IS it possible to pursue economic stability while at the same time imparting massive volatility to the theatre of politics? The simple answer is yes, but at tremendous cost to the country and especially the poor.
The present government now has to tackle this double challenge. They are engaged in talks with the IMF for resumption of the programme, which is already delayed since it was supposed to have restarted by September. At the heart of these talks are two critical plans the government has to present. The first is a revenue plan to convince the Fund that they have a credible road map on how to curb the fiscal deficit that for the second year in a row has come in above eight per cent of GDP, a manifestly unsustainable position. The second plan is on the circular debt that has crossed Rs2 trillion and is mounting faster than it ever has before (though the government argues that in recent months the acceleration is due to disrupted recoveries on account of Covid-19 lockdowns).
It is in this context that the government has appointed Waqar Masud as special assistant to the prime minister on revenue. A Q-block veteran and an old associate of Hafeez Shaikh (with whom he will be working), the appointment is a clear indication that the government is reaching out for assistance on building its revenue plan in the context of the IMF talks. On the circular debt side we were told that Shahzad Qasim, the former SAPM on power, was in the advanced stages of drawing up a plan until news arrived that he had been replaced by Tabish Gauhar, former chairman of K-Electric and senior member of the Abraaj Capital team that oversaw the management takeover of the power utility back in 2009. It is not clear what this handover of charge means for the ongoing efforts to draw up a circular debt curtailment plan, but if Gauhar decides to turn the clock back and chalk out his own road map rather than continue with what Qasim was already working with, it could prolong the talks. We will have to wait to see.
At the same time as these talks, and the efforts to draw up the plans necessary to satisfy the Fund, are continuing, a massive confrontation seems to be brewing between the government and the opposition parties, especially after the registration of sedition cases against the leadership of the opposition. The government would have us believe that it has nothing to do with the registration of these cases, that they have been registered by a private individual in his private capacity. Then it transpires that the individual in question is supposedly a worker of the ruling party and numerous images start circulating of him shaking hands and smiling broadly with various party leaders, especially Chaudhry Sarwar, the present governor Punjab. Then surprisingly the name of one of the people mentioned in the FIR — Prime Minister of Azad Jammu and Kashmir Raja Muhammad Farooq — is struck off at the behest of the Punjab government, but the rest of the names are left in place.
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Even as efforts are being made to draw up the plans necessary to satisfy the IMF, a massive political storm is brewing.
So the government had nothing to do with filing these FIRs accusing two former prime ministers of the country of ‘sedition’ based on logic so specious that only a handful of people in the country can claim to understand it? And it is a sheer coincidence, is it, that these FIRs are registered two days after the prime minister himself accuses Nawaz Sharif of “playing India’s game” and his own people are all over the airwaves advancing the idea that Sharif is a tool in the hands of the country’s enemies?
As if this was not enough, the other big party from the opposition — the PPP — has had fresh ‘corruption’ references filed against its leadership, including former prime minister Yousuf Raza Gilani and the former president Asif Zardari. The timing is unlikely to be a coincidence, as these developments come right after the formation of the anti-government Pakistan Democratic Movement alliance — the name has close resonance to the Movement for the Restoration of Democracy in the early 1980s.
So the order of battle is falling in place between the government and the opposition, with each side escalating matters towards a confrontation. Meanwhile, the government’s own people are preparing to sit across the table from the IMF team and present credible plans for how they intend to raise more revenues, cut spending, raise recoveries in the power sector, adjust fuel prices to reflect global market realities, and arrest what looks like accelerating inflation. At the same time, as the confrontation with the opposition (should it come to that) will be taking off, the government may well be signing off onto another adjustment programme, though perhaps not as harsh as the one it had to implement in its first year considering foreign exchange reserves are not in as dire a position today as they were back in August 2018.
Some in the top echelons of the leadership apparently understand this. Reports in the media suggest that in the cabinet meeting held on Tuesday, some ministers raised concerns about the brewing confrontation while at the same time underlining rising inflation as a critical problem. In the days to come they will be adding rising tax burden, interest rates, currency depreciation, fuel and power price hikes to this list as well. We will see how much of an appetite for confrontation remains once the economic realities begin to assert themselves, one more time.
Without any political buy-in, the only way to make macroeconomic stabilisation happen is through the bluntest of instruments, like interest rates and fuel and power pricing and taxation. Never mind tax reform for now. Never mind power-sector governance. Never mind privatisation of large entities like PIA or Steel Mill. When politics soaks up the oxygen, there is no space left for policy.
The writer is a member of staff.
Published in Dawn, October 8th, 2020