Initial Reviews
The visible primary difference between Caretaker and elected governments is that being unaccountable to the people and with no lasting commitment to the nation, the MQ Regime could enact any number of reforms and give forth any number of pledges in the comfortable knowledge that neither were these strictures binding on the successor government nor were they answerable to anybody. In a space of 90 days, a sophisticated image building exercise raised the expectations of the people, this was bound to become an albatross for any elected government in comparison. What was conveniently left unsaid was that though every elected government may have similar ambitions they are constrained in the implementation of their promised policies post-election by political realities.
Having been in business only about 45 days or so, Ms Benazir Regime should not be expected to conjure up any economic miracles. Furthermore, economic initiatives seldom make immediate headway towards their objectives even though measures that seem punitive will always get an instantaneous antagonistic response in the streets. Most of the “dirty work” as regards imposing additional limitation at the behest of the IMF had already been done by the MQ Administration, but the additional conditionalities agreed to by MQ is unfairly shackling the present incumbent for a three-year period. For the record, the revenues acquired by the extra MQ measures of taxation are projected at almost Rs 10 billion, an almost 50% backbreaking increase on the Rs 20 billion proposed and voted for in the annual Federal Budget guided through by the then Federal Finance Minister Senator Sartaj Aziz. Many more IMF conditionalities were accepted by the MQ Regime than were by former Finance Minister Sartaj Aziz in April 1993 but the IMF has still not released the Standby Facilities. In effect the IMF has conned us into a three year captivity without giving anything in return and now want more from the Bhutto Regime. The quality of life of our citizens will thus deteriorate further as their spending power decreases. In hindsight we should not have let IMF-pensioner MQ negotiate with his parent institution. Further the tax burden should have been better focussed towards the higher income group.
Mr. V.A. Jafarey has always been a competent technocrat but he pales significantly in comparison to his predecessor Sartaj Aziz in the Ministry of Finance. Figures were duly trotted out to show the improved economic indicators as compared to the corresponding period in 1992. No great emphasis was laid on the fact that in the aftermath of the 1992 floods, almost any statistical data would be better. The great surprise has been that despite the great economic limbo in the period Feb-July 1993, and the uncertainty thereafter till the new government was sworn in, the economy has been resilient enough to bounce back as soon as stability was assured. One of the factors contributing to this evaluation has been the increased arrivals of raw cotton to the market as compared to last year.
As regards economic management, Mr. V.A. Jafarey, conscious that the bureaucrats surrounding him, Saeed Qureshi, Qazi Abdullah, etc were the same as around Senator Sartaj Aziz before him, held forth about better fiscal discipline and an ingrown aversion to grandiose schemes like the Motorways, etc. While he was being honest about the need for better financial management to avoid a debt crisis, the concerted attack on the PML(N) fiscal managers as was expected from the media exercise did not come about. Rather Mr. V.A. Jafarey’s tone, in keeping with his gentlemanly mien, was almost apologetic about the “indiscretions” of the Nawaz Sharif regime in its pell-mell headlong rush into a massive building of the communications infrastructure. Being a honest person he must have the nagging feeling that if Pakistan were to become the land bridge for Central Asia to the warm waters of the Indian Ocean, it was (and remains) necessary to make a massive effort to build up roads, railways, telecommunications, logistic bases and shipping. It is also necessary to draw the attention of Central Asia southwards to their historical and traditional trading affinity in comparison to their artificially Soviet-crafted northern and western routes. While it may be the consideration of petty politics to run down Mian Nawaz Sharif’s penchant to try and rapidly force the country into a modern 21st century, the lack of a communications infrastructure within the next two years will force the newly emerged Central Asian Republics (CARs) to take another look northwards. At the moment the goods and commodities of the CARs cannot be transported elsewhere except through a long, circuitous western route. If we don’t open up the southern access, economic compulsions will drive them back into the hands of their old masters, communist in everything but name. In this respect, the conversion from six lanes to four lanes for the Lahore-Islamabad motorway is nonsense. Instead of saving Rs. 3 billion, we will be paying Rs. 30 billion sometime in the future to make the two additional lanes when it will become obligatory to make them because of the forecasted use. Let us not be penny-wise, pound foolish just because we want to score political points.
The Prime Minister has scored heavily with the masses with her scheme to repay the lost millions because of the Coop scam. This is something that was badly needed. However, she lost out on credibility by failing to give the correct figures about the money already returned due to the efforts of the previous elected government. At least 260,000 families had been affected because of the confidence trick of a few incorrigible scoundrels but a majority of those who invested upto Rs. 50,000 had already been paid back. What was demeaning to the concept of justice was that these rascals were living off the fat of the land while thumbing their noses at the poor depositors who were running from pillar to post. Ms Benazir Bhutto articulated an excellent modus operandi for dealing with the situation and as long as the effort remains bipartisan by not becoming an instrument of political persecution, it will be welcomed by both the intelligentsia and the masses. In this respect she should not be selective in forgetting the Samad Dadabhoys, Bokharis, etc of Karachi. More power to her in her quest to hunt out the perpetrators of this horrendous crime.
Loan default is also getting the attention of the present government. While the MQ Caretaker Government published the list of defaulters with great fanfare, it never really moved to take action against any of the defaulters. Since two of the Caretaker Ministers were included in the default list, one can understand why. The crooks who have siphoned off millions continue to flout their wealth while taking cover under legal loopholes. One reason for this is that the heavy penal interest imposed is counter-productive and actually works in the favour of defaulters because of its very volume. A suggestion would be to have a cut-off date for default as being one year after the loan becomes due for total payment i.e. the loan and penal interest are frozen. This total amount then becomes the defaulted amount to be recovered. A practical sense has to be used for recovering the amounts due, at the present time it is at most a theoretical exercise that is good only for paper publicity. If recoveries are to become a fact, a more pragmatic approach is vitally necessary. In this respect one must also request the State Bank of Pakistan to tone down its enthusiasm to recover 100% of the amounts due, such an exercise will not only be futile, if embarked upon will wreck the present economic equilibrium.
In the latest NEWSWEEK, a world map of drug-related crime shows that in comparison to others (and despite adverse media publicity) Pakistan is a relatively small channel with regards to drugs trade. The government is to be commended for its much publicised war against drug barons but must turn words into deeds by giving Maj Gen Salahuddin Tirmizi’s boys teeth to wage a war without parameters. Again a non-partisan approach is most necessary otherwise the forces of evil will escape under the cover of political persecution. Of greater concern is the fact that both UAE and Pakistan are marked on this map for money laundering. It must be noted that some domestic banks are showing spectacular growth in deposits and investments. Some of these banks are openly laundering money under the cover of currency dealing that is quite out of proportion to the requirements and size. Moreover, a lot of this money has moved into the Stock Market and artificially raised prices though one daresays scrip buying has been selective. It is an open secret that most of the Bank profits are derived from currency dealing or foreign exchange deposits in various names. This is extremely dangerous as it artificially inflates the portfolio (and the profit) that the financial institutions administers and gives a wrong picture of the actual performance. It must be remembered that our scandalous name in world financial circles was acquired because of BCCI, it is no secret that while BCCI’s collapse may have come about mainly because of bad loans and advances to Middle Eastern individuals, it was seriously compounded by very speculative currency dealing. Leopards never change their spots and the old money laundering connection remains with credible financial institutions as fronts for their speculative tendencies. The government has to be extremely careful about this aspect as it can bring down the whole financial house of cards.
As stated earlier, it is too early to make any substantive comments, particularly because no new measures have been initiated. However, one gives the Ms Benazir Government credit in being cautious with the economy before it proceeds to unveil its own economic plan. Ms Benazir has already captured the essence of continuity in her first 45 days in going along with the broad spirit and soul of Nawaz Sharif economic initiatives. However, she seems to be exercising greater caution, giving more attention to detail and instilling a deliberate sense of prioritisation.
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