Budget cosmetics

Updated 25 May 2017


IN the last year of its rule, the PML-N has decided to throw all caution to the winds and go for a growth strategy that is as cosmetic as the period of its rule has been. This was the party that ran on a promise to address deep-rooted structural bottlenecks in the economy: to eliminate load-shedding and restore the growth momentum of the economy. But the years of the party’s rule have shown us that they are in fact no different from their predecessors. Cosmetically, yes. Substantively, no.

Their predecessors, the PPP, found it next to impossible to close a major deal with a foreign partner. This was not because the deals they were closing were inferior, but because there was the question of the Supreme Court shooting down almost every foreign deal it could, starting with the Steel Mill case, through Reko Diq and an LNG deal, and ending with the rental power deals and the Turkish company whose barge was famously ordered to return once it had left port because no interconnection was provided to it once it was ready to start generating.

This government did not have any such problem. They had a clean run of things, until the dharnas. But even the noise and fury of the sit-ins caused a few delays at best; they did not become the permanent blockage that the PPP faced throughout its rule.

The budget is likely to be laden with schemes and projects designed to create a short-lived and artificial sense of respite.

The rule of the PML-N began with a massive retirement of the circular debt, cleverly done before the end of the fiscal year 2013, so its impact on the deficit could be attributed to the previous government. A single-stroke retirement caused the deficit to shoot up to beyond 8 per cent of GDP, from where it could only come down. Today, they proudly claim to have brought the deficit down from that peak to around 4pc, as if halving the deficit was a feat of fiscal management. It wasn’t. It was a feat of accounting. It is looking ever more likely that yet another massive retirement of the circular debt will be undertaken before the government ends its term, causing the wheel to come full circle.

Some stabilisation of the fiscal framework did indeed take place. There was also a hefty rise in the foreign exchange reserves that had fallen to around one month’s worth of import cover at the time they took control. The MD of the IMF, during her brief visit, mentioned in every public appearance that a hard-won “moment of opportunity” had opened up, and now was the time to undertake the right reforms to put the economy on sustainable rails.

The devil was in the wording because a moment of opportunity is just that: a moment. And moments pass, sometimes before they are even noticed. What was this ‘structural reform’ mantra that we keep hearing about? The public-sector enterprises, for example, doubled their accumulated losses in this period. The circular debt returned as the government was unable to reform crucial areas like power-sector governance and pricing reform.

The tax base did not broaden, and the revenue burden fell harder and harder on those who were already paying their taxes. Reserves rose, but through borrowing primarily, sometimes under rather non-transparent arrangements like the so-called ‘gift’ from the ‘brotherly country that does not want to be named’, ie Saudi Arabia. Few believed back then that this money has no quid pro quo, and watching the obsequious appearance of the Pakistani leadership at the summit in Riyadh recently reminds us of that fateful $1.5 billion that fell like manna from heaven at that crucial hour. Now payback time approaches, and it will be far more than mere money that we will be called upon to provide.

All through it, the partnership with the Chinese blossomed into a tale that grew with the telling. First it was said that our partnership will enhance our trade. Then it was said that the power investments coming in under the early harvest programme would eliminate the power crisis once and for all. Then we learned of the massive investments planned for the rest of the economy, and were told that these are there to jump-start the growth process and ‘industrialise our agriculture’ and take us on a growth path towards the advanced industrial economies.

Posters appeared showing Gwadar decked up like the jewel of the Indian Ocean, looking like a cross between Dubai and Singapore. Today those dreams have acquired almost delusional proportions, while apprehension is growing in the country that the government does not fully comprehend what it is taking us into.

Underneath it all, we see the real game in the allocations made in next year’s development budget, and it looks just like the old game. An allocation of Rs25bn, for instance, for programmes titled ‘Electricity for All’ and another titled ‘Clean Drinking Water’. The latter is little more than a plan to instal filtration plants in a few constituencies, so for the three months that their filters function, the leadership of the area can campaign on having provided the people with clean water. After the election, we will see.

The budget is likely to be broadly similar, laden with schemes and projects designed to create a short-lived and artificial sense of respite in the run-up to the elections. Tonight’s presentation of the economic survey will carry the dreams of an emerging prosperity further, decked up not with fancy pictures but fancy numbers that seek to lull us all into a false sense of comfort that all is well, things are turning around.

Except that they’re not. Things have returned to square one, which is not the same thing as turning a corner. The party that is preparing to hit the polls on the claim of having solved the country’s problems will be standing on a wafer-thin platform when it gets about the task.

The writer is a member of staff.


Twitter: @khurramhusain

Published in Dawn, May 25th, 2017