Blame game

The Pak Banker - - Front Page - Dr Ash­faque H Khan

THE fi­nance min­is­ter faced se­ri­ous criticism of his per­for­mance by his cab­i­net col­leagues in the fed­eral cab­i­net meet­ing of Oc­to­ber 31. Min­is­ter af­ter min­is­ter, in­clud­ing the prime min­is­ter, crit­i­cised the fi­nance min­is­ter for mis­han­dling the econ­omy, in par­tic­u­lar the price sit­u­a­tion. The fi­nance min­is­ter re­sponded to the criticism in equally terse lan­guage. Such an episode in the cab­i­net is not un­com­mon. When the chips are down, blame-game is a com­mon phe­nom­e­non in our so­ci­ety.

In re­spond­ing to the criticism the fi­nance min­is­ter at least re­vealed the truth. He came down hard on the po­lit­i­cal lead­er­ship for the new NFC Award and launch­ing of the Be­nazir In­come Sup­port Pro­gramme (BISP). From his point of view, the NFC Award and the BISP are re­spon­si­ble for the per­sis­tence of higher in­fla­tion in the coun­try.

Is the fi­nance min­is­ter solely re­spon­si­ble for se­verely dam­ag­ing the econ­omy? While the min­is­ter is to be blamed for pre­sid­ing over the eco­nomic de­struc­tion as cap­tain of the eco­nomic team, the po­lit­i­cal lead­er­ship can­not ab­solve them­selves from the de­struc­tion of the econ­omy ei­ther. The po­lit­i­cal lead­er­ship is to be blamed for not fo­cus­ing on the econ­omy since they took charge of the coun­try’s af­fair. They brought fre­quent changes in the eco­nomic team and hence did not al­low the ap­pointees to work with con­fi­dence. The mem­bers of the team they ap­pointed were weak, dis­jointed, with lit­tle un­der­stand­ing of the ground re­al­i­ties. The po­lit­i­cal lead­er­ship did not pro­vide ad­e­quate sup­port to its eco­nomic team in undertaking dif­fi­cult struc­tural re­forms, par­tic­u­larly in the ar­eas of tax­a­tion, ex­pen­di­ture, power sec­tor sub­sidy and so­cial safety net pro­grammes. They them­selves failed to main­tain fis­cal dis­ci­pline, forc­ing the eco­nomic team to bor­row reck­lessly to fi­nance their un­met de­sire and needs.

It was the de­ci­sion of the po­lit­i­cal lead­er­ship to crim­i­nally in­crease the sup­port price of wheat with­out car­ing about food prices and the poor of this coun­try. It was also the de­ci­sion of the po­lit­i­cal lead­er­ship to fi­nalise the NFC Award with­out any eco­nomic foun­da­tion. This award has de­stroyed fis­cal dis­ci­pline and sowed the seeds of per­pet­ual macroe­co­nomic cri­sis in the coun­try. Pump­ing tax­pay­ers’ money in rot­ten pub­lic ser­vice en­ter­prises (PSEs) to keep them afloat, pro­vid­ing Rs1.5 tril­lion to the power sec­tor to fi­nance their cor­rupt prac­tices and in­ef­fi­cien­cies and bor­row­ing in dol­lar terms, con­vert­ing them into ru­pee, and drop­ping them on 3.5 mil­lion house­holds were also the de­ci­sions of the po­lit­i­cal lead­er­ship. On their part, the weak and dis­jointed eco­nomic team sim­ply failed to com­pre­hend the eco­nomic chal­lenges fac­ing the coun­try. The laid­back, lethar­gic and non-se­ri­ous at­ti­tude of the team fur­ther com­pounded the dif­fi­cul­ties. The cap­tain of the team never both­ered to in­clude hon­est, ef­fi­cient and ded­i­cated civil ser­vants, nor pro­fes­sional economists fully aware of the ground re­al­i­ties in the team.

The eco­nomic team kept the pri­vate sec­tor at bay and never com­mu­ni­cated with the peo­ple of Pak­istan. The team, par­tic­u­larly the cap­tain, failed to muster the courage to pre­vent the po­lit­i­cal lead­er­ship from tak­ing fis­cally ir­re­spon­si­ble de­ci­sions, such as rais­ing the salaries of gov­ern­ment ser­vants by 50 per­cent in one go at a fi­nan­cially dis­tressed time, in­creas­ing the sup­port price of wheat by more than 100 per­cent, fre­quently bail­ing out rot­ten PSEs, dol­ing out tril­lions of ru­pees as pow­er­sec­tor sub­sidy, spend­ing money al­lo­cated for the year in just three months, adding project af­ter project in the list of the de­vel­op­ment pro­gramme by by­pass­ing the par­lia­men­tary ap­proval, and so on.

The eco­nomic team lacked the courage to call a spade a spade. For ex­am­ple, the cap­tain of the team ac­knowl­edges pri­vately that the new NFC Award was a dis­as­ter for the econ­omy but lacked the courage to tell this to the po­lit­i­cal lead­er­ship. Only when he came un­der at­tack in the cab­i­net did he do so. The team never warned the po­lit­i­cal lead­er­ship about the ill­ef­fect of the BISP and the power-sec­tor sub­sidy.

A fis­cally ir­re­spon­si­ble gov­ern­ment, to­gether with a weak, dis­jointed and non-se­ri­ous eco­nomic team have dam­aged the econ­omy to the core within five years. There is gen­eral con­sen­sus at home and abroad that Pak­istan’s econ­omy was never in such dire straits since its in­cep­tion.

Af­ter al­most five years at the helm of af­fairs, the score card of the gov­ern­ment and its eco­nomic team is cer­tainly dis­mal at best. Eco­nomic growth has slowed down to an av­er­age of three per­cent per an­num, in­vest­ment is down to a 60-year low, do­mes­tic sav­ings have never been so low in the his­tory of this coun­try, un­em­ploy­ment and poverty have risen, the bud­get deficit has reached an all-time high (8.5 per­cent of the GDP) last year and expected to at­tain a new height this year, and pub­lic debt has more than dou­bled in the last five years.

An ex­ter­nal debt re­pay­ment cri­sis is knock­ing at the door, the ex­change rate ap­pears to be in freefall, for­eign ex­change re­serves are de­plet­ing fast, for­eign in­vest­ment has van­ished, do­mes­tic in­vestors are mov­ing abroad and cre­at­ing jobs in other coun­tries. Elec­tric­ity and gas “short­ages” have af­fected the lives of mil­lions of Pak­istani and hurt eco­nomic ac­tiv­ity in the coun­try; the law and or­der sit­u­a­tion has de­te­ri­o­rated and badly af­fected the coun­try’s econ­omy, in­fla­tion per­sisted at dou­ble-dig­its for 55 months in a row, PSEs are bleed­ing pro­fusely, state in­sti­tu­tions have col­lapsed and the writ of the gov­ern­ment has van­ished. With eco­nomic de­struc­tion all around, the gov­ern­ment and its eco­nomic team are least both­ered. The me­dia, civil so­ci­ety and par­lia­ment ap­pear to have lost in­ter­est. Those at the helm of af­fairs are bent upon emp­ty­ing the na­tional ex­che­quer by March 2013. Those who can re­ally make a dif­fer­ence in sal­vaging the econ­omy have be­come silent spec­ta­tors. Let the haem­or­rhag­ing of the econ­omy continue. Let pol­i­tics over­ride eco­nom­ics. Let the peo­ple of Pak­istan continue to suf­fer.

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