in Pakistan, banking licences are essentially license to print money.
It's difficult to lose money. No other bank can lose money. That bank has been losing money for 15 years in a row.
I mean, that really is a matter for that. And the government of Pakistan has been trying to privatise that bank since 2008.
And after 15 years we have not been able to privatise.
And so as a result, I think this year they will have to shut it down, but they can't privatise because we have too many accountability laws,
too many procedures, too many processes, and we can't do anything about this.
You know, basically it's just paralysis. And then these are all state owned enterprises losses.
And they keep going up. I want to show you something here. Look at Pia's losses going down in 2020.
You know why? Covered the left the fly the of.
With this money you can do for our Rowan University hospitals every year.
This is the loss of state making to state owned enterprises. They don't do.
They don't. Now you do data since 2019.
Uh, but. But know about 500 billion. 600 billion every year.
And we talk about catchy about regulation. That's another example that, you know, everybody talks about, you know,
how these these shantytowns need to regularise and people have to be given documents and all that stuff.
I mean, I fiercely dispute this is for a 40 year old.
The governments have been trying to do it for at least 40 years and they haven't been able to do it.
My my my thesis is that the government of Pakistan is simply very ineffective.
It can't do anything.
And unless and until we change the structure of our governance, because our governance is completely ineffective, we can't go anywhere.
So that's why you see India going ahead of us, you know, in the 1990s, Bangladesh going ahead of us.
Sri Lanka is in deep trouble. But I mean, obviously, all the statistics show that when Sri Lanka gets it right.
You know, things will be okay. One problem that I think that the POSCO,
the president rather Bhaskar and Prime Minister Rajapaksa and Finance Minister Pascoe made
and Defence Minister that POSCO also made was that they decided that oil was worth $60,
but international price of a barrel of oil went to $70, but rather POSCO decided that it was $60,
so they would sell it at $60 as if it were $60, and then the price went to $80.
They said, no, we will sell it as if it's $60. Then the price went to $90.
They said, No, we will sell as if at $60 they went bankrupt. So if you close your eyes to reality, you know something?
You know reality bites. So now we are in a very severe economic crisis because we have also closed our rights to reality.
So I want to talk to you about two things now.
The first is I'll give you first the Pakistani rupee story and ignore me in it, and then I'll give you the dollar story.
This year, Pakistani government revenues are supposed to be ₹7,500 billion.
They won't be there. They won't they will get to about 7200 billion.
But they're supposed to be 7200 billion. ₹3,500 billion of which the prevention share is ₹4,500 billion.
It's actually a little bit more, but let's just give them that simple. So ₹4,500 billion will go to the provinces.
So you're left with the federal government is left with ₹3,000 billion.
The federal government has to pay ₹5,500 billion as interest on debt,
just the servicing of the debt at ₹5,500 billion this year, which means that you have to borrow money to pay your interest.
And then you borrow money to pay interest. That's called a debt trap.
That means that the more you dig the you know, the more further you'll go in the hole.
Now, suppose next year the government is able to double the deficit, double the revenue.
It will never happen. You know, we won't get more than 20% increase or 5% rate increase or 10%.
But suppose we were able to double the revenue and suppose by some chance we were
able to keep the expenditures where they are and not increase in spite of 35%,
you know, growth in inflation.
So next year, we'll get ₹15,000 billion revenue and 9 billion will again go to the provinces and it will be ₹6,000 again.
And next year we will be basically just being the interest and our deficit again would be six or 7000 billion when you have such high fiscal deficit.
And those of, you know, economics were not something called twin deficits.
The fiscal deficit will give rise to a current account deficit that when governments borrow money,
when governments run deficits, they need to borrow money. They can borrow money either from your local banking sector.
And if they borrow money away from the private sector, that that's called crowding out.
If the private sector saves more, that's called ricardian equivalence.
But typically, Pakistani savings rates and investment rates are the same.
So foreigners have to lend money to us.
And when foreigners lend you money, they lend, they give you imports.
And so you have run a current account deficit. So every time you have a fiscal deficit, you end up running a current account deficit.
So Pakistan has been running its current account deficit 72 out of 75 years.
And as a result, we now all about $100 billion to foreigners that we have to produce in a five year cycle.
So every year we have to give a debt amortisation of about 20 billion between 20 and 25 billion.
And we don't have that money. And the world is not willing to lend us this money.
What typically we do, because we run our current account deficit, we have no money of our own, dollars of our own.
So we will borrow from World Bank to the IMF. We will borrow from IMF to Patient Development Bank.
We will borrow from China, Saudi Arabia and some other countries.
But now the world is very reluctant to fund this because our economy is also not growing.
There are no chances of investments. And by. It's not for now.
We don't know how to prepare foreigners. And that's why IMF becomes important and that's why we are skirting with default.
Once you start starting with default, your demand for dollars go up, goes up, and people want to fly to the safety of a U.S. dollar.
And so the price of dollars goes up and really gets even more trashed in the market and then inflation becomes higher.
And that's why we are where we are and our debt amortisation is 80% of our exports and exports are only financing 40%.
Nowhere in the world you will see that export and financial only 40% of your imports, which is where Pakistan is.
So Pakistan really now we need to rethink what we what we need to do with our country.
We really need to. Figure out how to save these this crisis, how to save Pakistan from this crisis.
I don't really see Pakistan getting out of this foreign currency crisis any time soon.
The next two, three years are going to come up with $25 billion every year,
which means that we'll have to borrow money and have to do, you know, listen to conditions of the world.
And even then, it will become very difficult. That's why Pakistani bonds are today selling for $0.40 on the dollar.
So the market expects a default outcome. But if there were a default in Pakistan, which is not a good thing, and because of the political crisis,
these twin crises then give Pakistanis an opportunity to rebuild Pakistan, a better Pakistan, a Pakistan that goes for two things, in my opinion.
One is economic growth. You want markets to function.
You want privatisation where privatisation is unnecessary.
You want a minimal state aid or a state footprint because Pakistani state is very ineffective.
But the fact of the matter is that in a country which is as uneven in Pakistan, where there's a sea of poverty,
it's very difficult for a driver's child to come compete with an elite persons child.
So you need to have social justice as well.
And there was a Harvard philosopher, John Rawls, who talked about beyond the veil of uncertainty or beyond the veil of ignorance,
that if you didn't know before you were born whether you would be a male or a female, you'd probably not be a misogynist.
If you didn't know before you were born, you would know that you would be Sunni or Shia or Muslim or an M.D. in Pakistan.
You'd probably not be going after minorities so much if you didn't know what the ethnic group would be.
You'd probably be okay with all ethnic groups if you didn't know whether your father would be,
you know, the prime minister of Pakistan or your father would be,
you know, a sweeper in some college, you'd probably be a little bit more for social welfare and social justice.
So if you think about this, if you are deciding this beyond the veil of ignorance, then you would come up with a society which is more egalitarian,
which actually sort of builds up the poorest Pakistanis so that they're able to compete.
And there are two ways to think about this.
I used to actually, to be very honest, I used to think like that once Pakistan becomes rich, we can make all our people richer.
But that's not right now. Pakistan doesn't make rich.
Pakistan doesn't become rich if everybody else is poor. Pakistan only becomes rich if people become poor, richer.
So first you make people richer. Automatically, Pakistan will become rich.
So if you give Pakistanis education, you can't have 60% Pakistani standard administered and then expect economic growth.
That's just not going to happen. You cannot have 75% functional illiteracy and then expect Pakistanis to progress.
That's not going to happen. I mean, you can visually all it's not going to happen.
You can't have an ineffective government in Pakistan if you have these four provinces,
Punjab province, that would be as big as it drove largest country in the world.
We need to have more provinces and we need to devolve power to the local level.
But we really need to rethink Pakistan. And I think that right now what is the objective function in Pakistan, but that you want to maximise?
The objective function in Pakistan is that every elite group wants to maximise its own objective or own utility,
subject to the blocking coalition, subject to the constraint put on by the other blocking coalition.
Instead, we should have this concept that we want to maximise economic growth,
but at the same time we want to be absolutely social justice has to be important so that if a sugar mill comes to you and says,
I want subsidies for exporting sugar, or if a yarn manufacturers comes to you and says, I want import tariffs for the imports of yarn,
you ask yourself whether it's going to be enhancing economic growth, but you also ask whether it's going to be good for social justice.
Or are you just giving subsidies to the richest Pakistanis, which is what we end up doing mostly, most of the time.
And if you do this and this crisis actually gives Pakistanis an opportunity,
because otherwise the way Pakistan is going with the deficits that we have,
8% of GDP, budget deficits and with the financing issue holds that we have dollar financing holes.
I don't see Pakistan going moving forward. You know, we can have a low level equilibrium of 2% growth, another growth under growth, another crisis.
And we have a two and a half percent growth of population. We can either go through this sort of a semi-feudal straightaway or we can reduce Pakistan.
And and I think that this crisis, if anything, offers an opportunity to redo Pakistan.
Thank you so much for your vision.