| November 20, 2002 | Wednesday | Ramazan 14, 1423 |
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Discount rate cut
Maulana in the dock
THE figures are now out. The National Assembly speaker’s acrimonious election yesterday forced the major parties to finally show their hand. The candidate of the PML(Q), Chaudhry Amir Hussain, won with 167 votes. The PPP nominee got 71 votes, against the 81 seats it had won in the elections, and the MMA’s 80, 20 more than its 60 seats. The PML(Q)’s own tally of NA seats was 118, but it has obviously won support from the MQM, the National Alliance and other smaller parties, and it is now just six votes short of mustering a simple majority in parliament and getting its own prime minister. To enable it to consolidate its position, further high jinx can be expected, and even then its coalition will be fragile. The speaker’s election has actually underlined in even starker relief the complex situation thrown up by last month’s electoral exercise. Talks between the PML(Q) and the MMA, which were at one point reported to be close to an agreement, are said to have broken down. The same failure had dogged efforts for an alliance between the MMA and the PPP/ARD, but they might make another effort now to reach a deal over the prime ministership. An initial move for a PPP-PML(Q) partnership had fizzled out even before it could get to the stage of hard bargaining.
The administration may have worked for a hung parliament, but it is clear that it did not bargain for as complex a break-up of the vote as was thrown up in the October elections: its dilemma is not less than that of the political parties, and its embarrassment is greater. It is coming under mounting criticism for its resort to manipulative tactics to patch up a stable coalition of its liking. The latest example is Monday’s raid on the “no-go areas” in Karachi of the MQM’s breakaway Haqiqi faction, meeting one of the key demands of the main Muttahida Qaumi Movement. The areas were in existence for almost ten years, and no one had so far acted to end them. The raids took place a day before the speaker’s election, and Muttahida’s announcement that it would support the PML(Q) was not late in coming, although the fact that this is what it would eventually do was evident all along. The creation of a “forward bloc” of PPP legislators is also a case in point. None of this helps lend credence to President Pervez Musharraf’s claim, repeated at a corps commanders gathering the other day, that his government was not trying to influence the country’s future political set-up or was backing any particular group.
The MMA-PML(Q) negotiations were believed to be moving towards a compromise on the former’s demands regarding the NSC and Section 58(2)(b), but proved inconclusive over the “king’s party’s” inability to convince the army high command that Gen Musharraf should set a deadline for relinquishing his office as COAS. A president simultaneously holding the office of Chief of the Army Staff is a constitutional anomaly and contrary to democratic practices. But we all know that we are trapped in a tangled situation. The longer the existing crisis lasts, the political parties will come under greater contrary pulls and pressures from within their own ranks, and again it will be the establishment that will stand to gain.
THE State Bank of Pakistan’s decision to reduce its discount rate by 1.5 per cent to 7.5 per cent has not come as a surprise. In fact, it was expected for quite some time and the delay was rather inexplicable, because the finance minister had already expressed himself in favour of a substantial cut in the commercial banks’ interest rate. Besides, seasonal bank credit starts picking up between September and December after which retirement starts. The new rate became effective Monday. With the value of the rupee remaining stable, inflation under control and no upswing in the demand for credit, the economic environment is right for the measure that the State Bank has now taken. There may, however, be some doubt in certain quarters whether the cut in the discount rate is enough to cause a surge in credit demand.
The discount rate allows banks to borrow from the State Bank for up to three days to meet temporary liquidity needs against government securities like treasury bills, long-term investment bonds, etc. In such contingencies, banks have no option but to cut their own lending rates to the private sector borrowers. However, interest rates are not reduced by about the same proportion. During the last fiscal year, the discount rate was cut by five percentage points to nine per cent but commercial banks did not pass on the benefit to the borrowers to the same degree. According to the banks, the reason is the large amount of bad debts and non-performing loans and low yields on treasury bills. Doubts are being expressed that the discount rate cut leading to a reduction in bank lending rates may not act as a spur to the demand for investment funds because some other factors are missing, especially political stability: with a few days to go before a new government takes over, the prospect remains uncertain.
THE Punjab government’s decision to move the Supreme Court to disqualify MNA-elect Maulana Azam Tariq has raised a number of questions. The Maulana, once chief of the banned Sipah-i-Sahaba Pakistan, fought and won his election from a Jhang constituency while under detention. Soon after he was elected, the Lahore High Court ordered his release. The Punjab government has challenged that decision in the Supreme Court and is pleading for his disqualification and re-arrest because of his links to a banned sectarian organization. The SSP, along with a number of other militant groups, were banned by the government in January 2001 for allegedly engaging in terrorist and sectarian violence. What is intriguing is the timing of the Punjab government’s move to disqualify the Maulana. As the full bench of the Supreme Court has pointed out, the question of Azam Tariq’s disqualification should have been raised with the Election Commission during the run-up to the polls.
Objections that Azam Tariq was the chief of a banned organization and therefore not eligible to contest were rejected at the time on the ground that he was standing as an independent and not on a party ticket. If Azam Tariq was, in fact, engaged in terrorist activities, how did he manage to escape the rigorous scrutiny of the EC and stand as a candidate? This question is all the more pertinent given that many aspiring candidates were barred from contesting elections on much more trivial grounds. In any case, Azam Tariq is only one of many controversial individuals who escaped the supposedly hawk-eyed scrutiny of the Election Commission. A number of known bank defaulters were also cleared to contest the polls. The current proceedings in the Supreme Court offer another reminder of the curious criteria employed by commission before the October 10 polls to separate the tainted from the clean.