EDITORIAL: In a visible departure from successive Chinese governments’ policy not to comment on any country’s internal political dynamics, the visiting Chinese Foreign Minister, Qin Gang, during a joint press conference with Foreign Minister Bilawal Bhutto-Zardari at the conclusion of the closed-door fourth Pakistan China Strategic Dialogue, stated: “we sincerely hope the political forces in Pakistan will build consensus, uphold stability and more effectively address domestic and external challenges so it can focus on growing the economy.”
It is gratifying that no stakeholder - political party or institution - has declared these remarks as an interference in the country’s internal affairs, the usual posture premised on previous such remarks by other world powers, however one can only hope that the silence subsequent to the delivery of Qin’s exhortation indicates serious reflection by all political forces as well as key stakeholders in the country to agree to work together at best, failing which, to agree to disagree without further vitiating the environment that is taking a major toll on the economy in general and the quality of life of the general public in particular.
China is one of the three “friendly” countries requested by the International Monetary Fund (IMF) to re-pledge assistance during the duration of the ongoing ninth review of the Extended Fund Facility (EFF) programme and was the only country that did so promptly as part of its very long-term sustained strategic partnership with Pakistan.
Saudi Arabia and the United Arab Emirates followed suit only recently, however, what is now a further lacuna in the success of the ninth review is the fact that there is a difference of around 2 billion dollars between what is being cited by the IMF team the country requires in terms of external funding and the finance ministry – a difference acknowledged by Finance Minister Ishaq Dar publicly last week though he bafflingly then proceeded to insist that all pending conditions for the ninth review have been met.
One would have hoped that instead of arguing about Pakistan’s actual external funding needs Dar had instead slashed current expenditure that has been on the rise since he became finance minister in the final days of September 2022, with an estimated 75 percent rise in current expenditure July-April 2023 compared to last fiscal year which is not attributable to assistance to the 33 million flood-affected people as disbursements to them were met within the budgeted Benazir Income Support Programme of 360 billion rupees.
This rise in current expenditure has been made possible by a dramatic rise in domestic borrowing largely through issuing Pakistan Investment Bonds (PIBs) at exorbitant rates in view of the high discount rate. This in turn has led to a widening budgeted deficit than was envisaged earlier this year.
Today the thrust of the economic manifesto of the eleven-party coalition government and the Pakistan Tehreek-e-Insaf (PTI) remains identical: attribute the entire blame on the other.
This newspaper, however, holds no brief for how the economy was handled during any of the previous four to five administrations as the entire period was marked by the implementation of the very same elitist policies that were in practice in the past and continue to the present day.
These include amnesty schemes, electricity subsidies to exporters, raising current expenditure to ensure a more pliant civilian-military establishment while raising reliance on higher utility rates to meet full cost recovery objectives of donor agencies and on indirect taxes whose incidence on the poor is greater than on the rich rather than ushering in structural reforms; yet it is relevant to note that the current dispensation has worsened the economic impasse with flawed policies that have no basis in economic theory and include the control of the rupee till end January this year that cost the economy more than 1.8 billion dollars in lost remittance inflows through official channels and relying on issuing PIBs to borrow domestically.
The policy of deficit financing accounts for key macroeconomic indicators considerably worsening that, without doubt, must be a serious concern for the Fund, domestic economists and the general public grappling with an ever-rising rate of inflation.
In other words, the Chinese foreign minister privy to the ongoing stalled negotiations with the Fund has given advice that is in the country’s best interests and with elections scheduled this year, though the month is yet to be finalised and is being fiercely debated at all forums, there is an urgent need for politicians to release the almost constant pressure on the country’s fragile economy for the sake of the voters they claim to represent and the country they owe allegiance to.
Copyright Business Recorder, 2023