The reversal of increases in petroleum products' prices was welcomed by the people, but it raised a storm among the "friends" of Pakistan. No sooner had Prime Minister Gilani announced the change, US Secretary of State Hillary Clinton called it a "mistake" - a reflection of how perceptions differ between Pakistanis and the friends of Pakistan.
She also told the Pakistani ambassador that "we think it is a mistake to reverse the progress being made to provide a stronger economic base for Pakistan and we will continue to express that opinion." A State Department spokesman later added "what we've said all along is that the reforms that the government of Pakistan is undertaking are difficult, but they're important for its long-term economic stability."
In free (for all) economies characterised by volatile markets, economic stability is a joke, as proved by the current recession because passing on the greed-driven market, prices cause economic chaos; governments must absorb a part of the impact by cutting their expenses to avoid reversing the progress towards a stronger economic base; that's not a mistake.
Hillary Clinton's remarks reflect the US approval of the Pakistani regime's economy destabilising policies. To its own peril as well as Pakistan's, the US ignores that, from day one, the regime didn't strive for economic stability; it recklessly did the opposite. That's why resource waste, corruption, and Pakistan's public debt rose in unison, to which the US was a witness all along.
The size of the federal cabinet - 71 ministers - manifests blatant waste of state resources. Even during economic recessions, governments can successfully implement unpopular economic reforms provided people see them taking the lead in cutting waste in state offices, prioritising economic revival, and optimising value generation from every penny of tax revenue.
Except for the US and the IMF, nobody noticed anything of the sort happening in Pakistan. While the US and the IMF kept telling Pakistan to levy new taxes, they didn't counsel the government on cutting waste and checking corruption, improving debt management, hedging against oil changes, and recovering funds pocketed by fraudsters in state offices.
Pakistan confronts its largest-ever fiscal deficit due prolonged mismanagement by a regime, backed by the US. Advice about imposing more taxes also comes from the US while the solution lies in recovering stolen state wealth, which surely didn't evaporate. By not emphasising the urgency of this effort, the US makes itself more unacceptable to the Pakistanis.
Oil imports have bled Pakistan's economy white; they cause the largest outflow of export earnings, enlarge trade deficit, reduce external debt servicing capacity, weaken the currency, jack up inflation and cripple the economy's competitiveness. Yet, neither the US nor the IMF advise Pakistan to switch to strategic hedging against oil price changes.
After touching $147.5/barrel in July 2008, in February 2009, the oil price dipped to $36/barrel. Booking forward purchase contracts from then on could have cut the oil import bill. During 2008-10, oil imports amounted to $21 billion. What we lost out on were the savings that strategic forward buying could afford and oil stabilise energy and transport prices - essential for economic stability.
But why blame Pakistan's "friends" for not being the friends they claim to be. No Pakistani parliamentarian conducted a simulated exercise on strategic oil buying to highlight the lost economies, or pointed to the continuing gaffe (buying on spot) courtesy which Pakistan wasted several billion dollars and ended up borrowing from the IMF.
Parliamentarians exhibit the same concern for improving public debt management. Of the 340 members of the National Assembly, 83 don't participate in any debate; they simply rely on reports of the parliamentary committees, consisting of 10 to 20 members whose proposals are passed within minutes without discussion or dissent.
Due to disorganised public debt management, the state sometimes over-borrows because it doesn't notice the funds lying in its scattered bank accounts; banks keep re-lending those funds to the state at ever-increasing risk premiums courtesy the rising SBP discount rate. No parliamentarian came up with the facts on this distortion. This is the democracy the US backs very vocally.
Regulating retail and wholesale markets, and the financial services sector, continues to be ignored by the government despite being prodded by the CCP and court verdicts. Regulators have yet to penalise trade bodies for their failure in enforcing self-regulation in these markets where the state has zero capacity for checking price manipulation.
In the financial services, the latest regulatory stunner is the SBP permission for unsecured consumer lending up to Rs 2 million, although the recent losses in consumer lending demanded cutting secured and unsecured consumer lending limits. Besides, should consumption be encouraged, and with MUP rates bound to rise, does this concession reflect prudence?
The biggest irritant, however, is the state's reluctance to retrieve stolen national wealth, ie taxpayer funds, squandered by state offices and public sector enterprises. It is undeniable that the incumbent regime isn't serious about it, as manifested by its attitude towards investigating the massive frauds unearthed so far, or in implementing court verdicts thereon.
Imposing new taxes isn't a cure-all, especially in a recession. Imposing new taxes (eg RGST) is pointless because the FBR lacks both the apparatus and the will (amply proved by leaks in tax collection) to deliver results. Nothing short of a complete overhaul of the tax levying bases, tax-paying procedures, documentation involved therein, and credible systems to verify correct tax payment, will deliver.
Above all, taxes must be invested in sectors and services that visibly improve taxpayers' lives. The incumbent regime lacks the willingness as well as the capacity to deliver on these expectations. People are tired of paying taxes the bulk of which is squandered on exuberance and corruption; they have had enough of democracy. By becoming the vehicle for serving vested interests democracy has lost its sanity.
Yet our politicians wonder: "Sanity, what the hell is it?" PM Gilani's promise to Nawaz Sharif to change in 45 days what he couldn't in three years is a ploy for the coalition's staying in power; given the coalition's record, being out of power is unthinkable for any politician. It implies that further delay in take-over by an untainted and professionally competent regime would only sustain misrule; sanity mandates a change.