Politics of economics

Politics has clearly taken precedence over economics. This must be a source of serious concern for the country's 177 million people resident in this country, who have no foreign bank accounts, do not have dual citizenship, cannot easily procure visas for foreign shores and have no family members living abroad. A quick look at the country's Who's Who reveals that nearly all our politicians do not belong to this category of the wretched.
There are some generals, as well as some senior bureaucrats not proactively supporting one political party over another, though they may have worked with several governments at senior positions, who inexplicably have large foreign bank accounts with some family members living abroad, but by and large, this group does not meet all the criteria specified above. Or more particularly, many of them are resident in this country and do not have dual citizenship.
The question is why has politics been allowed to take precedence over economics considering the state of our economy which should be a source of serious concern to any democratically elected government that is answerable to the people of the country. The PPP high command would no doubt point to two compelling reasons. First, that it is a minority government in the centre and the recalcitrant MQM, a critical coalition partner in the centre with 25 seats, has once again flexed its muscles in an attempt to force the PPP co-chairperson to take decisions that target the Sindh Home Minister, a very close friend of President Zardari. In addition, the two parties hold opposing views with respect to local bodies' elections and while, thus far, the President has given into MQM demands, yet he almost certainly would support the demand of his party members in case of a rupture with the MQM. That is the trump card he holds with the MQM. Rehman Malik, the Interior Minister who has for the last three years played a key role in sustaining the PPP-MQM coalition is in the UK at present on an official visit with the objective of once again patching differences between the two parties. Meanwhile the President, a master in the art of wheeling and dealing, met with Chaudhry Shujaat and his cousin as well as the former Chief Minister Punjab Pervez Elahi among other members of the PML (Q) not averse to forming a coalition with the PPP in the Centre. Many believe that this was the President's checkmate to the MQM.
Be that as it may, some movement towards a rapprochement between the PPP and the PML (Q), notwithstanding statements of caution by some political analysts, was visible in the Punjab Assembly wherein the elected members of the PML (Q) Chaudhry Group as well as the 105 PPP MPAs staged a protest against the PML (Q) Unification Bloc, derogatorily referred to as lotas, and the PML (N) government. The question is what can PPP and PML (Q) offer each other? The President wants to keep his government in the Centre and at the same time at best, destabilise and at worst embarrass the Punjab government. That the Chaudhrys can give him. However, in return the Chaudhrys would want key federal ministries that may be used as a lure to get the PML (Q) currently in partnership with the PML (N) back into the fold, ministries that the President would no doubt vigorously negotiate. This is unlikely to appease say Faisal Saleh Hayat, strongly opposed to supporting PPP and may well deter the majority of the PML (Q) Unification bloc, though not all.
Second the PPP co-chairperson decided to take on the Supreme Court's directive to fire Justice Deedar Hussain Shah as Chairman of the National Accountability Bureau (NAB) - a decision that was based on the failure of the Presidency to follow procedure, as laid down in the constitution. In order to meet the procedural requirements a letter to the Leader of the Opposition detailing why Deedar Hussain Shah is an appropriate man to head NAB, has been sent. The outcome given that it was the Leader of the Opposition who filed the case in the Supreme Court against the appointment is unlikely to be positive from the government's perspective.
There is little doubt that the logic behind this latest challenge to a Supreme Court decision was premised on: (i) the court's 'patience' as noted by the Chief Justice in his remarks on Friday, over the government's resistance to implement some of its earlier judgements since the reinstatement of Chief Justice Iftikhar Chaudhry; and (ii) the invocation of the Sindh card by declaring Friday as a protest day against the Supreme Court verdict wherein the Sindh PPP assembly members wore black bands and forced the city to come to a standstill, causing the death of nine people, and a loss of crores of rupees. This decision for any government to take and especially one that was incharge in the centre and in Sindh was obviously flawed. Asma Jehangir, the President of the Supreme Court Bar Association, critical of several Supreme Court verdicts that have angered the PPP high command as well, was compelled to state that the government should have opted for the legal recourse available to it, namely to file a review petition, which incidentally the government has filed.
Meanwhile the state of the economy is in shambles. The visiting International Monetary Fund (IMF) team has left the country and the Stand-By Arrangement (SBA) remains stalled. This implies that all other assistance for budgetary support, from multilaterals as well as bilaterals including from the Kerry-Lugar bill, would remain undisbursed. The government team may well point out that the IMF team has not cancelled the SBA and therefore there is hope for the release of the penultimate tranche prior to the end of the current fiscal year by end June 2011. True but the fact that the IMF statement did not talk of specific quantifiable targets must be a source of serious concern. Reports circulating in the federal capital indicate that the Presidency refused to accept the four proposed revenue generating measures that the Fund and the Ministry of Finnace had agreed upon during the last day of negotiations. These include (i) flood surcharge of 15 percent (pending in parliament since November with no takers other than the PPP), (ii) increase in special excise duty by 1.5 percent (also pending in parliament since November with no takers other than the PPP), (iii) increase in the power tariff by 2 percent per month till the end of the year which was implemented on Friday, and (iv) a commitment to implement the Reformed General Sales Tax by next year citing agreement of all the provincial governments. This is unlikely given the recent fronts opened by the PPP with the PML (N) and MQM as well as opposition to this tax as declared by nearly all parties with the exception of the PPP.
Be that as it may, some questions need to be raised with respect to the performance of the Ministry of Finance and the man who holds the Finance portfolio Dr Hafeez Sheikh. Why did he not get approval for the specific revenue generating measures from the President prior to reportedly agreeing with the IMF on specific proposals? He may well argue that since all the proposals had been previously discussed with the President, he assumed that he had the presidential seal of approval. He would do well to recall his allegations against the PML (N) that the party had agreed to the implementation of the RGST, which it later reneged on. Economics of our democracy, Dr Sheikh one would hope has learnt a lesson by now, is the art of staying in power, be it through doing a summersault with popularity ratings in mind or be it through deferring to the will of the powerful. The President may well defend himself by arguing that he had refused the option of an ordinance as he is a firm believer that parliament must be the final decision maker on money bills. That too is a valid argument.
Meanwhile the PPP government remains focused on staying in power at the centre and the economy is clearly no longer a priority. The IMF's exhortations with respect to structural reforms, eliminating subsidies and indeed to desist from borrowing so heavily from the State Bank are unlikely to be heeded without the lolly so desperately needed by the Finance Ministry: assistance for budgetary support. In short, one must expect heavier reliance on borrowing from the State Bank, the inflationary impact of which would be evident in two to three months time, with increase in revenue generation remaining a pipe dream.