Mind the capture |
RECENT Fitch Ratings have framed Pakistan’s economic challenges as being driven largely by external shocks—rising oil prices, global uncertainty, and regional tensions. While these pressures are real, they do not fully capture the broader underlying dynamics shaping the crisis. The real issue lies in how these shocks are passed on and played out within the system. Over time, a pattern has taken shape where shocks are not absorbed by the powerful but are instead transferred downward to maintain fiscal balance.
Elite capture has deepened this pattern, shielding entrenched interests while passing economic strain onto ordinary citizens. The result is not only economic stagnation but also a gradual erosion of sovereignty, as rising dependence and shrinking policy space steadily constrain the state’s ability to act on its own terms. When adjustment becomes unavoidable—often under programmes linked to the International Monetary Fund—the government tends to fall back on quick fixes. It raises fuel prices, scales back subsidies, and brings in indirect taxes. These steps help shore up revenues in the short run, but they also eat into the purchasing power of ordinary people. As households cut back on spending just to get by, the broader economy starts to slow down.
At the same time, those at the top largely manage to hold on to their advantages. Through exemptions, policy loopholes or simple influence, powerful groups sidestep the hardest impacts. This is how elite capture plays out in practice—it bends policy in ways that shift the strain away from those who can afford it and onto those who cannot. As a result, the system doesn’t just adjust; it tilts. This imbalance begins to show up across the economy. As demand weakens, businesses scale down operations or hold back investment. Growth struggles to pick up, jobs don’t come through and tax collection fails to keep pace. Even when institutions like Fitch Ratings point to signs of stability, the ground reality tells a different story. Stability, in this sense, is held together, but only by stretching the limits of public endurance.
Over time, this approach starts to box the state in. Since it cannot fully tap into elite resources, it has to lean more heavily on external financing. This, in turn, narrows policy choices and ties decision-making to outside constraints. Sovereignty doesn’t slip away all at once; it gradually wears down as the state finds itself with fewer options and less room to manoeuvre. Meanwhile, the social impact keeps building up.
Inflation bites deeper, frustration piles up and people begin to lose faith in how the system works. When hardship is seen as one-sided, it doesn’t just hurt—it alienates. The sense that the rules are uneven makes it harder for the state to carry people along. The choice is clearer. Either the state takes on elite capture and spreads the burden more fairly, or it continues to push the pressure downward and risks prolonged stagnation. Because when people are squeezed too far, they don’t just cut back—they pull away. And when that happens, both the economy and the state start to lose their footing.
—The writer is a political analyst, based in Islamabad.