FISCAL policy is by definition political; it is made by politicians. In contrast, monetary policy is kept away from political rulers in all functioning democracies.

Generally a non-political professional is appointed, not elected, as the head of the central bank and left alone to take an independent view of the economic and financial data to announce a monetary policy in the best interest of the economy. It is hard to apply this description to the monetary policy just announced by the State Bank of Pakistan.

The monetary stance seems to have been decided in the cabinet meeting held in early January and announced as such by the information minister at a press briefing that usually follows. The industries minister has been telling all and sundry in business that the government will not allow an increase in the interest rate. The adviser on finance too did not leave any doubt that the State Bank had to be a team player. What was left for the State Bank was to make a detailed justificatory statement, which has been done in the form of the latest monetary statement.

Both the government and the State Bank face a public relations dilemma. They are unable to explain in common parlance why the interest rate in Pakistan is following a different trajectory from that in every other country of the world. Rising inflation was easy to blame on the global hike in food and energy prices, but persistent core inflation is not. While the State Bank governor was at a loss to interpret the usual divergence between the wholesale price index and the consumer price index, the real issue for him was the core inflation. The fact is that core inflation is not moving at all. It was 18.9 per cent in November and 18.8 per cent in December. Variation of a few points at these high levels is of no significance at all.

If the State Bank had followed the principles of monetary economics, and its own researched position that financial charges are not a major component of the cost of doing business, then the discount rate should have been increased, not necessarily to the full extent of 150 basis points to please the IMF but by 50 basis points to make an unambiguous statement of intent. By following the government lead to keep the rate unchanged, the market expectation cannot but be of a cut the next time. By changing the frequency of monetary policy statements from half-yearly to quarterly, such expectations would be reinforced. The situation will not be helped by the fact that Pakistan does not have quarterly GDP data, making an assessment of nominal GDP that much difficult.

There is, however, more to the shift to quarterly announcements than meets the eye. In case the assessment in the forthcoming IMF review goes the other way, ignoring the democracy dividend plea put forth to the IMF first deputy managing director John Lipsky in Davos by the prime minister, the State Bank will have to suffer the ignominy of having to announce an interim monetary policy.

A quarterly statement will come in handy here. Let it be understood though that unfulfilled business expectations of a cut in a quarter from now will have a more devastating effect than their present disappointment over no change in the rate. And let it be also understood that the IMF is likely to be guided more by the commitment to achieve a June-on-June inflation rate of 12 per cent than anything else. The time was thus not yet to relax.

In a word, the do-nothing policy aimed to please the government, appease business and confuse the public is likely to add to the prevailing uncertainty. Projecting a GDP growth of 3.7 per cent in the current year against the earlier IMF projection of 3.5 per cent and the latest World Bank projection of three per cent makes the confusion worse confounded.

I have written earlier in these columns that we would be lucky if the GDP growth rate this year stays slightly above the population growth, unless the witch doctors of the Shaukat Aziz era, who continue to be in the employ of the government, are called upon to regroup their dirty-tricks squad to spike the growth rate. This will be the last nail in the coffin of the integrity of our statistical system.

The writer holds the Mahbub ul Haq Chair in Economics at the GC University, Lahore.

The biggest “environmental” issue in Britain for the past year has been the plan to build a third runway at London’s Heathrow airport. The growth of air travel, the protesters claim, is a major cause of global warming, and John Sauven, director of Greenpeace UK, predicted that Heathrow would become “the battlefield of our generation.”

So the protesters contacted Jim Hansen, one of the world’s leading climate scientists, to back their campaign.

They assumed that Hansen, the director of Nasa’s Goddard Institute for Space Studies in New York, would back their campaign, for last year he helped to defend six British protesters charged with criminal damage after occupying a coal-fired power station in Kent. To the obvious astonishment of the Heathrow protesters, he refused.

Hansen resisted several attempts by President Bush to silence him during the Great Darkness, and recently wrote an open letter to Barack Obama warning him that he must act decisively on climate change in his first term. Nor does he deny that planes flying through the stratosphere contribute to global warming.

He just insists on a sense of proportion — and he does not think that devoting the energies of the entire British environmental movement to preventing a third runway at Heathrow is a productive use of its time. “Coal is 80 per cent of the planet’s problems,” he said in an interview with The Observer. “You have to keep your eye on the ball and not waste your efforts. The number one enemy is coal and we should not forget that.”

All fossil fuels are a problem, for they all release carbon dioxide that was buried underground long ago back into the atmosphere, but coal is by far the worst. A coal-fired generating plant emits twice as much carbon dioxide as a gas-fired plant that produces the same amount of electricity. That is where the big cuts must be made soon if we are to escape grave consequences, and going after aviation emissions now is only a fashionable distraction.

But after we have stopped burning coal and gas to generate electricity, and after we have even replaced oil for most purposes, we will eventually have to deal with aviation’s contribution to global warming, for by then it will constitute a significant part of the remaining problem. Happily, there is a solution.

The major problem with airliners is not the carbon dioxide they produce as they fly — and in any case, that can be solved just by substituting some bio-fuel with a high enough energy content. Several such fuels are being experimented with now, and will almost certainly be commercially available in 10 or 15 years.

The real issue — three or four times bigger than the CO2 problem, by most estimates — is the water vapour that high-flying airliners dump into the stratosphere, which turns into persistent high-altitude clouds that reflect heat back to the surface and contribute to global warming.

The solution to that, obviously, is to fly lower than 27,000 feet down in the weather, where the water vapour turns harmlessly into rain. But that means smaller wings, because the air is denser down there, and smaller wings mean longer take-off and landing runs. Flying in the troposphere also means constant turbulence and a lot of air-sickness bags.

But there is a single technology that would solve all of these problems at once. “If you go to something called circulation control,” explains Dennis Bushnell, the chief scientist at Nasa’s Langley Research Centre, “which is to bleed the engines and inject air backwards at the upper trailing edge of the wing, you can produce lift coefficients which are easily three or four times what we can get out of conventional wings.”

That means very short take-offs and landings, so short that existing runways could accommodate several aircraft at once. And the same circulation control system, used in flight, has “such tremendous control authority” that it can counter the bumps that are normally part of flying down in the weather and produce a smooth ride.

Problem solved — in 15 or 20 years, when that technology is incorporated into the civil airliner fleet and aviation-grade biofuels are available. Even Heathrow’s third-runway problem would be solved at that point, since far more aircraft could use the existing two.

Climate change is a problem caused by technology, and most of the potential solutions are also technological. Aviation is a small part of the problem, and the solutions will be along in a while. Concentrate on closing down the coal-fired power stations, and we may get through this without too many casualties.