EDITORIAL: Caretaker Prime Minister Anwaarul Haq Kakar’s decision to attend the fifty-fourth annual meeting of the World Economic Forum (WEF) at Davos Switzerland, a mere three- and-a-half weeks before the general elections scheduled for 8 February, may attract criticism on the grounds that with parliament dissolved prior to his appointment on independence day last year he is not empowered to get a finance bill approved that contains taxation measures critical before any foreign investor is likely to consider investing in Pakistan.
True, he can get a presidential ordinance passed but the validity of that document is limited and there is no guarantee for the foreign investor that the parliament, as and when elected, would subsequently endorse the measures contained in the ordinance.
Past precedence does indicate that decisions: (i) fiscal and monetary incentives to sector(s)/subsectors by different administrations vary between political parties; for example, the construction sector, the textile sector, the sugar industry; and (ii) contractual incentives extended to foreign investors lead to expensive litigation (domestic courts as well as in international arbitration fora) at great cost to the exchequer and to the general public.
However, there is of course a counter argument: with the establishment of the Special Investment Facilitation Council (SIFC) by the previous eleven-party coalition government, manned by the senior most civilian and military personnel, continuity of policies irrespective of whichever party or a coalition succeeds in forming the next government is envisaged.
What is, however, a major determinant of direct foreign investment inflows (as opposed to portfolio investment inflows that can exit the country at the press of a button) is a stable political economy that with minimum risk for a prospective investor.
Pakistan’s economy today is not presenting a favourable outlook with rising reliance on foreign debt accompanied by ever more stringent conditions by multilaterals, including the implementation of administrative measures envisaging a massive rise in utility rates.
Pakistan’s low rating has disabled the country from accessing the budgeted 6.1 billion dollar external borrowings from commercial banks abroad and through issuance of sukuk/Eurobonds that in turn has implied a massive rise in domestic borrowing, money that is disturbingly being used to increase allocation for current as opposed to development expenditure – a highly inflationary policy, a reason for the Sensitive Price Index (SPI) rising to 44.1 percent year-on-year for the week ending 11 January 2024 and by 1.36 percent as compared to 4 January 2024.
The press release issued by the government noted that Kakar will deliver a keynote address on Trade Tech’s trillion dollar promise, a subject delivered by a head of government of a country, which is still way behind several other countries in the field, and if past precedence is anything to go by, few non-Pakistani-descent prospective investors would attend the special “Invest in Pakistan” event.
Finally, the press release also mentions his intent to attend three other seminars: ‘preventing an era of global conflict; restoring faith in the global system and preventing economic fracture’ which may strengthen his capacity to understand the subject but which will have extremely limited benefit to the country.
While the expenditure that would be incurred by the treasury for this visit is an infinitesimal amount, yet one would have hoped that given the scarcity of foreign exchange reserves at 8.15 billion dollars on 5 January 2024 (barely enough to meet three months of imports that are the standard minimum required), rising poverty levels (40 percent as calculated by the World Bank recently), consumer price index nearing 30 percent (inclusive of imported inflation) and as a result a citizenry increasingly restive about the expenses incurred by members of the executive there is a heightened need to justify foreign tours in general and that of members of the caretaker government in particular.
Sadly, that need remained unmet in this most recent visit as it did in most of his multiple previous visits abroad and one would hope for a little more sensitivity on the part of members of our executive (caretakers or elected) to weigh any expenditure, however small, against the visibly worsening plight of the general public. Optics matter and when the going is tough with more than 40 percent of the population living below the poverty line, struggling to eke out a living with their dignity unscathed, it matters much more.
Copyright Business Recorder, 2024