Monday, April 18, 2011

Daily Times editorial April 19, 2011

Economic woes

A high powered delegation of the economic managers of the country, led by Federal Finance Minister Abdul Hafeez Sheikh, is in Washington for discussions with the international financial institutions (IFIs) and major donor countries in and around the annual gathering of the IMF-WB. While the Pakistan side outlined its difficulties and strategy to cope with the same, the IMF was extremely critical of the economic management of Pakistan, criticism that has already led to the suspension of the last tranche of the $ 11.3 billion Standby Facility. Mr Sheikh dumped the entire responsibility for the inability to carry out the tax, energy, and withdrawal of all subsidies reforms onto parliament, calling it the most serious obstacle to such reforms. This is not an untypical technocratic argument by a finance minister steeped in the culture and approach of the IFIs. The fact of the matter is that Pakistan is suffering from the fallout of the still precarious global recession, the devastation caused by last year’s floods, the malign effects of terrorism, and mismanagement by our brilliant technocrats. The latter’s ready made formula for any economic problem is to impose the burden of bad times on the masses, while preserving the benefits of good times solely for the elite. The political elected representatives of the people in parliament have to defend the interests of their constituents. Hence the technocratically crafted reforms, for which no prior groundwork to develop a political consensus around arguably some good and necessary reforms like RGST had been carried out, found shipwreck in parliament when the politicians, fearing a backlash from their constituents, refused to go along with the above mentioned ‘ready made’ formula.
The result, of course, of this impasse was the suspension of the IMF programme, withholding of the last tranche, and the current scepticism of the IMF expressed to the Pakistani delegation that failure to carry through the tax reforms, withdraw subsidies, assure revenue targets are met, etc, throws the possibility of a fresh IMF loan to pay off the past loan into doubt. Even were such a loan granted, it would be a classic case of the country being in a debt trap. Discussions with German, British and US officials on the sidelines of the IMF-WB meetings too have yielded little beyond offers of hydropower projects, help in accessing the EU market, etc, essentially pie-in-the-sky. The prospects therefore of the Pakistani delegation returning from Washington with its pockets full of more than small change seem dim. That is likely to translate into more burdens for the people.
Another instance of what is wrong with the economic management of this government is the appointment, once again, of the newly elected Senator Dr Asim Hussain as Adviser on Petroleum, a post from which he had to resign a year ago in cloudy circumstances. Accompanying this fresh return of the redoubtable Dr are the instructions of Prime Minister Yousaf Raza Gilani to fire all the MDs of the oil and gas companies as the first step in reforming the energy sector. Fresh boards will be constituted for these companies in an effort to enhance the production of oil and gas, rationalise petroleum prices, and tackle the endemic problem of circular debt that has caused considerable problems in the energy sector as a whole. It is best to suspend judgement on how the advisor intends to achieve all this till some policy formulation is available.
But the reappointment of Dr Asim Hussain, known to be a close friend of President Asif Ali Zardari, will once again lead to finger-pointing regarding the penchant of the present dispensation to rely on cronyism in top appointments at a time when the very serious economic crisis requires the best professional talent to be given charge and autonomy to manage the increasingly unmanageable state of our economy and finances. So long as political loyalties trump competence in this regard, the hope for better days any time soon is wishing for the moon.

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