Economic Upturn?
If the boom on the Stock Market and the IMF delegation that was in Pakistan this week are to be believed we are back on the road to economic resurgence, a dramatic reflection of the present government’s economic restructuring drive. Conservative financial analysts do not pay much attention to the price of shares in Pakistan as a good enough economic indicator and the IMF stopped believing the Benazir regime’s fudged statistics since they made it into a state of art, in the presence of stock manipulators and gamblers who have a history of resorting to subterfuges for profit-taking, they prefer to look at the numbers that make up the fiscal deficit, such as the revenues available to meet the current expenditures and the sense of purpose behind structural reforms. However even the most hard-bitten observer will concede that there is momentum which must have origin in conceptually sustainable policies, this has been confirmed by the IMF team which has lauded “the concrete policies of the present backed by political determination”. As we go into the final stretch leading to the celebration of the 50th year since Independence, there is a remarkable parallel in July 1947 to July 1997, on a pro-rata basis that is. Our economic forefathers were then faced with imminent bankruptcy for the fledgling nation, being deprived of their allocated share of funds by British “fairplay”, they had too little in the kitty and too much to pay for. The vast difference in 1997 is that in 1947 in contrast to almost nothing in the areas designated for Pakistan, India had a wide range of medium to heavy industries with a sophisticated infrastructure in support. Pakistan virtually caught up in the 60s till the Bhutto hiccups “one” and “two”, father and daughter’s horrendous economic shortcomings paling before the voracious Zardari appetite for unadulterated greed almost put paid to us economically. In the early 60s, we were a model for more than a decade.
The first real reforms initiated by the first Sharif regime in 1991 were like a breath of fresh air in a moribund economy surviving simply because of Pakistan’s depth of natural resources, its excellent geographical location providing for a resilient parallel economy thriving on black-market and smuggling and the aid-pumped in by western countries in the 80s because of the Afghan War. By the end of that decade there was little hope for us without dramatic moves to change the entire direction of the economy. The rapid progress made was brought to an abrupt stop by the “great conspiracy” of 1993 leading to the ouster of Mian Nawaz Sharif as PM and then ensuring his electoral defeat by computer sleight of hand masterminded by a “gang of three” three star generals. The rascals responsible need to be prosecuted for treason as their intrigue destroyed our economic momentum as a nation and set us back many years. The re-induction of the Bhutto regime in 1993 saw the economy become undone. No words in the English language can fitfully describe what the Bhutto-Zardari combine did to Pakistan’s economy, even the colourful Punjabi vocabulary would not be adequate. What Mian Nawaz Sharif inherited on February 3, 1993 was an unmitigated disaster of the greatest magnitude, the Caretaker Regime inducted by President Farooq Khan Leghari just managing to keep the economy afloat. Inheriting a holy mess, the PM would have been well-advised to wash his hands off the whole affair till some order had been created out of the mess but Mian Nawaz Sharif seems to have set about his task with sense of divine purpose and while we are still very much in the woods economically there seems to be a glimmer of hope at the end of the tunnel, if not the actual light at least the hope for one.
The country (and the PM) are very lucky to have a man of the quality and maturity of Senator Sartaj Aziz as Finance Minister. This extraordinary self-effacing, publicity shy person has masterminded the PM’s directive for liberalisation and restructuring. This has been seen to excellent effect in the strategic and bold move away from the costly (6-7%) Stand By Agreement (SBA) to the much softer Enhanced Structural Adjustment Facility (ESAF) at 0.5% per annum. Leading to that eventuality has been the tactical move of conducting wide-ranging structural reforms on our own as a necessary exercise for economic survival without prompting from the IMF. In contrast to the confusion of the Benazir years the IMF Director for the Region, Paul Chabrier, has put full confidence in the present government and has signed an agreement for the disbursement of a US$ 1.5 billion facility in phases in the near future. The acquisition of badly needed funds aside, it is the much-needed vote of confidence that foreign investors need before they can risk entering the market. Coincidentally, in the week that the IMF delegation is in Pakistan, the Stock Market has gone berserk but positively.
While across a broad front the Nawaz Sharif government has shown a bold and confident ability to tackle problems head on, potential flashpoints stem mainly from the extremist/nationalist allies in the three Provincial governments of Sindh, Balochistan and the NWFP, the bad law and order situation in Karachi and the worsening sectarian issue in his Home Province of Punjab. While the ANP is loyal as much as the constraints on their politics will allow them, JWP in Balochistan and MQM in Sindh seem to have no qualms. The systematic destruction of the administrative machinery, first by politicisation since 1985 and then by instilling of nepotism and corruption by the motivated means of using both the carrot and the stick, became virtually institutionalised since end 1993 when the uneducated Asif Zardari took over the controls of the whole State except for the superior judiciary and the Army. At normal times the bureaucracy is indolent and inefficient, with the bureaucracy corrupted, terrified and/or politicised into willing compliance to misdemeanours any succeeding elected government will have a hard time if they observe the Marquess of Queensbury rules. Some willing partners in white-collar crimes, even volunteered to show Zardari the way to loot the treasury in manifold ways. The misdemeanours of a chosen, unscrupulous few has been unfortunately generalised, the reaction has been a full-scale prosecution of the whole bureaucracy. If anything the backlash has been an unofficial slow down, acting as severe drag on the working of the government. Nevertheless, by carrying out a whole series of political and economic reforms, some by “shotgun” marriages in Parliament that could have been more deliberate, the government has kept the momentum going. The dynamism of the PM notwithstanding, it is important for this government to be more conservative in processing of issues as haste can lead to problems down the line. In any case it is wise to always remember the linkages of social and political issues (and the influence it may exercise) over the economy. Problems cannot be solved in isolation of the national objectives, the national objectives cannot be held hostage by minority political groupings. If the smaller partners decide that by blackmail they can have a bigger share of the economic pie then the whole object of democracy and the concept of economic alleviation of the misery of all the masses is subverted at the altar of convenience. Eventually Mian Nawaz Sharif will have to be tough about national issues in priority over political compromises.
Above all effective monitoring of supply-sided economics is badly needed. One feels that the present government’s faith in the conscience and responsibility of the business community is badly misplaced. They are a bunch of “takers” and are mostly an ungrateful lot at that, our champions of commerce and industry have very little concept of “give” on offer. It would be suicidal to rely solely on their goodwill for enhancing revenues in the government’s coffer, one must encourage their response by keeping a potential Sword of Damocles over their heads, to add to the government’s tax hounds one must have different private agencies carry out verification of assets and earnings. The only way to generate more revenues is to get maximum of the people into the tax net and then for maximum of them to pay their dues, and in time.
Is the sustained Stock Market boom a flash in the pan or is it just another stratagem by high stakes manipulators to create artificial “highs and lows” in order to skim profits? A lot will depend upon the volume of revenues flowing into the government coffers in August and September, if the present trickle slows down we are in real trouble. The next indicator will be the cotton crop in October/November, by that time we will see whether we have, to paraphrase my friend Humayun Gauhar, a tiger or a pussycat in our tanks? Life is a series of perceptions, while we certainly have a sense of going adrift because of the magnitude of the task and the overwhelming commercial and economic environment remains negative, there is a definite aura of success in the consolidation as a measure of “damage control”. Despite three economically disastrous years of Ms Benazir one remains an incurable optimist about the future of the country. While one cannot really shake off apprehension yet there is a sense of determination behind the sustained drive by this regime to regain the momentum of the 60s and take us as a viable economic entity into the 21st century.
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