Pakistani public today faces a host of economic difficulties that can be laid at the doorstep of those who governed this country — the status quo parties (Pakistan People’s Party and Pakistan Muslim League-Nawaz), the party in power for three years and eight months considered the non-status quo party (Pakistan Tehreek-e-Insaf) and military adventurers.
If the period in power is taken as a yardstick for determining the responsibility of the current economic impasse, then the onus rests with the military dictators who ruled this country for the longest period. However, civilians have occupied the position of chief executive since 2008, the longest time uninterrupted by military adventurism to date — more aptly indicated by the fact that the position of the country’s president — the position of choice of military dictators — has been occupied by civilians since 9 September 2008 when Zardari was elected president.
While many maintain that military intervention remains prevalent as key policy decisions in the international and economic arena continue to be taken outside the civilian setup (with the Khan administration going so far as to give a seat to the Chief of Army Staff on the National Development Council constituted in June 2019) yet others claim that it is establishment support and not intervention — support critical to forge better ties with friendly and not so friendly countries that has, in recent years, paved the way for considerable economic assistance.
The status quo parties claim credibly that the Extended Fund Facility (EFF) programme agreed between the International Monetary Fund (IMF) and the Khan administration in 2019 is the root of the economic impasse today as it envisaged a high discount rate (13.75 percent) that crippled the large scale manufacturing sector’s (LSM) capacity to borrow and compete internationally as well as domestically (fueling smuggling across the large porous borders), the rupee was allowed to fall below its market value fueling imported inflation, and a contractionary fiscal policy which was not only unrealistic but further compromised output and raised prices.
The pandemic allowed the government to suspend the EFF and thence began a phase of expansionary monetary and fiscal policies (including yet another amnesty scheme) that fueled growth but led to an unsustainable budget deficit, an unsustainable current account deficit with imports far outpacing exports, inflation in double digits and heavier than ever reliance on external and domestic borrowing.
The incumbent 11-party government’s narrative is that they were compelled to take politically challenging economic decisions agreed between the Khan administration and the IMF which has a steep political cost, all for the sake of the country.
This is a flawed narrative given the chronology of two disturbing decisions. First and foremost, the Cabinet took the oath on 19 April 2022 with the explicit proviso that there was an urgent economic need to undo the previous Prime Minister’s 28 February 2022 relief package that reduced the then petroleum and products price by 10 rupees (to remain effective till 30 June 2022) and electricity rates by 5 rupees per unit – a need strengthened by the fact that the IMF would not agree to a staff level agreement without its complete withdrawal.
It took the incumbent government six and a half weeks (27 May) to partially withdraw the subsidy and another five days to completely withdraw it – a period which exacerbated the budget deficit (a highly inflationary policy) delayed the staff level agreement which has continued to compromise the rupee dollar parity.
Such hesitation was not evident in amending the National Accountability Bureau (NAB) Act. On 26 May the Law Ministry had finalized the draft amendments to the NAB Act and the House approved these amendments the following day. There was a month’s delay due to the President’s refusal to sign off on the amendments however by 24 June the amendments had become law.
The most worrisome aspect of the amended NAB Act is the deletion of Clause 14 which had placed the onus of proving his/her innocence on the accused (there was no presumption of innocence). Henceforth the investigating agency and the prosecution will be required to provide the money trail which is expected to benefit the leadership of the two status quo parties.
While one may dismiss PTI criticism of the amendments as political point scoring yet it is relevant to note that the seventh/eighth staff level agreement uploaded on the Fund website dated 13 July 2022 notes that: “to improve governance and mitigate corruption, the authorities are establishing a robust electronic asset declaration system and plan to undertake a comprehensive review of the anti-corruption institutions (including NAB) to enhance their effectiveness in investigating and prosecuting corruption cases.” Ismail is on record as having acknowledged that the review was IMF’s demand and will take place. However, the period to be reviewed has not yet been shared though it will no doubt include the clean chit given by NAB on all cases involving PTI from September 2018 till 9 April 2022.
Presumption of innocence is in line with the law in the United Kingdom yet it is critical to note that changes have been made that affect this principle for example a defendant’s previous convictions in some instances maybe revealed to the jury and although a defendant may not be compelled to respond after formal arrest, failure to give information maybe prejudicial at trial. In addition, statute law provides for criminal penalties for failing to decrypt data on the request of the investigating official.
And secondly, one of the country’s two economic team leaders, notably the Governor of the State Bank of Pakistan, has been in an acting capacity since 6 May 2022. This is a critical position in any event however it is more so at present as the head of the central bank is a signatory to letters of intent submitted by the authorities for an IMF tranche release. And yet NAB Chairman was appointed on 21 July 2022 after his predecessor retired on 3 June 2022.
To conclude, the Shehbaz Sharif-led government needs to revisit its narrative of economic decisions in national interest at a political cost or better still put their money where their mouth is.
Copyright Business Recorder, 2022
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