The compulsions of continuity imposed on it by the military regime is likely to pose the biggest challenge to the elected government designate. The so-called reforms which the military government has introduced without consulting the nation and which it wants the elected government to continue are nothing but a recipe for economic disaster.

In simple words these reforms mean putting an even tighter leash on public spending in the pursuit of keeping the budgetary deficit within the limits prescribed by the IMF, frequent increases in utility charges to justify withdrawal of subsidies being given to make good the fiscal holes created by official corruption in the public corporations and job cuts to improve the profitability of enterprises on the block for privatizing.

In the last three years these reforms have only prologned economic stagnation, curtailed the purchasing powers of the masses causing production to drop which seriously discouraged investment and finally the unemployment rate to go out of hand. What has saved this country from going the way Argentina went was the 9.11 related dole which has poured into Pakistan over the last one year. But this bonanza is not going to continue for long. The economies of the donors themselves are not in good shape. They have not even been able to contribute even a fraction of the over $4 billion they had promised in Tokyo early this year for the reconstruction and rehabilitation of Afghanistan.

So, the perceived ‘free-lunch’ is going to come to an end very soon. After this all that would be left would be the highly generous ( again, due to 9.11) debt rescheduling which we had obtained ( again, thanks to 9.11) in December 2001 and the $8 billion that we have accumulated in part as a result of this rescheduling and partly because of an extraordinary increase in the flow of remittances triggered by the 9.11 insecurity being felt by overseas Pakistanis.The new government in its transitional briefing would perhaps be told sternly that these $8 billion are only window dressing. Not a single dollar from this could be used because they have not been earned through genuine economic activity like exports or invisible trade as such.

On the issue of not having a mandate to introduce far reaching economic reforms the military rulers had always fallen back on the cliched argument that the they have the backing of the silent majority. It was like claiming that there were one trillion stars in the sky, knowing very well that nobody could disprove you. But then the nation disproved the military regime in the October 2002 election as the silent majority, that is 60 per cent of the registered voters, did not come out to vote for continuity. It was the same even in the referendum. Most of those who have reached the parliament have been voted in by those who do not want Musharraf’s economic policies to be continued. And for obvious reasons even those who have reached the Parliament on the back of Musharraf vote and who are likely to form the government are not likely to be in a position to honour the compulsions of the continuity. They would be made accountable by their voters if they kept a leash on public spending, kept increasing frequently the utility charges and kept downsizing the public enterprises. Questions would be asked in the parliament and they would have to answer them to the fullest satisfaction of the nation.

It can not any more be a monologue like the President used to enjoy until now while explaining to the nation on TV and radio why he was prolonging the stagnation by pressing on with these so-called ‘reforms’. Now there would be a debate inside the Parliament in full view of the nation. Musharraf has so far used multilateral lender’s classical argument to justify the reforms in his monologue. These multilateral lenders while advancing a loan ensure its return with profit and in time by extricating a promise from the borrower that he would pass the burden of repayment to those sections of society who have no political clout to disrupt the pursuit of the lenders’ goal: macroeconomic stability. This argument runs something like this: Pakistan can no more live on borrowings. It has to earn its keep. And the only way to achieve this goal is to stop public spending, eliminate subsidies, cut jobs and privatize everything. It is a logical argument.

But then in the first place Pakistan’s debt burden is not so much a reflection of its profligacy as it is the result of our security-related expenditure which had always remained beyond the nation’s meagre means. It was in order to make good the gaps in the income and expenditure caused by the ever growing needs for acquiring weapons to match the offensive capability of our mortal enemy whose economy has always been at least five times larger than ours that we kept borrowing left and right. As a matter of fact we even diverted resources borrowed for manpower development on to defence. This ever growing need for more and more weapons would continue to eat into our ability to remain within our meagre means and force us to borrow more and more. And even if the masses became completely destitute while trying to enable the government to achieve the goal of macro-economic stability, this goal is likely to remain a distant illusion. But then how does one get out of this debt trap without compromising on our security needs and without prolonging the domestic economic stagnation? The answer will have to be found by the elected representatives. Most of them have come in on the anti-continuity votes. So, they will have to device their own home-grown economic policies to cope with the situation. But then, as long as the present team of official economic managers remained at the helm of affairs, this is not going to happen. This team has already succeeded in creating the illusion of a success story with its $8 billion of foreign exchange reserves. And it would continue to do more of the same because all the members of this team are completely sold on to the IMF’s prescription for achieving the illusionary macroeconomic stability no matter to which darker bottom that led the country.

There is a lot of wastage in defence expenditure which goes unnoticed because of the non-transparency being maintained in this sector. The first thing that the new government should do is to bring the defence budget on the floor of the Assembly to debate it threadbare. Next, it should shift the expenditure on armed forces’ pensions back to the defence budget from the civilian head. This would put the defence budget in the correct perspective. And in fact the armed forces could be made leaner by trimming off its long tail to a reasonable size and sharpening its teeth. Next, the government should take in hand immediately as many physical infrastructure projects in hand by diverting the savings made from defence expenditure to civil expenditure.

This would expand job opportunities and place surplus purchasing power in the hands of the masses which in turn would cause production to rise and which in turn encourage the private sector to give up its long wait-and-watch mode and start investing. Macro economic stability as the only goal of all economic policies should be abandoned immediately. Its achievement, however, should be made a part of a wholesome economic policy framed to kick-start the economy, take it out of its stagnation and make it grow and expand reducing poverty and increasing prosperity.