Commerce
Federal Budget circa 1990 – III
The coming Federal Budget exposed Pakistan and the Federal Government to the financial ills inherited from the past, not the least of them being a foreign debt burden of US$ 19 billion with almost US$ 6 billion lying unutilized due to inefficient bureaucratic practices. Already plans for a LONG MARCH on Islamabad post-budget are afoot, it being taken for granted that there will be reason enough to make an attempt to bring the streets into the front-line of the Dump-Benazir campaign (or as it is probably known, Anybody But Benazir (ABB). One does not have to be a soothsayer to predict tragic consequences for the country, encouraging the neutrals, or the Great Silent Majority if you please, to take a “plague on both your houses” attitude. The Federal Government needs to elicit support from all sections of the people to find answers to the problems troubling the economy. It behoves the opposition to respond in kind for the sake of the nation. Let’s not play games with economy, in the end the masses that have voted the governments into power need the elected to tend to the more serious matter of ameliorating their atrocious living standards.
Federal Budget circa 1990 – II
The coming Federal Budget promises to be a milestone, a truly once-in-a-decade turn in the financial road should be more than expected, the PM has been dropping enough warnings of impending tough measures. With a populist Government dedicated to the task of finding solutions for the common man, yet hobbled with an economy in utter shambles because of muddled half-baked policies towards the fag end of the last regime, the Federal Budget promises to be a fine balancing act between the need to re-invigorate the economy by giving intending (and present) entrepreneurs due incentive and the contradictory need for imposing more taxes as a form of additional revenue to run the business of Government. What is more possible is that the Government goes in for a one-time massive devaluation, telescoping the creeping method projected for the next year, thus building up badly-needed government revenues. This is in all senses of the word a risky enterprise, with the increase in cost of import, inflation is a sure bet. Big business has not taken to its heels at the advent of PPP, on the contrary amazing accommodation has been shown, barring few aberrations, on both the sides to come to a mutual working arrangement, this is a significant milestone for democracy, business feeling safer historically with the stability of Martial Law Governments. One wishes that the same pragmatism would be seen in the relationship between the Centre and the Province of Punjab so that Pakistan should shrug itself off from the present state of limbo and get on with the task of economic emancipation. The churlishness has gone far enough, the governments at the Federal level and the Provinces are not petulant Under-19 teams.
State of the Economy
The business of elections is now past, the nation having delivered its verdict, the important thing now is to knuckle down to the realities of governing a country. In order of priority the first issue to come to grips with is the economy of the country. For a short period of time and till November 19, 1988, the masses were the most important commodity in Pakistan, one week into the post-election process the perceptions of being shrugged off is manifest in the horse-trading confined to a few elected representatives in seemingly smoke-filled corridors and the back-rooms of power. While the political process is one of compromise and any other route leads to disaster, political parties do not have any right to compromise on the commitments made to the electorate.
Dovetailing Populism into the Economy
It is impossible for politicians to take hard decisions not in consonant with the populist promises made during the run-up to the elections. In the cold light of day one finds that it is difficult, having promised the moon, to settle for cheese. Perforce many are reduced to simply ignoring any pledges given during the passions of the election process or simply giving lip-service with a drum-beat and a flourish. Unfortunately for the poor souls at the bottom end of the spectrum, all this spells more misery, complicated by the hope generated by unreal promises.
The Corruption Syndrome
From time to time, various exhortations are made from diverse pulpits against the disease of corruption. One of the inherent premises of democracy is that this evil is subject to public scrutiny and therefore effective check. There is no denying the fact that Martial Laws, ostensibly meant to eradicate corruption, end up (because of their longevity) having a Catch-22 effect due to the muzzling of the Press, which in turn makes for a corrupt society, malfeasance having ample opportunity to flourish under an imposed cloak of silence. Now that democracy has been found to be alive and well and living in Pakistan, it is time to turn to accountability in the real sense, not as an end for purposes of political revenge, but to ensure that exposure and punishments work as an effective means of deterrent for the potentially corrupt. The media has to play a responsible and effective role in this process.
Now for the Hard Part
Poverty stricken countries cannot afford long drawn-out euphoria, pledges made to the masses can only be redeemed by positive action, not by falling back on populist demagoguery. 1988 has been soon over giving way to 1989 which promises to be a year of trials, mostly on the economic scene, the landscape having been devastated by inept, indifferent and intellectually dishonest economic managers with an ingrained penchant for ineffective theoretical solutions. Instead of going over the litany of the past, the normal moan and bemoan of woes has to give way to living hope for the future and our approach to our economic problems should be solutions-oriented.
A Year of Satisfaction
This has been a year of mixed fortunes for Pakistan, in final evaluation it must be regarded as a satisfactory period, successfully negotiated. In economic terms we are in such desperate straits that the requirement for Banks collecting Haj money to be deposited with the State Bank of Pakistan after a 14-day period has been shortened to 24 hours. The financial cupboard is bare and that is not a political statement, it is a testament of failure of policy that has tragic overtones for a hapless population. It is not fair but the government of Ms. Benazir is likely to be saddled with galloping inflation and widespread unemployment, which is not a legacy of Gen. Zia (who had no pretensions of being an economic genius) but a heritage from the Junejo period, compounded in the last six months by the chameleon policies of the most powerful economic technocrat ever in Pakistan. If there is a lesson to all this, it must be that essentially all Third World countries should treat acquired foreign qualifications in economic management with care, if not outright suspicion. There is a sick joke going around that while previously the first prize for good economic management was the Chairmanship of the Senate (sic Mr. Ghulam Ishaq Khan), it may now well be the ultimate reward for ruining the economy of Pakistan, perhaps the only appointment in the country from where Dr Haq cannot cause further harm to the economy.
Deja vu?
The state of the economy is precarious. The head of government did not resort to subterfuges and minced no words in confirming what was more than just a suspicion, in the past few months we had reached a climax of sorts in being systematically sold down the river, flags waving and bands playing. While surreptitiously and simultaneously signing away our options, our ex-financial genius (and part-time politician) was extolling the health of the economy, so much for intellectual honesty. Safe within the portals of the Senate, he now informs us that he had only signed a “Letter of Intent” and not an agreement which, he remonstrates, the present government is free to re-negotiate, conveniently papering over the fact that an Intent is an agreement in principle and successor governments run the risk of being ostracised if they do not honour sovereign commitments once made. Irrespective of the fact that the state of the economy justified the agreement in principle and the extent is not disputed in the circumstances, the manner and timing is simply deplorable, so was the Hobson’s Choice given to any new government. It was a loaded weapon and Ms. Benazir’s decision to avoid adventurism was pragmatic inasfar as it avoided the Catch-22 type trap manifest in re-opening the arguments, more power to the new government’s financial brain trust that they chose to roll with the punch.
State of the Economy
Eighteen months ago, the Pakistan Rupee was pegged around 18 to the US dollar, at that stage one felt that it should have been closer to 20. The gap between our perceptions and that of the State Bank of Pakistan has been consistently Rs 2 or 10%, almost as if 10% was the margin kept as “Reserve for Unforeseen”. Creeping devaluation, average rate of paisas 10 every month, has managed to keep a tight control in a volatile Economic situation. Ashraf Janjua, Economic Advisor to the State Bank of Pakistan, had an excellent Question and Answer session with economic journalists on Monday April 24, 1989, it seems both sides learnt to some extent the craft and perceptions of the other. Mr Janjua earlier had given an excellent dissertation of the approach of the State Bank to fiscal policy, his candid views were very refreshing. Though Mr I A Hanfi, the Governor of the State Bank, missed the function due to an unscheduled but fortunately successful operation of the gall bladder, his gall at the scope and intent of even permitting such an open discussion, seldom previously attempted, was exceedingly welcome, no doubt encouraged by the standards of frankness instituted by his predecessor, Mr V A Jafarey, now the Advisor to the PM on Finance.
Rural Potential
Pakistan’s economy is primarily agri-based and this is reflected in our inherent capacity for food autarky and in the ability to export cotton and rice, which in fact are our main cash foreign exchange earners, given support lately from fruits and vegetables. For any Third World country this is a significant achievement particularly in view of ever-increasing populations.