The common man will suffer
State Bank of Pakistan Governor Tariq Bajwa has more or less conceded that the country is headed for low growth, which is bad enough, but when combined with a further devaluation of the rupee, spells out suffering for the common man, as prices rise and wages stagnate. Federal Planning Minister Khusro Bakhtiyar was only stating the obvious when he said the government was willing to expend political capital. The assumption behind is that it that the government is still in the first year of its five-year tenure, and something will turn up in the remaining four years. This may prove an overly optimistic assumption, not least because an election in a parliamentary system might well be held prematurely. It should be the government’s privilege to go for an early dissolution, but our history since 1988 shows that premature dissolutions occur at the behest of outside, Napoleonic, forces.
Another reason for the PTI government to be wary is that there has already been much suffering, imposed because IMF conditionalities are being imposed in advance in a bid to satisfy it. The resignation that appears to have set in within the PTI government is not shared by the public. The PTI’s leaders seem to be losing sight of the reason they were electecd to office: to solve the problems of the common man, not add to them. The low growth foreseen by the State Bank Governor is a problem, and should not be papered over as he tried to do. Mr Bajwa, addressing the Pakistan Economic Forum held by Bloomberg LP, disclosed that there was a 72 percent decline in the deficit, but exports had still declined. That shows that the devaluation of 31 percent since December had not worked.
Mr Bajwa said that the PDSP has been cut to Rs 575 billion from Rs 800 billion. This would be counter-productive, as this would act as a brake on growth. Mr Bajwa also disclosed that the agreement with the IMF would be reached after agreement on the timing of the stabilisation measures. Former Federal Finance Minister Hafeez Pasha criticised the way the IMF wanted a free float of the rupee and recommended a managed float. A free float would be dangerous, because it could lead to speculation. Mr Bakhtiyar probably unveiled the official euphemism for a free float by mentioning a ‘flexible exchange rate’. Clearly, the much touted packages from friends have not only failed to avoid an IMF package, but also the harsh conditions it imposes.
