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Voodoo Policies or Noora Kushti? – Searching Questions. Ambiguous Answers

With the postponement of the visit of the IMF Mission to Pakistan, for all intents and purposes the economic battle lines seem to have been drawn with Pakistan heading pell mell into default. Already being labelled as an international basket case, it seems we have no choice but to unilaterally declare a debt moratorium. Within the grace period of a series of small defaults, we seem to be resorting to populist rhetoric to provide answers to the many questions that have arisen to bedevil this country. Because of the looming recession worldwide, temporarily arrested by lowering of interest rates by the US, Pakistan does not figure prominently on international economic radar screens, others being more vital to western interests. A recent article in TIME magazine clearly documented changing western perceptions vis-a-vis the continued integrity of a country once acknowledged as the cornerstone of US policy in the region, to its present outcast status as opposed to the interests of India. On a whole range of issues, political, social and economic, Pakistan is under severe pressure. Unfortunately instead of addressing the issues, Mian Nawaz Sharif seems to be adopting a confrontationist course, this is a deliberate policy that could well be a smokescreen. Is all this for real or are we the witnesses to an elaborate “sting” operation? There is growing suspicion (and uneasiness) that an agreement of sorts may have been reached with IMF on the basis of a secret commitment on CTBT, that all this bluster is meant to mobilise domestic public opinion. Whatever, this head-on policy has worsened investor’s last remaining confidence in Pakistan’s economy, they have been pulling out of blue-chip stocks even, leaving Pakistan teetering on the brink of economic catastrophe. Could this also be a ploy for raking in short-term profits? Maybe we are reading too much into conspiracy theories.

Eighteen months into his rule, the PM has thankfully discovered Karachi, the linch-pin of economic activity in Pakistan. The worsening law and order situation has actively contributed to economic apocalypse and general depression among the intelligentsia and the elite of the city. When the PM very rightly supported a suggestion by prominent concerned citizens for Metropolitan Police in Karachi, the bureaucracy promptly tried to shoot it down point-by-point. In a Catch-22 situation, how can they afford to give up power that ensures systematic chaos and confusion, that in turn allows them to rule the roost in the name of law and order without any check and balance? Not surprising, while the whole exercise is still a zero sum game, it has given a PR photo-opportunity to the PM to “show his concern for the people of Karachi”. The Rs.24 billion economic package will certainly be of indirect benefit to Karachiites in the sense of easing the transportation/communication problems for the benefit of those up-country but what Karachi needs is direct government investment in creating more jobs, both in the public and private sectors in the fields of education, health, transportation, electricity, water, sewerage, gas, roads and other community-oriented socio-economic infrastructure. What Karachi badly needs is local self-government. For such an elaborate scheme to be successful one needs not only political will and the money to back that will but also an honesty of purpose and dedicated approach. Unfortunately we are sadly bereft of these attributes. So unless we can come up with a miracle, the immediate and long-term prognosis is bad for the country. With contempt we noted when Kissinger labelled Bangladesh an international basket case, in the space of one day (May 28) we have gone into two different directions, we became a nuclear power, sort of, and simultaneously commenced our journey down the road to economic ruin.

The PM recently addressed the doyens of the business community in the Federation House Karachi and asked them to mobilise US$ 5 billion deposits. The PM would be better off chasing straws in the wind. When he suggested that 1,000 businessmen should come forward with US$ 5 million each, a certain uneasiness was discernible in their ranks, so the PM amended it to 5,000 persons investing US$ 1 million each, the assembled economic and industrial elite visibly snickered. This is a community whose greed for money mostly transcends national spirit in any form, their patriotic enthusiasm is contained in rhetoric not in deeds. Did they react positively when one of the first initiatives by the Mian Nawaz Sharif regime in 1997 was to halve the amount of taxes and duties and then halve it again? What was their gut reaction to a commendable “supply-sided” attempt to re-invigorate the economy by viz (1) lowering the tax burden on entrepreneurs (2) bringing cost of manufactured products down so as to enhance consumer purchases and (3) encouraging the entrepreneurs to pay their legitimate dues? Not one single business brought prices down, they simply added the difference as a bonus to their profits and continued to pay a fraction of taxes as they always have done. And what about their venomenous reaction to General Sales Tax (GST)? There are least 20,000 businesses in our country capable of paying income/wealth taxes annually of the Rupee equivalent of US$ 1 million and above, i.e. a cool US$ 20 billion, the PM should have simply told them to pay their dues — or else! According to some estimates, Pakistanis (including some of these businessmen), have as much as between US$ 75-90 billion stashed away in foreign banks, the PM would be naive to even think that this hard-bitten greedy lot will ever part with even a fraction of their ill-gotten gains.

The IMF has now come out into the open and asked Pakistan to first solve the IPPs problem and then discuss an electricity tariff hike of 15% before they take up any requests. As we all know, in the face of considered financial opinion otherwise and in the face of bankruptcy for WAPDA and KESC, the PM went the populist course in reducing tariffs by as much as 30%. Obviously the people of Pakistan are not going to take kindly to tariff increases but in Heaven’s name why did the PM, unless he knows something we do not, embark on this exercise when he well knew that his negotiators had tacitly gone the opposite route and agreed to a tariff hike? Unless he has a tacit agreement with the US on CTBT that will influence the IMF, taking this populist course is fraught with danger as it raises the expectations of the people while knowing that they will be disappointed later when the GoP, as it invariably does, backs down. Mian Nawaz Sharif seems to thrive on brinkmanship, it is quite possible that, having taken a number of calculated risks and having been successful, he may now be playing chicken with the IMF, hoping (or calculating) the IMF will blink. Unfortunately IMF executives are not gentlemen in the mould of Gen Jehangir Karamat (JK), who, in the best interests of the Service and the nation, sacrificed himself rather than risk the stability of democracy and the integrity of the country. Since he is being systematically bad-mouthed by the GoP’s spin-masters on prime time media, print and electronic, even a person like JK must be regretting falling on his sword. In normal circumstances our only option in the present default situation is to declare a debt moratorium and live with the consequences which would mean a further blow to the solar plexus of the economy. While debt moratorium may be the only answer left to all the economic questions, it may set off a chain reaction of events not conducive to economic revival. There has to be a well-planned cohesive plan to offset the effects of the negative fallout and it has to be implemented in letter and spirit. Unfortunately we have a very fragmented and disjointed economic team that makes recommendations having no relevance to the situation on the ground. When taking calculated risks that may well jeopardise the security and integrity of the nation, one has to be fully confident of one’s own prowess and abilities or else be in the knowledge of such trade secrets that we, the citizens, lack. One cannot keep on playing Russian Roulette-Pakistani style with the nation’s destiny (in Russian Roulette you put one bullet in the revolver and leave five chambers empty, in the Pakistani version you put five bullets in the revolver and leave one chamber empty).

In the run-up to the US Presidential primaries in 1980, Bush called candidate Reagan’s supply-sided policies as “voodoo economics”. He later lived to eat his words when he became President Reagan’s VP. For the moment we are desperately hoping that instead of “voodoo policies”, GoP is really playing an elaborate game of “Noora Kushti” and everything will come out alright. If in case we are really pursuing “voodoo policies” in earnest without a “Noora-Kushti” fall-back arrangement, then we are in far worse trouble than we can imagine.

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