Tailspin tales

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For the first time since 2008, the price of oil in international markets surged above the US $100 a barrel mark this last week. Since it coincided with the end-of-the-month review of prices on the domestic front, it indeed was a surprise that the Pakistani regulators didnt bat an eyelid and retained the pricing on the whole raft of petroleum products.

Doesnt make sense in an economy where the GDP has for the last three years been limping along at a growth rate of a mere two to three per cent, where the budget deficit has climbed to a whopping 6.5 per cent of the GDP. And, so pronounces the federal finance minister, unless the current policy of survival through subsidies was not eschewed, this could go further up to eight per cent.

This is not all the bad news. The inflation rate is hovering around 20 per cent. The war on terror, the flash floods of summer 2010, the fratricide in Karachi and the acute energy shortages leading to a fall in industrial production together have taken a tottering economy to the verge of emergency. The coalition government is so seriously strapped for cash that each day it puts the presses of the State Bank of Pakistan under unwarranted strain to print currency notes worth Rs two billion!

Herein lies a tale within a tale. Why didnt the regulators pass on the oil price increase to the consumers? Its obvious: the regulators take their cue from the government. And having already eaten humble pie a month ago by taking back the hike under intense pressure, the beleaguered government didnt have the pluck to again make an attempt that was likely to attract the ire of friend and foe alike.

This certainly is going to result in disaster. And here we are guided by a precedent that is too close to home, too recent to forget. In 2007, the Musharraf/Shaukat Aziz duo, owing to considerations that were political and made no economic sense, put the treasury under the strain of unsustainable subsidies on the petroleum products. The country has struggled to recover from the aftermath of that most unsound of expedient decisions.

The fallout was bankruptcy. And the one to announce the cause and the consequence of that opportunism happened to be Ishaq Dar, the PML(N)s economic wizard who in 2008 was the finance minister in the honeymoon period of a coalition that didnt last long.

Of course, Dar didnt have to clear up that muck. This was the unhappy responsibility of the trio who followed him in that office. And with the crippling circular debt (a direct outcome of that particular subsidy), next to no foreign exchange reserves and a soaring budget deficit, so bad was the situation that none could restore it to a semblance of normalcy.

Yet the PML(N) and others like the MQM, the party of the Maulana who has acquired infamy through smuggling of diesel and, even the least demanding of the coalition partners, the ANP insist that the subsidy way is the right way.

Not burdening an already much burdened masses with higher fuel prices and what these entail per se is a noble idea. But the politics of survival through subsidies has previously taken a massive toll, and continuing on the same path is only likely to exacerbate an already bad situation into the realm of the irretrievable.

The PML(N), which otherwise claims to prop up the PPP government by not threatening to bring it down, should by now know that populism so devoid of realism has the potential to cause both eventual social havoc and financial ruin.

And not just the sermons on good governance can take us out of this economic mess. Advice to the government to tighten its belts by cutting down on non-development expenditure, reining in systemic corruption and preventing huge pilferage and waste in the public sector organisations is all very well. But none of it can be done overnight. Again the reasons are political. The requisite political will and long-term vision are conspicuously absent.

Lets take an example. The KESC, the already privatised power supply company, only recently tried to cut its running costs by firing 4500 employees who it considered were redundant. After protests and pitched battles that found political sponsors, the KESC had to retract and take them all back. A similar outcome is likely elsewhere. For instance, will the MQM allow Pakistan Steel to be purged of its fat when it had so painstakingly infiltrated it with its cadres over the years? Or can the PIA be rid off its flab when the PPP, the PML(N) and the MQM have all taken turns to swell its rank and file with favourites?

Aside from the many multi-point agendas that are being shoved down the governments throat, our political class across the board is incapable of taking decisions that are tough but correct. Or we would not have seen across the board closing of ranks first to resist the RGST which, once you cut through the fog of propaganda, is a good measure for it does not put additional burden on the common man yet is fashioned to document the economy, the bane of our mercantile class that is the constituency of PML(N) and now the stubborn refusal to allow a corresponding increase in fuel prices according to the international hike.

But with the IMF not willing to budge an inch, and the economy in dire straits, something has got to give.

An afterthought: the prime minister and most analysts seem to be in agreement that the situation in Pakistan is not ripe for the kind of agitation and uprising that we are witnessing in Tunisia, Egypt and Jordan. While unemployment and the social unrest that it entails may not have been the only driving force behind the revolts over there. The grim situation that exists on the economic front is enough to give our ruling elite, if not sleepless nights, at least a wake-up call for drastic action. Seize the day, seize the hour, should be the refrain to prevent a re-run of Middle Eastern events at home.

The writer is Sports and Magazines Editor, Pakistan Today.