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Return of the Undertakers

Caretaker PM Moeen Qureshi is on his annual “yatra” to Pakistan. On Friday last he spoke on “Pakistan and its economy in the global context” to a gathering in Karachi organized by “The Reformers”, the brainchild of one of the Caretaker Ministers of 1993, Mr Nisar Memon, former long-term Chief of IBM in Pakistan. This elite audience consisting of businessmen, technocrats, intellectuals, bureaucrats etc was carefully selected to get the maximum mileage from Moeen Qureshi’s thoughts to the Pakistan populace. His message of “doom and gloom” was well articulated, he spoke about the eminent collapse of Pakistan’s economy. Our man who lives in Washington (but will agree to live here either as President or PM) has been saying the same thing for some years now, and the inference is that it was only because of his three months Caretaking in 1993 that Pakistan’s economy has managed to survive this long. Moeen Qureshi pontificated a few “priorities” for the military administration, viz (1) long-term loans from world financial institutions at low interest rates (2) restoring investors confidence (3) law and order situation to be improved (4) administration to be strengthened and (5) a long-term poverty alleviation programme to be structured with help of IMF and World Bank. Well, I have news for Mr Moeen Qureshi, with some adjustment to substance and priority, and with all due respects, isn’t that what the military regime has been trying to do for the past year? And Shaukat Aziz as Finance Minister has done a reasonable job in stabilizing the economy, we may default on our debts but not for any fault of Shaukat. Moreover, the heavens will not fall in case of Pakistan default even though there may be wailing in the corridors of the IMF and the World Bank because of the deviation from their prepared script. As much as I have read history and about economies, one cannot come across a single instance where a nation that can feed itself has collapsed economically. Moreover, any child in Pakistan knows that we spend too much on defence, that same child also knows that even that is not enough (by far) to retain parity with the enormous increases in defence spending that India is presently engaged in. What Moeen Qureshi is asking us to do in sophisticated language is to roll over and play dead. He may be a super-salesman for “signing of the CTBT crowd”, disarming and playing second fiddle to India will take some selling to Pakistanis, especially those who live in Pakistan.

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Where Do We Go From Here?

The recent Federal Budget has increased the threshold of pain that the common man has to endure because of the misconceived policies that a “democratic” regime is implementing in horrendous fashion through an errant bureaucracy. Despite what Mr. VA Jafarey claims, and Mr. VA Jafarey has been making quite a number of claims to the contrary recently, the economy is in serious trouble. If it were not for our much vilified parallel economy, the same that everyone (and his/her IMF uncle) wants to document and cannot, we would be up the creek with only a begging bowl for a paddle. The Pakistani Rupee is sliding ominously against the US dollar and the country’s stock markets are barely kept afloat by frequent doses of massive public sector intervention. An economic disaster-in-the-making is not a startling revelation, not only does it cost the man in the street more to go on living, everyday drives him deeper into debt. The middle class cannot afford to die even, their hard-saved life insurance may not be worth the paper it is written on, given that the Ministry of Finance (MoF) has requisitioned almost all of State Life’s funds to create the instant liquidity Government of Pakistan (GoP) seems to acquire whenever an IMF deadline approaches. Creative accounting be damned, we have resorted to outright fudging to maintain the financial lie that all is “milk and honey” with respect to our economy.

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The “Willing” Crowd

As is usual for this time of the year, a number of Pakistani expatriates settled abroad are visiting Pakistan, among them former Caretaker PM Moeen Qureshi (MQ), potential Prime Minister Shahid Javed Burki, former Finance Minister Dr. Mahbubul Haq, etc, (the last named is believed to be returning home to settle in Pakistan permanently). Whether by coincidence or design, they seem to visit Pakistan every time there is some sort of a political or economic crisis in the country. In keeping with past practice, they are doing their usual well-organised rounds of speaking on various platforms, meeting the civil and military hierarchy as well as a cross-section of the people who matter in the Opposition and the Establishment. Dutifully, the print media is effusive about the “pearls of wisdom” that emanate from these economic intellectuals about the measures to be taken to “save” the economy and turn it around so as to provide for a glorious future for the people of Pakistan. Gifted with the gab, having years of experience to back their known brilliance and academic achievements, their solutions still are very much in line, except occasionally perhaps for Dr. Mahbubul Haq, with the known prescriptions of the IMF and the World Bank, the institutions they served faithfully over the years. Dr. Haq has a penchant for human resource development as an agenda of one point, except for him the other two have scant experience in the running of Third World Governments on a day-to-day basis till called to serve, as in the case of MQ as Caretaker PM.

As much as one respects Mr. Moeen Qureshi (MQ) for his outstanding performance as a Pakistani in reaching almost the top slot in a world finance institution despite the BCCI tag on Pakistanis as far as financial credibility is concerned, his ready acceptance of the IMF conditions in August 1993 despite the fact that the Mian Nawaz Sharif Government had initialled a draft in April 1993 having much easier terms, is the raison d’etre for our economic morass today. As the successor elected Government, Ms Benazir was obliged to accept the stiff IMF conditions which certainly gave immediate resuscitation to an economy ailing because of civil strife, but which strait-jacketed her flexibility to manoeuvre in the coming months and years, resulting in economic doldrums as we broke through every danger indicator on the economic path, particularly deficit financing in the past year. If MQ had spent more time in Pakistan, he would have been perhaps more inclined to stiffen up Pakistani resistance to the IMF conditions that were not pragmatic or conducive to the prevailing economic environment. With the opening up of the economy, there was a necessity for increased documentation, but slowly and gradually so as not to “disturb the natives and make them restless”. The second issue one takes with MQ is about shedding crocodile tears for the Muhajir community. Today’s law and order problem in Karachi is not of MQ’s creation but the basically unstable political structure presently in Pakistan is because the MQM did not take part in the National Assembly elections in 1993 when MQ was Caretaker PM and it was his duty to ensure every citizen got due representation at the national level and was not psychologically cast out of the national mainstream. What did MQ do then to redress the MQM’s grievances that in effect changed the entire political balance in Pakistani politics? And which 26 months later remains an insoluble sore point in the list of MQM’s demands? As far as corruption is concerned, at least 1 or 2 of his own ministers made use of their office for personal benefit during the 90 days or so of his Care-taking, why does he not denounce them publicly as he seems to be asking others to do? Or does charity begin at home?

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The Sahibaan Enigma

Speaking at his brother’s residence soon after arrival from the USA, former Caretaker PM, Moeen Qureshi said that keeping in view the political and economic challenges confronting the country as well as the internal and external problems all segments of the society should give up confrontation and evolve national consensus. MQ said that the law and order situation in Pakistan was deteriorating and until the problem was resolved the country could not develop. While declaring himself as “not a supporter of Martial Law” since democracy was restored in the country after a long struggle, MQ said that during general elections in the country he had insisted on the formation of a national government as according to the results of the elections, both the largest political parties of the country had won equal votes. The former PM said that as per democratic spirit an in-house change could be made in the country as a national government was the need of the time. During this Press Conference, he was flanked by the Minister for Information during his tenure, Mr. Nisar Memon, the long serving IBM Chief in Pakistan. Thankfully, other members of the American Business Council (ABC) and the Overseas Chamber of Commerce and Industry, who made up a fair segment of his Caretaker Cabinet, were not present as then it would look very much as the kick-off of a selection campaign by this expatriate Pakistani to become PM of another “national” government.

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The Federal Budget 1995-96 – More Than Meets the Eye

To the common man, the areas of the Federal Budget that are important are those that affect his buying power. To that end, the Peoples Party’s propaganda machine is working overtime to convince the populace that the only increases proposed are the tax-hike with respect to petroleum and gas prices. Since the common man was already shelling out more for his PIA tickets and electricity (raised pre-Budget) while bracing himself for the anticipated rise in telephone and transportation prices (left to the mercy of the Corporations) it is a moot point whether the masses would have yelled with joy at the resounding theatricals of Makhdoom Shahabuddin, the Federal Minister for State, for Finance, the man elected by the PPP Government to present the Federal Budget prepared by others. Not known for any dramatic potential during his Sadiq Public School days, this better than average School-hockey player is obviously a late-starter to histrionics and was thus fighting a credibility problem even before he began his speech. For whatever it is worth he struck a sympathetic chord in his leader who gave him encouragement by approving glances throughout his performance (of reading the Budget). In the Post-Budget Press Conference, the Makhdoom acted as a traffic cop, deftly passing on almost all questions to V.A Jaffery (mainly) and Shahid Hasan Khan, Special Assistants to the PM, and thereby confirming what is universally known to all, that he knew nothing of the Budget before, during or after its Presentation (shades of Capt (Retd) A.A Jilani with respect to his Lower Urdu Paper in the Army).

In the 1994-95 Federal Budget, the PPP Regime had set out unrealistic targets. Failure to reach these as well as the deficit target of 4% of GDP was cause enough for criticism. The resultant shortfall was to the extent of Rs 40 billion in tax revenues. This brought the budget deficit of Rs 72 billion to well over Rs 100 billion. Ambitious targets combined with inflexible expenditures based on incorrect estimates invariably leads to frustration and a size of deficit for which the authorities are least prepared. Naturally this surprise upsets a lot of calculations on which economic forecasts are prepared, thus affecting the credibility of the system. Through the years, the rulers, whether political or military, get the blame while the bureaucrats who set up these wrong projections in the first place escape retribution, indeed are rewarded in many cases for their “flamboyance” in outrageous estimates and expertise in sleight of hand with financial figures.

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The Return of MQ Prime Minister-in-Waiting?

Former Caretaker PM Moeen Qureshi, flew into Pakistan in the early hours of April 14, 1994, almost 6 months to the day after he handed over power to the elected PM, Ms Benazir Bhutto. For those addicted to conspiracy theories, his visit seems to have been synchronized with that of US Deputy Secretary of State Strobe Talbott as well as carefully orchestrated to invite attention. It raises a pertinent question, what is MQ doing here at this time? For the Ms Benazir regime, this is certainly not a happy period. Given that a very bad precedent had been set in July 1993 for future Constitutional sleight-of-hands by forcing out an elected PM who commanded a substantial Parliamentary majority, speculation is rife that MQ is here to personally gauge the situation and if the political environment is conducive for a “national” government, indicate to the powers-that-be his availability to be of service to Pakistan in taking our chestnuts out of the ever-spreading quagmire. Unlike last time, when his credentials were only that of an international technocrat and he was an unknown quantity to the public-at-large in the field of governing third world countries, MQ’s Curriculum Vitae (CV) is now much more credible for any concerted sales effort by vested interests. Whether anyone likes it or not, there are many in this country who believe that an interim period of national government is necessary and for them MQ remains a very distinct possibility as a PM in-waiting. It is also true that no political government can survive a nuclear “rollback”, at least publicly, MQ has no such problem in delivering.

Less than 180 days after MQ handed over the reins to Ms Benazir, Pakistan is in much deeper trouble economically, politically, socially and externally than when he took over from Mian Nawaz Sharif. Some of Pakistan’s problems were inherited by Ms Benazir as they were inherited by Mian Nawaz Sharif before her. To cast a broad brush in apportioning blame on PPP alone would not be fair, however on one important count Ms Benazir’s PPP surpasses Mian Nawaz Sharif’s PML (N) by miles, most of her problems are either self-created or occasioned out of designed neglect. Caretaker PM Moeen Qureshi stemmed the rot that arose out of the civilian coup that had paralysed the Federal Government. By the time he left the country was on its way to a more or less stable economic condition with hopes for building adequate foreign exchange reserves. The present situation may not be one of extreme economic apprehension despite the fact that the price of atta is slowly edging past the reach of the common urbanite. However, it is nowhere as rosy as the government’s rhetoric presents. On paper, the country’s foreign exchange reserves has gone up to US$ 1.9 billion, unfortunately it seems the same bureaucrats who served Mian Nawaz Sharif “loyally” do not seem to be informing the PM that almost US$ 1.5 billion of these so-called “Reserves” are short term borrowings by different government and semi-government corporations. To test MQ’s intellectual honesty, one could well ask this technocrat what is his analysis of the state of country’s present foreign exchange reserves?

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Financial Credibility

The enactment of the State Bank of Pakistan (SBP) Ordinance of October 5, 1993 by the Moeen Qureshi Administration giving the SBP considerable powers of autonomy with respect to monetary policy and the subsequent repeal by the present Ms Benazir regime as well as a fresh Ordinance replacing it thereof on Jan 1, 1994 has aroused quite a level of intellectual discourse within the economically knowledgeable both within and outside the country. The question of the impact on economic management has become of topical content and needless to say, well-wishers are looking forward to some kind of equitable working arrangement separating fiscal policy from monetary policy which would be in the best interest of the country’s economy.

The principal question to answer is what should be the level of autonomy of a Central Bank in a country like Pakistan? It is commonly believed that in developing countries Central Banks are (and must be) universally subordinated to the Government in the overall economic interest. The factual relationship could be the other way around, mainly that Third World countries have remained backward because among other things they have not allowed the development of various institutions vitally necessary for the emancipation of the economy. This is not much unlike the process of democracy building its roots in a country, dependant mostly on strong policies rather than the frequent holding of elections or number of political parties, etc. It is extremely important that developing countries promote institutions like the Central Bank, the various planning agencies and related financial institutions so that they can graduate into financial maturity. It is a tragedy that in Pakistan there is no tradition of commercial banks or other financial institutions having full-fledged Policy and Research Departments. Therefore, our Economic Analysis is generally very poor and usually not backed up by the information data that is the prime pre-requisite of carrying out such evaluation e.g. credit rating and project appraisal agencies in the private sector, it being understood that public institutions will always be under pressure to produce favourable data for the government in power. The aforementioned must constitute the backbone of correct decision-making for resource allocation by the government.

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Banking on Trouble

One of the most important Ordinances enacted by the Moeen Qureshi Caretaker Administration was the State Bank of Pakistan (SBP) Ordinance of October 1993. This gave virtual autonomy to the SBP thereby separating the governance of fiscal and monetary policies. This Ordinance was due to expire on Feb 5, 1994 if it was not passed by the NA or the Senate but it was repealed on Jan 1, 1994 and replaced with another which has considerably curtailed the independent status of the SBP. To understand the intricacies of the how and what for, one must come to layman’s terms with certain economic facts that govern fiscal and monetary policies and the mutual relationship thereof.

Market oriented economies have three principal objectives, viz. (1) economic growth (2) financial stability and (3) viability of external sector of the economy. While economic growth is self-explanatory, financial stability requires price stabilization, maintenance of people’s confidence in the currency of the country and the viability of financial institutions while persevering with consistency in financial policies. To maintain the viability of external sector of the economy there should not be a unsustainable large balance of payments deficit and that automatic inflows over the mid-term period should take care of balance of payments problems. To achieve these three micro-economic objectives there are two sets of approaches, viz. (1), market oriented and (2) centrally planned, centrally directed approach i.e. State ownership, complete regulation and direction, etc.

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Sacred Cows and the Vision

Determined to restore the vision envisaged by the Quaid in the concept of Pakistan, Moeen Qureshi has called into question the quality of our leadership over the past four decades. He has taken steps to bring those who aspire to be the rulers of Pakistan within the ambit of the rule of Law. Civilized society expects its leaders to be subservient to the rules and regulations they are pledged to uphold, not to be above the law they enforce for others. In Pakistan today, the laws of the land are meant to govern only those who are without money and/or influence.

Some of the names of the privileged elite has been published in the loan defaulters list and some will definitely be “mentioned in dispatches” in the utilities and tax default score sheet that we have been given to believe is to follow. While many are bracing themselves in anticipation of disclosure, in a perverse way it is a sort of a status symbol that denotes the person’s ability to not only take more out of the hopelessly over-burdened socio-economic infrastructure but also refuse to pay for the services acquired. In a manner of speaking, those who have not made it on one list or the other have failed to benefit from the “open season” on the national assets and can be classified as the great silent (and stupid) majority, serving only as extras in the grand act of the national drama.

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Magic Wand or IMF Stick?

What others would not attempt in a lifetime, Moeen Qureshi’s Administration has carried out in less than eight weeks. MQ has had the courage to face upto problems affecting the lives of a majority of the Pakistanis in supersession of the motivated interests of a privileged and elite minority, a class act by any standard of measure.

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