Old wine in a new bottle
Finance minister Asad Umar is so cocksure that measures already taken have revived a moribund economy that he is not willing to brook any criticism of his policies. When a correspondent at his post mini-budget conference asked him a question regarding possibility of a cheaper loan package from the IMF (International Monetary Fund) he was visibly irritated.
In an emotional tone he declared that we would not go on our knees nor take any dictation from anybody, as Pakistan was a country of 201 million people. But the question that begs an answer is that hasn’t Islamabad already gone down on its knees by begging expeditions to China, Saudi Arabia, UAE and Qatar in recent months?
The finance minister in his budget speech had revealed that finally the government has decided to go for an IMF bailout. After months of procrastination and hemming and hawing about whether to go for a bailout or not the government had finally taken a decision.
It is good to declare that we are a proud nation that will not be bullied. Nevertheless it is too soon to make such a claim. Despite assertions to the contrary we are yet not out of the woods or realistically speaking on the road to economic recovery.
It is a relief that despite the bravado the finance minister’s disclosure that he is negotiating a bailout package with the international lending agency is welcome news as Islamabad has been left with no other viable option. The facility is all the more necessary not only to improve Pakistan’s international standing with credit rating agencies but also to restore confidence of bodies like the World Bank and Asian Development Bank (ADB).
Asad Umar also claimed that each and every decision taken by him has the full confidence of the prime minister. This is how it should be. But perhaps the finance minister felt beleaguered by his own colleagues and from the prime minister’s kitchen cabinet not too happy with the manner in which he was handling the economy.
If the economic czar is not backed by his own prime minister, he should be packing his bags and going home. But a debate on policy matters is a healthy sign. More so on how to fix an economy in tatters.
But Asad Umar seemingly does not brook any form of criticism even from his own party. Like most of his colleagues he seems to be unhappy with the media as well.
According to him the media is responsible for creating despondency as all bad news and criticism is only on talk shows and in newspapers. Otherwise on the ground all is fine.
And it is quite fallacious to assume that smaller the IMF package its condtionalites will not be as tough.
The announcement of a second mini-budget within a short span of five months is in itself symptomatic of an economy in trouble. However it proved less of a budget and more in the realm of policy measures to revive the confidence of the business community in the government’s economic policies.
Of course if all were well the prime minister would not have made quick forays to friendly countries for emergency financing. The government should be given brownie points for successfully getting regular infusions to avoid a default and the resultant chaos.
However what is still lacking is a road map to tackle the endemic structural fault lines of the economy. The mini budget can be termed as old wine in a new bottle. Hard measures still need to be taken to put the economy on a growth tangent
For example the circular debt has ballooned to Rs1.14 trillion. Despite having excess capacity to produce electricity this is affecting not only power production but distribution as well. Even the state oil company PSO is on the verge of bankruptcy due to Rs83.5 billion owed to it by power producers dependent on oil.
The mini budget apart from tinkering here and there imposes no new taxes. Perhaps it feels that business revival as a result of the government’s new measures will generate enough activity to fill in the gap of Rs7 billion thus created.
This is insignificant as compared to the overall revenue shortage that by last month had ballooned to Rs175 billion and it will be almost double by the end of the current financial year.
On the expenditure side as well the finance minister chose not to unveil any plans. Owing to 30 percent devaluation resulting in increasing the interest rates from 7.5% to 10% and increased defence expenditure the debt servicing is bound to cross Rs700 billion more than planned.
The finance minister also claims the fiscal deficit will remain within limits. He is also crowing about just a minimal increase in exports. This is not enough to bring the burgeoning current account deficit significantly down.
Perhaps everything is being left for signing a front loaded package with the IMF. This would entail a manifest increase in taxation.
It is quite apparent that the PTI government has postponed hard austerity measures for a future date. To say that the expected IMF bailout will be the last is a tall claim to make.
This will depend on international economic conditions and also how far the PTI will be able to follow a reform agenda. And it is quite fallacious to assume that smaller the IMF package its condtionalites will not be as tough. Actually the lending agency’s reform agenda is not contingent upon the size of the package.
Even more so pathetic was the prime minister’s aide Naeemul Haque’s tweet terming Shahbaz Sharif as the illegitimate child of late military dictator Zia ul Haq.
It was rather unfortunate the rumpus created by the opposition during the finance minister’s speech. More so the leader of the opposition Shahbaz Sharif in his speech just before the finance minster’s budget speech unnecessarily attacked the prime minister who was present in the house as the “selected prime minster.” Despite past provocations this was against the spirit of the agreement brokered by the speaker to keep the proceedings of the House within decent limits.
Even more so pathetic was the prime minister’s aide Naeemul Haque’s tweet terming Shahbaz Sharif as the illegitimate child of late military dictator Zia ul Haq. He also threatened that the government can revoke incarcerated Sharif’s production order.
In reality he cannot. It is the sole prerogative of the speaker of the National Assembly.
No matter how grave the provocation two wrongs don’t make a right. The government needs the cooperation of the opposition in order to get its reform agenda implemented, provided it has one.
The prime minister and his stalwarts need to outgrow the container mentality. Less friction with the opposition is in the government’s own interest. But as things stand today Khan’s fury expressed through his various spokespersons is in direct proportion to the opposition’s acerbic criticism of his government’s policies.