INSIGHT
Pakistan’s fragile economy continues to suffer due to growing political instability, now being witnessed more intensely due to the increasing civil-military standoff over the highly damaging Dawn leak’s report published last year.
The civil/military relations went soar for the first time so openly over the issuance of a notification by the prime minister’s principal secretary last week, which was instantly rejected by the DG ISPR through his tweet that sought the publication of complete relevant portions of the investigation report as was mutually agreed between the two sides.
Insiders say that the military authorities are unprepared to accept anything short of punishing those involved in Dawn leaks under the Official Secret Act-1923. The government, they said, was adequately told that breach of national security had occurred that warranted serious action against the wrongdoers.
As if Panama scandal was not enough to harm the country’s $300 billion economy, confrontation over Dawn’s highly objectionable report further brought political uncertainty at a time when the next budget is to be presented within this month. One of the serious issues is fast depleting foreign exchange reserves of the central bank, which now stand at $16.1 billion.
Separately, little over $5 billion are being maintained by the private commercial banks, out of which $3.93 billion have just been borrowed by the government to what is being said, to “artificially sustain reserves at $16 billion level”. This was done against the conditions agreed with the International Monitory Fund under the three year $6.2 billion Extended Fund facility (EEF) that ended in September 2016. Now on one side there is an escalating confrontation between the government and the army, and on the other side a stop–gap budget is being finalised by temporarily posted officials in the ministry of finance, Federal Board of Revenue (FBR), Economic Affairs Division (EAD) and the State Bank of Pakistan (SBP).
Questions are being asked everywhere as to how can there be any serious preparation for the new budgetary proposals when officials are working as “acting” heads, and this shows that the government is too busy fire fighting political matters, and is left with no time to take into account the deteriorating economic issues.
The beleaguered Pakistan Muslim League-Nawaz (PML-N) government, being last year in office, faces serious challenges both on political and economic fronts, and things are reportedly getting tougher because of increasing tense civil and military relations as both sides seem to be sticking to their point of view.
A few well- wishers of the prime minister are believed to have told him to mend fences with the military and deal with the Dawn leaks issue, including by ordering the closure of the Daily for 15 days for publishing a highly controversial report that had serious implications for national security.
A worried PML-N Senator Enver Baig believes that national security must not be compromised at any cost, being very important to the nation’s vital interests. He urged the prime minister to immediately replace what he termed a “team of under-19 of advisors” with a mature political and economic team to ensure both political and economic stability which, this time around, has terribly been hit by the worsening civil and military relations.
“Our rulers relish crisis after crisis and this is suicidal for our leadership,” he said, and added that the Dawn leaks issue needed to be resolved on war-footing.
“Whatever had been agreed with the military authorities on Dawn leak must be honoured to avoid repeating the past that was full of acrimony and had ultimately led to the dismissal of the previous PML-N governments,” the senator said.
He was of the view that “there was an urgent need to convene the Central Executive Committee (CEC) meeting of the party”, the only forum, he believed, which could give strength to the prime minister under these puzzling circumstances.
The country’s economy, Senator Baig said, was in doldrums as the economic managers preparing 2017-18 national budget had been posted on ad-hoc basis which did not reflect good governance. “There is no sign of economic stability due to renewed political controversies because the ruling party is bent upon having crisis after crisis.”
When asked about the official position of Maryam Safdar in the party fold, Senator Baig said the household must be kept away from any party decision or any statement related to the prime minister. “I am sorry to say that she does not hold any official title within the party or the government, therefore, all the statements made on behalf of the prime minister must be routed through his official press secretary and not her,” he maintained.
While the political atmosphere gets murkier due to the unending Panama gate and Dawn Leaks, the economic situation is turning even scarier. The preparation of the new budget by ad-hoc appointees is a new phenomenon never experienced before.
These appointees, some believe, were incapable of working out the nitty gritties of the budget, but appeared ready to “oblige” the finance minister in any way.
Now, when the Planning Commission had already been bypassed by the finance minister, the minister for planning and development Ahsan Iqbal is reportedly too frustrated and has said privately on a couple of occasions that he was not given a free hand nor his Commission allowed to prepare the broad contours of the budget. This is said to be happening for the last four years. It did not happen when he was the planning and development minister in the second PML-N government.
It is in this backdrop that the experts have been saying that the Planning Commission must be wound up, as it is just a drain on the national exchequer, and that those working in it should either be absorbed in other ministries or asked to go.
Former deputy chairman planning commission and senior economist Dr Nadeem ul Haque believes that the mounting political uncertainty being seen in the presence of Panama and Dawn leaks was suicidal for the economy as all transactions and investment proposals had been put on hold. “This is most unfortunate that our rulers are unconcerned about our ailing economy and are just trying to push forward their own political agenda meant only to get away with Panama and Dawn leaks,” he said.
“Uncertainty is appallingly affecting the market,” Dr Haque said, and added that now when the budget was around the corner, no policy planning was being done to come up with any viable budget having clear priorities about the income and the expenditure.
“The ministry of finance has destroyed the economy as no tax reforms and other reforms were undertaken by the present government.” How could there be any viable budget in the presence of increasing current account and capital account, he asked.
“Economic fundamentals have to be addressed to improve the current rotten tax structure. There is no debt management, there is no asset management and there is no exchange rate policy. The Economic Committee of the Cabinet (ECC) is only a transacting forum, so is the cabinet that has lost its meaning in terms of guiding the institutions,” Dr Haque lamented.
He said there were no economists who could help carve better budget and give policy guidelines on major economic issues. “All those sitting in the ministries are working for donor agencies and are running their consultancies instead of doing their job honestly and professionally,” he said.
Dr Haque said he has no doubt that the new government which would come into power after the next election would have to go back to the International Monitory Fund for emergency lending. The situation on the external sector is very precarious as reserves are depleting fast because of falling exports and decreasing home remittances, he added.
A Karachi-based prominent businessman and Pakistan Bedwear Exporters Association (PBEA) chairman Shabir Ahmed regretted that the widening divide between the government and the army was causing new problems to the already crippling economy.
The issue of Panama and Dawn leaks, he pointed out, was terribly mishandled by the government that brought more economic instability in the country. He said he did
not know how would the officials of the ministry of finance and the FBR firm up new budgetary proposals aimed at fixing the ailing economy. “Exports are failing, foreign exchange reserves are waning, home remittances are declining and the FBR is failing to restrict revenue shortfalls and this all shows how vulnerable the economy of the country is.”
Ahmed said both the ministers for finance and commerce have failed to repair the economy and hastened to add, “When they would not look after their ministries and only indulge in political matters, how could there be any improvement in the economy?”
He was of the view that the economy needed to be fixed on war footing and this job, he believed, could not be done by the present rulers who were out only to protect their political interests and have no time to ensure good governance.
While increasing revenue shortfalls are not allowing the planners to firm up credible new budgetary proposals, the reduction in foreign inflows is also fast becoming a serious problem for the government.
Shabir Ahmed
PBEA chairman
“Exports are failing, foreign exchange reserves are waning, home remittances are declining and the FBR is failing to restrict revenue shortfalls and this all shows how vulnerable the economy of the country is...When they would not look after their ministries and only indulge in political matters, how could there be any improvement in the economy?”
Dr Nadeem ul Haque
Senior economist
“Economic fundamentals have to be addressed to improve the current rotten tax structure. There is no debt management, there is no asset management and there is no exchange rate policy. The Economic Committee of the Cabinet is only a transacting forum, so is the cabinet that has lost its meaning in terms of guiding the institutions.”
Enver Baig
PML-N Senator
“Our rulers relish crisis after crisis and this is suicidal for our leadership...Whatever had been agreed with the military authorities on Dawn leak must be honoured to avoid repeating the past that was full of acrimony and had ultimately led to the dismissal of the previous PML-N governments...there was an urgent need to convene the Central Executive Committee meeting of the party.”
According to the central bank, the country’s total reserves, including $5.1 billion being held by the commercial banks, stood at $21.1 billion by April 21. In absolute terms $2.1 billion were borrowed for a month and $1.825 billion for two to three months. These short-term loans had been obtained by the government from the commercial banks.
The situation calls for careful handling of both internal and external accounts so as to plan a practical budget for 2017-18 aimed at reducing fiscal deficit and achieving five percent plus GDP growth. Can all this be achieved under the present political circumstances, is a question being currently debated in all the official and unofficial quarters.
The writer is a senior journalist based in Islamabad
