Political repercussions
Now that the IMF has okayed another instalment, perhaps the government should focus on the waivers it has to seek every time. Interestingly, despite begrudgingly agreeing to lapses in deficit, borrowing, revenue, etc, the Fund makes a point of praising economic fundamentals, which raises more than a few eyebrows. But this program will expire next year. And with the government still predominantly dependant on borrowing to even stay afloat, it will face a tough time as the next general election draws near.
That is why the economy is now becoming one of the most important political considerations for the prime minister. He has been unable to follow through on promises of expanding the tax net, increasing the export base, and overcoming the power crisis, all of which are crucial for the kind of economic growth that Pakistan is in need of. So far, the government has been able to ride the international oil price collapse – and subsequent low inflation at home – and present a semblance of stability. Yet production is chronically weak. As is manufacturing. And there are still no credible plans for adding value to the export mix.
From here on, the government will have to modify its obsession with mega projects like metro busses, motorways and power plants. Such enterprises, and their glitter and glamour, look good for a while. But since they, too, are increasingly seen as benefitting the same few with little or no trickle down for others, translating this particular policy into votes will be difficult. It is time, therefore, for a complete overhaul. The government must gather the political will to take tough decisions regarding taxes. And a comprehensive program should be initiated to overhaul exports. There should also be more serious checks on public debt. Unless such steps are taken, economic problems will assume an increasingly political nature, especially around election time.
