Between hope and hype5 min read

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deficits
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THE only question now is this: when does the work begin? At some point, the optics must end and the policy must begin. One is waiting for that moment when one sees key members of the cabinet beginning to gel together as a team, when the language of the prime minister and his spokesman moves away from today’s little stunt to tomorrow’s big vision. The address to the nation may have been a starting point (at best), but by now we need to know the path forward. Thus far, there is nothing on that front.

Consider as an example the prime minister’s address to the Senate, his first. He repeated his concern about children’s health and stunting due to malnutrition, an admirable goal for a prime minister to pick, but there is no indication that he has been briefed on the work that is already under way in this area for at least two years now (the government of Sindh launched a programme in 2017 to reduce stunting in collaboration with the World Bank). If this is such an important priority (as it deserves to be), the least that Khan could do was find out how much there is to build on in this area, who are the right people to talk to and how to get a briefing from them.

We are being reassured by the finance minister that work is currently under way to develop a broad plan to tackle the country’s growing deficits on the fiscal and external side. But from the prime minister, we hear repeatedly of a plan to ‘bring back looted money’ and hints of launching a donation drive among overseas Pakistanis. So which is it? Are we seriously going to try and plug a $2.2 billion monthly current account deficit by launching charity appeals to overseas Pakistanis and trying to ‘bring back looted wealth’? That sort of thing makes for excellent campaign rhetoric but lousy policy.

Give them a chance, say some. Fair enough. But how much time do they need to find their feet?

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Give them a chance, say some. After all, they’ve only just come into power! Fair enough, I say. One question though: how much time do they need to find their feet? This is the honeymoon period, when not just voters, but investors and creditors are all watching their every move. And they all want to know one thing: what is the plan for plugging the deficits? Is this talk of appealing to overseas Pakistanis and pursuing looted funds abroad going to be the plan? Or is there more to come on that front? Will we ask for a bailout, when, and from whom?

Also Read: Foreign policy and economic challenges

Finance Minister Asad Umar wants to convince us that detailed work is being done on a plan for macroeconomic stabilisation. Data is being pored over, projections are being tweaked, debt service schedules and commitments are being drawn up, data sheets and projections left behind by the previous government are being cleaned out because, as he put it, “with all due respect, they are not worth the paper they are written on”.

He’s a busy man with a lot riding on his shoulders. One question for him: at what point will we begin to hear words being uttered by him coming out of Imran Khan’s mouth? How far will Umar be able to command the attention of the prime minister? Imran Khan would do himself a favour to listen more carefully to his finance minister, but will he? We’re waiting to see, because thus far there is no indication that he is doing so.

There are some rules of politics in Pakistan. First rule: those in power get skewered, whether they like it or not. Second rule: those in power own the failures and deficits of the state. If down the road, as a condition for a bailout, the government has to hike taxes on petrol and electricity, raise interest rates by several percentage points, depreciate the currency till it hits 140, roll back the tax cuts left behind by the last finance minister, they will have only limited room in which to say ‘all this is Nawaz Sharif’s fault’.

What we are living through right now is not, by any stretch of the imagination, a ‘crisis’, at least not economically speaking. A crisis occurs when the day-to-day lives of large numbers of people is adversely impacted, like it was in 2008 when the stock market was frozen and the financial system was nearly shutting down and large-scale capital flight was taking place from the country. Or like in 2013 when the power supply chain nearly shut down completely and we had 20-hour-long spells of load-shedding. Nothing of that sort is happening right now. The only way that the growing deficits have yet hit the day-to-day lives of people is the inflationary impact from the depreciations of the currency. We are not in a crisis, but heading towards one if serious corrective action is not taken.

So it’s a good idea to be prepared now to swallow a few basic realities. Donations, charities and appeals to people’s better nature are not going to cause revenues and foreign exchange inflows to materialise. Searching for, locating, seizing and repatriating ‘looted wealth stashed abroad’ is not going to be done so easily or so fast that it can help plug the deficits. We need a policy direction and we need it fast, and the only way that happens is if the party leadership stops fighting with everyone, pulls out of the business of optical stunts, and comes together as a team to put together a credible plan.

Let’s hope at the end of the day we will have more than totem poles, wild goose chases, madcap donation schemes and charismatic stunts to show for all the sound and fury. I, for one, am waiting for a team and a direction to emerge from this chaotic flux. The sooner the better, because those deficits aren’t going to plug themselves.

IMF

The writer is a member of staff.

Email: khurram.husain@gmail.com ,Twitter: @khurramhusain

(This news/article originally appeared in DAWN on August 30th , 2018)

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