Bye-bye reforms?

Economic reforms are always a thorny issue, but the current predicament of the country is an entirely new monster.
Setting aside the pressure from the IMF and other international lenders, Pakistans own mushrooming debt mandates that the government should urgently redress the taxation regime and rationalise blanket subsidies.
Besides, local gas prices for residential use and for transportation are unreasonably low given the international rates and the fact that the countrys reserves are depleting fast.
The agriculture sector has seen its fortunes rise in the wake of rising commodity prices in the recent past so the argument against the supply of subsidised seeds and the wheat support price has gained weight.
In fact, local wheat prices are higher than international rates despite an exportable surplus so the country is unable to find buyers abroad who are willing to match rates.
While acknowledging that taxing the agricultural sector is a provincial subject, finance minister Hafeez Sheikh has repeated calls for the implementation of more effective taxes on the countrys biggest economic sector.
But reigning in this sector has never been easy in Pakistan and now, with the political parties that derive their support and strength from the urban centres of Sindh and Punjab out of the ruling coalition, it appears less likely than ever before that the current government will move in this direction.
In fact, as the race for the elections due in 2013 heats up, most analysts fear that the government may unleash a slew of populist measures aimed at courting rural populations and solidifying the vote-bank.
So it is little wonder that as soon as the federal petroleum minister announced plans to slash subsidies on natural gas, his predecessor and current minister for water and power was reported to have opposed "any increase in the gas tariff", as this would be politically damaging for the government.
In a recent interview with BR Research, economist Dr Hafeez Pasha cautioned that the hotly debated agriculture tax would likely remain in limbo.
Former governor SBP Dr Ishrat Hussain told BR Research that proper implementation of property taxes in Karachi alone can boost the countrys GDP by at least one percent. However, reforms to this end have also not been forthcoming.
On the other hand, the newly-formed grand opposition has a unique opportunity, should they choose to accept it. The MQM and the PML-N must prepare a focused and coherent agenda to drive their opposition in the federal and provincial assemblies.
They should pressure the government to introduce reforms in agri-tax and phase out gas and seed subsidies. This would not only bring the governments fiscal balance in check, but would also improve the countrys chances of successfully negotiating better terms from the IMF in the next round of negotiations.
Political parties have shied away from these and other reforms because albeit their dire need, they are extremely unpopular. Higher electricity tariffs have drawn hordes of protestors out on to the streets and RGST has become a taboo phrase soon after its introduction.
The test of the opposition now lies in getting the government to implement these unpopular measures while keeping their own populist appeal intact.
Though this is not an easy proposition by any standard, there is help on the way. After all, international observers and local experts alike are in favour of removing blanket subsidies and broadening the tax net.
More importantly, success on this front would erode the rural vote bank of the ruling party and also go a long way in creating a more sustainable economic climate for whoever assumes power next.
Such are the twists and turns of the countrys political landscape that each of the most vocal opponents of the current government has been a part of the same regime over the past three years including times when the government implemented decisions that drew the publics ire (electricity tariff hikes, removing tax exemptions).
Now the government is preparing to play to the crowds to solidify its base. Ironically, only a coherent effort towards disciplined economic reforms can redeem those who are, for now, on the opposition benches.