DAWN Editorials - 28th January 2025
Posted: Wed Jan 29, 2025 4:30 am
Unstable outlook
HAVING slashed its key policy rate by yet another 100bps to 12pc, the bigger question for the State Bank now is whether or not it should pause the ongoing monetary easing cycle, which has seen the rate being cut by 1,000bps since June to preserve the recently achieved fragile stability.
Though the bank had long stopped providing forward guidance on interest rates, the latest monetary policy statement and its governor’s post-policy briefing offer some insights into the SBP’s thought process. On the one hand, it believes that a “cautious monetary policy stance is needed to ensure price stability … for sustainable economic growth”. This demands that the real policy rate “remain adequately positive on a forward-looking basis to stabilise inflation in the target range of 5-7pc”.
Moreover, the risks to inflation — volatile global commodity prices, protectionist policies in major economies, timing and magnitude of administered energy tariff adjustments, volatile perishable food prices, and any additional tax measures to meet the FBR target — call for a pause on monetary easing, or at least moderation in the pace of rate cuts.
On the other hand, the current account is expected to run a surplus of 0.5pc of GDP, with international reserves rising on increased remittances and a slight growth in exports in spite of heavy debt payments, while the bank has revised down its projections for the average annual inflation to 5.5pc-7.5pc, or close to its targeted range, from its original estimate of 11.5pc-13.5pc for this fiscal year. This means that the SBP still has enough room to continue the monetary easing cycle as real interest rates stand at 790bps, much higher than the historic average of 200-300bps.
Indeed, the economy appears to have turned a corner in the last several months. The improving indicators can be tempting enough to act boldly in order to accelerate economic growth. But must the bank go for this path and repeat past blunders?
In spite of the recent recovery, the economy remains on edge. The 45.5pc reduction in interest rates in seven months should be enough, at least for now, to send a positive signal to the private sector. It is time to prioritise long-term stability over unsustainable faster growth driven by imported consumption. We have seen the economy experiencing severe balance-of-payments crises as recently as in 2018 and 2022 due to the elites’ impatience with stabilisation policies.
Chasing growth without executing structural reforms in an uncertain global environment — in which the possibility of a global trade war in the wake of President Donald Trump’s threats to impose tariffs on America’s trade partners and rivals alike — can be suicidal. The wealthy elites will escape the impact. But it will crush middle-class households who have borne the brunt of the economic instability.
Published in Dawn, January 28th, 2025
Poor’ lawmakers
WHILE the average Pakistani is expected to carry the burden of austerity as he struggles to put food on the table, our lawmakers believe that their ‘exceptional’ performance entitles them to a substantial pay raise — on top of their considerable perks. A proposal by the National Assembly’s Finance Committee calling for hefty pay hikes for members of both Houses is currently with the prime minister. As per the details, lawmakers will see their monthly salaries jump from Rs180,000 to Rs519,000. The original suggestion had been to jack up remuneration to Rs1m a month, but the NA speaker reportedly felt this may have been a tad too much. According to media reports, the last time our hardworking lawmakers received a raise was seven years ago. Obviously, inflation has been biting and the MNAs and senators sorely feel their compensation should reflect the tough economic realities of the day. They may also have been inspired by Punjab Assembly members who gave themselves fat raises last month. Oddly, while political parties are usually at each other’s throats, members from across the aisle have united to secure this key human right.
If Pakistan were a First World economy, and if our lawmakers had been delivering like their elected peers in developed democracies, this proposed pay raise could have been justified. But we are struggling to stay solvent, while our lawmakers’ output is far from stellar. And with the centre slashing government jobs in the name of rightsizing to meet IMF demands, how can such massive pay hikes be justified? Moreover, the minimum wage in Pakistan is Rs37,000 per month in most provinces; can the people’s representatives justify such hefty salaries when the working man is expected to survive on a meagre amount? It is not, of course, only the lawmakers who grant themselves gracious pay raises. Members of the bureaucracy, judiciary and the military are all compensated handsomely at the taxpayer’s expense through salaries as well as perks. But the people’s representatives need to set an example to show they care about the common Pakistani. A raise can be considered, but not such an unreasonable jump. Also, such pay raises should be part of the budget and not appear out of the blue. The prime minister must do the right thing and ensure that any increase in the lawmakers’ salary stays within reasonable bounds.
Published in Dawn, January 28th, 2025
Digital security
A RECENT advisory issued by the National Telecommunication and Information Technology Security Board has caused a bit of a stir, while also bringing attention to the important function the board quietly performs. The NITB, which works under the Cabinet Division and issues policy directives for technology use and security in the government sector, recently flagged 16 ‘browser extensions’ for their vulnerability to hacking and data breaches. Though its advisory was a fairly routine one, it triggered much confusion when a few social and even mainstream media outlets misinterpreted it to mean that the NITB had found security issues with major artificial intelligence applications that are in vogue these days. The issues were, in fact, found in free tools created by third parties to integrate directly with internet browsers, but this got lost in the noise. The episode highlighted how easily average citizens, including those ‘reporting’ for the public, can be misled when there is inadequate understanding of modern technologies.
The NITB, a high-powered forum, mainly serves state interests in securing information and telecommunication technologies. Its mandate also covers the private sector. Unfortunately, its work does not seem to get the attention it deserves, even though ordinary citizens who use modern technologies daily could benefit immensely from the advisories it issues, especially those that pertain to circulating disinformation or security-related issues uncovered in widely used technologies. Over the past two years, for example, it has issued pertinent guidelines about how to use modern smartphones safely and securely, and also warned about serious issues with common CCTV solutions that are used to secure residential or commercial premises. With new technologies coming out almost every day, it is important for entities like the NITB to continue protecting the safety and interests of not just the Pakistani state but also its citizens. Meanwhile, it is the responsibility of those reporting on the work of such watchdogs to do so with care.
Published in Dawn, January 28th, 2025
HAVING slashed its key policy rate by yet another 100bps to 12pc, the bigger question for the State Bank now is whether or not it should pause the ongoing monetary easing cycle, which has seen the rate being cut by 1,000bps since June to preserve the recently achieved fragile stability.
Though the bank had long stopped providing forward guidance on interest rates, the latest monetary policy statement and its governor’s post-policy briefing offer some insights into the SBP’s thought process. On the one hand, it believes that a “cautious monetary policy stance is needed to ensure price stability … for sustainable economic growth”. This demands that the real policy rate “remain adequately positive on a forward-looking basis to stabilise inflation in the target range of 5-7pc”.
Moreover, the risks to inflation — volatile global commodity prices, protectionist policies in major economies, timing and magnitude of administered energy tariff adjustments, volatile perishable food prices, and any additional tax measures to meet the FBR target — call for a pause on monetary easing, or at least moderation in the pace of rate cuts.
On the other hand, the current account is expected to run a surplus of 0.5pc of GDP, with international reserves rising on increased remittances and a slight growth in exports in spite of heavy debt payments, while the bank has revised down its projections for the average annual inflation to 5.5pc-7.5pc, or close to its targeted range, from its original estimate of 11.5pc-13.5pc for this fiscal year. This means that the SBP still has enough room to continue the monetary easing cycle as real interest rates stand at 790bps, much higher than the historic average of 200-300bps.
Indeed, the economy appears to have turned a corner in the last several months. The improving indicators can be tempting enough to act boldly in order to accelerate economic growth. But must the bank go for this path and repeat past blunders?
In spite of the recent recovery, the economy remains on edge. The 45.5pc reduction in interest rates in seven months should be enough, at least for now, to send a positive signal to the private sector. It is time to prioritise long-term stability over unsustainable faster growth driven by imported consumption. We have seen the economy experiencing severe balance-of-payments crises as recently as in 2018 and 2022 due to the elites’ impatience with stabilisation policies.
Chasing growth without executing structural reforms in an uncertain global environment — in which the possibility of a global trade war in the wake of President Donald Trump’s threats to impose tariffs on America’s trade partners and rivals alike — can be suicidal. The wealthy elites will escape the impact. But it will crush middle-class households who have borne the brunt of the economic instability.
Published in Dawn, January 28th, 2025
Poor’ lawmakers
WHILE the average Pakistani is expected to carry the burden of austerity as he struggles to put food on the table, our lawmakers believe that their ‘exceptional’ performance entitles them to a substantial pay raise — on top of their considerable perks. A proposal by the National Assembly’s Finance Committee calling for hefty pay hikes for members of both Houses is currently with the prime minister. As per the details, lawmakers will see their monthly salaries jump from Rs180,000 to Rs519,000. The original suggestion had been to jack up remuneration to Rs1m a month, but the NA speaker reportedly felt this may have been a tad too much. According to media reports, the last time our hardworking lawmakers received a raise was seven years ago. Obviously, inflation has been biting and the MNAs and senators sorely feel their compensation should reflect the tough economic realities of the day. They may also have been inspired by Punjab Assembly members who gave themselves fat raises last month. Oddly, while political parties are usually at each other’s throats, members from across the aisle have united to secure this key human right.
If Pakistan were a First World economy, and if our lawmakers had been delivering like their elected peers in developed democracies, this proposed pay raise could have been justified. But we are struggling to stay solvent, while our lawmakers’ output is far from stellar. And with the centre slashing government jobs in the name of rightsizing to meet IMF demands, how can such massive pay hikes be justified? Moreover, the minimum wage in Pakistan is Rs37,000 per month in most provinces; can the people’s representatives justify such hefty salaries when the working man is expected to survive on a meagre amount? It is not, of course, only the lawmakers who grant themselves gracious pay raises. Members of the bureaucracy, judiciary and the military are all compensated handsomely at the taxpayer’s expense through salaries as well as perks. But the people’s representatives need to set an example to show they care about the common Pakistani. A raise can be considered, but not such an unreasonable jump. Also, such pay raises should be part of the budget and not appear out of the blue. The prime minister must do the right thing and ensure that any increase in the lawmakers’ salary stays within reasonable bounds.
Published in Dawn, January 28th, 2025
Digital security
A RECENT advisory issued by the National Telecommunication and Information Technology Security Board has caused a bit of a stir, while also bringing attention to the important function the board quietly performs. The NITB, which works under the Cabinet Division and issues policy directives for technology use and security in the government sector, recently flagged 16 ‘browser extensions’ for their vulnerability to hacking and data breaches. Though its advisory was a fairly routine one, it triggered much confusion when a few social and even mainstream media outlets misinterpreted it to mean that the NITB had found security issues with major artificial intelligence applications that are in vogue these days. The issues were, in fact, found in free tools created by third parties to integrate directly with internet browsers, but this got lost in the noise. The episode highlighted how easily average citizens, including those ‘reporting’ for the public, can be misled when there is inadequate understanding of modern technologies.
The NITB, a high-powered forum, mainly serves state interests in securing information and telecommunication technologies. Its mandate also covers the private sector. Unfortunately, its work does not seem to get the attention it deserves, even though ordinary citizens who use modern technologies daily could benefit immensely from the advisories it issues, especially those that pertain to circulating disinformation or security-related issues uncovered in widely used technologies. Over the past two years, for example, it has issued pertinent guidelines about how to use modern smartphones safely and securely, and also warned about serious issues with common CCTV solutions that are used to secure residential or commercial premises. With new technologies coming out almost every day, it is important for entities like the NITB to continue protecting the safety and interests of not just the Pakistani state but also its citizens. Meanwhile, it is the responsibility of those reporting on the work of such watchdogs to do so with care.
Published in Dawn, January 28th, 2025