Imran delivering; others found wanting

Imran delivering; others found wanting
The PTI government performance so far is better at managing external economic and political affairs versus domestic ones. PM Imran Khan has been utilizing his external capital to not only fetch the support from friendly countries but also in improving image of Pakistan in global landscape. The efforts are supported by appointing career diplomats in key countries.

The problem is, that the cabinet seemingly lacks capacity and at the same time it is too critical on the performance of previous regimes. Having said that, the media trial, political opposition and others are overplaying on the criticism as some are going to be adversely affected by the accountability process, while others’ rent seeking might be curtailed.

The picture has to be seen holistically, and the government requires mending its way by improving capacity in day to day management. Without it, the dividend coming from external front may start fading away in the growing domestic mess.

On external relations and economic dividends, the government from day one has maintained exhausting all other options before seeking the IMF programme. And it is doing exactly that. The government has so far secured $3billion deposit cushion each from KSA and UAE, apart from $2-2.5 billion and $3-3.5 billion deferred oil facility respectively by the two Middle Eastern countries. This is besides the $2 billion cash support expected from China, some oil and gas related support from Qatar, and any other help to be sought from Turkey, Malaysia and even the USA.

In the short period, the PM along with his team has visited many of the above mentioned countries and signed deals with two major partners (UAE and KSA) - $2 billion from KSA has already arrived and the rest of the promised amount and concessions will come in due course of time. High level delegations have started visiting Pakistan in return - UAE crown price Sheik Muhammad visited last week, a similar delegation from KSA is expected soon and by April visits of top leadership from Malaysia and Turkey would be ticked.
Apart from immediate balance of payment support, there are promises of big foreign direct investment in oil & gas and other sectors by these countries. It is hard to find such precedent in the last decade - there was mistrust in PPP’s time when nothing came from friends of democratic Pakistan and even the Kerry Lugar bill was overhyped.

In case of PMLN, the government entered an IMF programme, when current account deficit was mere 1.2 percent of GDP and there was no need of a bailout package. Later, all the eggs were put into the Chinese basket (apart from $1.5 billion support from KSA).
Now the government is diversifying its interests by having more partners in building requisite infrastructure and industrial base. Competition is good and seeing the growing relations of Pakistan in the region amid the Afghanistan imperative, the US president is showing willingness to meet the current Pakistan political leadership.

That is an important link in Pakistan-IMF relation. One of the reasons, this space advocated for delaying IMF programme is that souring Pakistan-US relationship could result in adverse conditions to be implied by the IMF. For details read "A case for doing without the IMF" published on 26th October 2018. However, the IMF programme seems to be imperative for improving international credibility. (For details read "On Saudis rescue and beyond", "Pakistan IMF be right back" and "Do more- talk less" published between October and December 2018).

The government after getting all the support can live without the IMF for a few more months and can negotiate on a strong footing with the IMF. One of the criticism on delaying Fund programme is that the government cannot do tough reforms without the umbrella of IMF. That said, most of the tough conditions are already in implementation mode - such as interest rates and currency adjustment, cutting down on development expenditure and upward revision in energy prices to lower subsidies.

In a nutshell, the immediate balance of payment crisis is almost over and FDI flows can churn economic growth without creating another external crisis in the medium term. The various rating agencies are now writing about the 'political stability' in Pakistan which is imperative for foreign investors.

That is the brief story on external front where Imran’s integrity has started paying dividends. The PM’s strength is in social and human development and he may end up doing a good job on these along with building a soft image of the country, which is imperative for FDI and tourism.

The problem is in domestic economic handling, where the capacity is low and is creating jitters amongst domestic analysts, media and businessmen. The government has promised too much and is too focused on criticizing the past - that gives room for propaganda. The issue with media is that most pundits lack economic understanding and the players were overcompensated due to skewed media policy by previous regime. (For details read "Media Swings", published on 27th November, 2018).

The PM has to realize this and should mend his economic and information management teams. The arrogance amongst ministers has to be corrected by direct intervention from the PM. The core of the economic woes is domestic structural issues and socioeconomic derailment. The economic ministers should focus on core issues such as reforming FBR, bringing fiscal austerity, reducing energy mess and improving overall business and investment climate.

The PM has to understand that the foreign dividends can only sustain if the government gets its act together and work on bring competitiveness in the domestic economy, and for that, requisite capacity is missing within the cabinet.