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.