Prime Minister Imran Khan’s persistent plea to the media as well as the public to give his administration a grace period of 100 days to sort out the serious issues that the party inherited expired this Tuesday. Notwithstanding the fact that little over three months was widely considered to be too short a time to make any meaningful difference given the scale and extent of the prevailing issues, yet the general public was told again and again to judge the government’s performance after 100 days as that was the time identified by the Prime Minister himself.
The tracker of the government’s achievements during the first 100 days, uploaded on a special website, reveals that task forces set up to assess the situation and recommend measures to deal with the prevailing issues have completed their work; however their recommendations have not been shared with the public and, therefore, no independent assessment can be made of their usefulness or indeed their implementability. Additionally, the government has laid out its ambitious legislative agenda ranging from strengthening the National Accountability Bureau law to bringing back plundered wealth stashed abroad (irrespective of the numerous difficulties involved in identifying plundered as opposed to legally held assets abroad); however the government does not have the parliamentary majority in the Senate or in a joint sitting of parliament to ensure the passage of legislation which may render this entire exercise irrelevant at best or fruitless at worst. And the continued attacks against opposition leaders bodes ill for the necessary parliamentary support required to pass bills many of which would almost certainly be supported by the general public.
While more time is required for the implementation of PTI’s ambitious reform agenda, yet the most disturbing feature of this administration’s performance to date has been its failure to focus on first identifying and then promptly taking mitigating measures to stabilise the economy – measures that were required to be taken within the first few weeks after the PTI assumed power. Khan’s successful tours to Saudi Arabia, China, the United Arab Emirates and Malaysia, (though here too details are lacking apart from the outcome of his Saudi Arabia visit), led to the claim that the country’s considerable foreign exchange requirements have been met (through loans, deferred oil payment and increasing Pakistan’s exports); however stabilisation of the economy that required immediate additional measures have yet to be announced.
Economic policy measures taken during the first 100 days consist mainly of measures taken in the supplementary budget presented by the PTI and sadly they are a continuation of past flawed policies: (i) a cut in development expenditure, with obvious negative implications on growth, given that private investors – local and foreign (with foreign direct investment plunging by over 40 percent during the first four months of the current year) – hesitant to invest as long as the government does not present its economic reform agenda for the current year; (ii) current expenditure remaining unchanged with no attempt made to negotiate a voluntary cut in civilian and military expenditures given that each section of society would need to make sacrifices given the current state of the economy; (iii) unrealistic revenue increasing measures, including 93 billion rupees additional revenue through technical means and through imposing regulatory duties on luxury goods without taking account of the commensurate rise in smuggling across our porous borders. These flawed measures accounted for 40 billion rupees lower revenue collection than budgeted during the first four months; (iv) reliance on borrowing from the State Bank of Pakistan has continued, a policy that would have to end on an International Monetary Fund (IMF) programme, with obvious inflationary implications; and (v) measures to promote exports dating back to the previous administration have continued but the imports especially if the China Pakistan Economic Corridor projects are allowed to continue at the same speed as before would keep the current account balance under extreme stress.
One way out for the government to ease investor concerns as well as formulate a homegrown doable reform agenda would be to negotiate with the IMF which would provide a comfort level to investors, open up cheap avenue for credit from other multilaterals/bilaterals, reduce the rate of return on issuance of diaspora bonds/Eurobonds/sukuk, and last but not least, keep the government on the straight and narrow rather than being diverted by political considerations. The government must be made aware that the IMF conditions can be negotiated by skilful negotiators who present a viable alternate homegrown plan (and the government should engage some lawyers from the Law Ministry to be part of the government team to highlight some constitutional impediments to IMF proposed reforms). In the event that the mission leader has exhibited policy lapses during a previous programme, as was the case under the three-year Extended Fund Facility, or a bias, the government can request a different mission leader. To conclude, an IMF programme would have eased investor concern as the immediate concern of economic stabilisation would have been dealt with.
(This news/article originally appeared in Business Recorder on November 29th, 2018)