Continuity in reforms

THE IMF is justifiably pleased with the way the government has consolidated gains in macroeconomic stability and is proceeding with the structural reforms in a difficult economic and political environment. This is perhaps the reason why the Fund had approved early this month the disbursement of the fourth tranche of the three-year $1.03 billion PRGF facility and, at the same time, concluded Article IV consultation despite the government’s failure to achieve its revenue targets for the last financial year and its inability to improve so far the financial health of the KESC and Wapda. Notwithstanding these serious slippages, the reforms, nevertheless, have helped Pakistan achieve in the short period of two years considerable macroeconomic stability, as a result of which today Pakistan can boast of record foreign exchange reserves (FER), a significant fall in the rate of inflation and marked improvement in current account and budgetary deficits. As a result, in the first quarter of the current financial year, both exports and revenue collections have exceeded their respective targets.

There are, indeed, visible signs that the long-drawn economic stagnation is about to end. Still, as pointed out by the IMF, the downside risks remain, including the risk that the reform efforts will not be sustained over a sufficiently long period of time, or that the current reforms will take longer than assumed to produce the desired impact. Also, the high debt burden continues to constrain investments in human development and infrastructure and that private investment and economic growth remain insufficient to reduce Pakistan’s high level of poverty. Therefore, one tends to agree with the IMF that in the near future the focus of the government should be on improving “public debt dynamics” further through fiscal adjustment and to address Pakistan’s “social gap” through enhanced provision of basic social services. Quite naturally, progress on these fronts will depend critically on better tax collection efforts, improved financial performance of public enterprises, especially the utility companies, and savings on defence expenditure.

It is perhaps in view of this that the Fund has very rightly suggested to the incoming new government to deal resolutely with the remaining challenges by further broadening and deepening the on-going reform effort in the period ahead. Indeed, it will need to make strong efforts to explain the rationale for reform to the people and make sustained improvement in governance and the delivery of social services because finally it would be the people at large who would make or break these reforms by owning or disowning them. Here, it must be realized that people cannot own reforms if these make no difference to the continued incompetence of the CBR and endemicity of fraud, corruption and leakages in the public utilities. Even the IMF directors appear to be highly dissatisfied with the performance of these organizations. This aspect of the failure of the reform efforts is perhaps the main reason why budgetary deficits cannot be kept under check without drastically curtailing public expenditure on socio-economic projects which have the potential to revive the economy quickly. In order to sell these reforms to its electorate, the incoming new government will, therefore, need to do something drastic and quickly about Wapda, KESC and the CBR. And here is where the new government will crucially need the cooperation and help of all the multilateral aid agencies.

A case for investigation

THE concern expressed by the minister of science and technology about the award of a licence worth $150 million to a mobile telephone company seems quite justified and at the very least warrants the attention of the government. The main telecom regulator in the country, the Pakistan Telecommunication Authority (PTA), has been accused by the minister of acting improperly. The PTA, he said, tried to exercise undue influence over the award of the contract by intruding into the jurisdiction of the Frequency Allocation Board. The allegation that the PTA chief exceeded his authority is a serious one and must be investigated. The timing of this deal has also been questioned. This makes sense for at least two reasons. One, the PTCL’s monopoly status is about to end, throwing the lucrative telecom market wide open to competition. Second, the federal government plans to announce a new policy for the deregulation of the telecom sector and hence any major deal could have waited till then.

The lack of transparency surrounding the award of the licence is unfortunately symptomatic of the way most major government contracts are concluded. Whether any wrongdoing was involved only a thorough inquiry will tell, but the fact is that public perception is that in many cases government contracts are awarded by a select group of officials acting without due regard to rules and procedures and the criterion of merit. Even the process of inviting bids through the media is prone to manipulation for reasons of favouritism and other questionable considerations. Government officials also sometimes tend to dismiss valid objections or demands for public scrutiny by contending that undue criticism is either not in the “national interest” or that it scuttles much-needed foreign investment. Such defensive postures are often a thin cover for kickbacks and commissions in the award of government contracts. The government should order an inquiry into the present case so that the truth about it is known, and the loss in government revenue, if any and proven, can be recovered and the guilty held accountable.

Afridi’s plight

THE case of Rehmat Shah Afridi, owner and chief editor of The Frontier Post and Maidan, has just been highlighted again. Mr Afridi was arrested during the Nawaz Sharif government on charges of trafficking in narcotics, denied bail, tried in a special court in summary proceedings, and sentenced to death on the basis of charges filed by the Anti-Narcotics Force (ANF). Mr Afridi has been in jail for four years, and a petition against his sentencing is pending with the Lahore High Court. He has throughout denied the allegations against him, saying that he has been victimized for exposing corruption in the ANF and for being close to the PPP leader, Benazir Bhutto. A group of reporters who on Thursday visited the Kot Lakhpat prison in Lahore where Mr Afridi is being held described the miserable conditions in which the journalist is being forced to live. In a recent petition, his son has also complained of mistreatment by the prison staff and denial of facilities to which Mr Afridi is entitled. Mr Afridi told the reporters that he was suffering from a number of health problems, including a skin disease. Doctors had advised him to wear different clothes to prevent his skin condition from being aggravated, but he said he did not have a change of clothes.

All this makes for extremely depressing reading and constitutes another sad commentary on our legal and administrative processes. It is said that just before his arrest, Mr Afridi’s paper had carried a number of stories exposing corruption in the ANF, and thus his defence that he has been unjustly penalized gains some credibility. In any case, Mr Afridi’s petitions should be immediately taken up and if prima facie a de novo investigation or a fresh trial is found to be warranted, it should be so ordered.