Prices will rise – Woes of governance


A plausible explanation for why the incumbent government has survived the minefield that is the Pakistani polity so far is the fact that it is an awful time to be running the country. No one is interested in holding the reins. Political parties can bide their time on the cushy opposition benches while the perpetual government – the powers that be, if you will – can twiddle their thumbs while watching the helplessness of the political government.

Not in any way to imply that the government has shown even the mere semblance of trying to make lemonade out of lemons. But lemons is exactly what the incumbents have on their hands. Take the economy: in the face of problems of extremely limited fiscal space, the government has decided to do away with subsidies for petroleum and power. This includes the Rs 5 billion per month for the former and the Rs 20 billion for the latter. To state the obvious, the prices of both will face a stark jump. Since it was the petroleum price hike that supposedly caused the MQM to quit the government (a chuckle here), do we expect even more political ramifications to follow the resumption of the higher prices, this time also accompanied by an even greater hike in the power tariffs?

Truth be told, apart from the obvious problem of there not being enough money in state coffers, that too when the state is reeling from one of the worst natural disasters in its history, the conditions of the IMF program also dictate an abolition of subsidies. Not to be analogised neatly with the pound of flesh, though, since an eventual abolition of the subsidies was our declared policy position since before we entered into the program. On other revenue generation fronts, the populist opposition to the imposition of the RGST is not only irresponsible, it is also surreally non-sensical: the tax would, by the nature of its very design, build up the database for the collection of income tax from the fat cats. The opposition parties can make their essentially anti-public stances sound populist only because of the toxic brand equity that the government has acquired. A tight spot they might be in, but nothing is stopping it from embarking on an austerity drive. A satisfyingly visual one at that. Cutting down on protocol, pomp and show, for instance, might not save astronomical amounts, but will definitely help enable the government to engage the public on some painful but necessary steps.