EDITORIAL: The country witnessed the first ever defeat of a sitting minister of the federal government in Senate elections. How did this come about will be subject matter of analyses and discussions for quite sometime but for the moment there are three possible scenarios that exist for incumbent finance minister Dr Abdul Hafeez Sheikh: (i) to resign as Finance Minister, a position he can hold only till 11 June when the six-month appointment expires; (ii) to revert to status quo ante, i.e., advisor to the prime minister on finance with the rank and status of federal minister with the prime minister holding the portfolio of finance minister; and (iii) the Prime Minister gets Dr Hafeez Sheikh elected to parliament from a relatively safe Pakistan Tehrik-i-Insaaf (PTI) seat.
The Opposition contends that Dr Hafeez Sheikh’s defeat is a no-trust vote against the Prime Minister – a charge he has aptly deflected by announcing that he will seek a fresh vote of confidence. The ruling party maintains that PTI’s post-election strength in the Senate reflects its strength in National and provincial assemblies barring only one out of the two seats the party contested in Islamabad, the only target of Pakistan Democratic Movement, and concludes that Sheikh’s defeat would not have been possible without large sums of money changing hands. While the constituents of the Senate are parliamentarians and not the general public, yet to ignore the pressure of persistently high food inflation, increasing reliance on indirect taxes for revenue - taxes whose incidence is greater on the poor than on the rich - rising utility tariffs and unemployment levels on the PTI parliamentarians who no doubt are subjected to a clamour for relief by their constituents may not be politically astute.
In this context, it is relevant for the Prime Minister to take cognizance of the on-ground realities with respect to the state of the economy and one easy way would be to review the IMF staff-level agreement signed on behalf of his administration by his economic team in 2019. The Fund’s growth and inflation projections in that document, the outcome of the agreement, would bring it home to the Prime Minister as to what his government agreed to: a growth rate of 1.5 percent (against 3.3 percent achieved the year before) and an inflation of 13 percent (against 7.2 percent in the year before) – a slowdown in growth implying unemployment and high inflation impacting on the pocket book of the poor more than on the rich.
The Prime Minister’s constant refrain no doubt fuelled by briefings given to him was that the severely contractionary monetary policies - a discount rate of 13.25 percent and the rupee depreciation – would bring the historically high current account deficit of 20 billion dollars down to manageable levels. True, but he was clearly not informed that this required delinking of the discount rate from core inflation and linking it to the Consumer Price Index (an inexplicable deviation from the past based on the premise that components of the CPI are not sensitive to the discount rate).
The fiscal policy, under the purview of the Minister of Finance, was also severely contractionary. The government accepted 5.5 trillion rupees tax target for 2019-20 under the IMF programme, with sector experts pointing out at the time that this was unrealistic, and 4.9 trillion rupees in the current year which is again being cited as unrealistic by senior officials of the Federal Board of Revenue.
In short, suffice it to say that the Prime Minister and his economic team have shown a singular lack of sensitivity to political considerations which accounts for their accepting harsh upfront conditions and they have little room to manoeuvre to renegotiate a more phased reform agenda. The pandemic has been the government’s major defence with respect to the poor state of the economy and this logic is only partially credible as the pandemic merely worsened the situation.
We have focused on the general dissatisfaction that pervades regarding the state of the economy as a major contributory factor to the setback that the government suffered in the Senate election. Food inflation, increasing tariffs of gas, electricity and petroleum products have put unbearable strain on the lives of the common people leading to severe discontent. There are, however, several other contributory factors for this outcome that include the heart burning within the PTI rank and file and also its allies with regard to the over reliance by the prime minister on a platoon of unelected advisors and special assistants instead of the elected parliamentarians who after all are answerable to their constituents and are called upon to defend and justify the decisions of the unelected cabinet members.
We hope that this episode will trigger a reappraisal of strategy and policies pursued thus far and lead to a corrective action. The mantra of corruption and ‘NRO’ does not feed empty stomachs or pay school fees or utility bills. In a parliamentary democracy, the opposition is the government-in-waiting and the lofty aim of doing good by the people, improving their lot and pulling them out of poverty cannot be achieved without a healthy working relationship between the government and the opposition. The onus for this to happen lies more on the government than across the aisle.
Copyright Business Recorder, 2021