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Corridors of power at a standstill

Updated October 09, 2017

The markets have been in a tailspin ever since PML-N supremo Nawaz Sharif was sent packing through a Supreme Court decision that also ordered a reference to be filed against his all-powerful finance minister, Ishaq Dar.

Opposition parties in parliament and the Senate Standing Committee on Finance have since been calling for Mr Dar’s resignation, saying it is embarrassing for the country to have a finance minister tainted with allegations of financial impropriety. Mr Dar has denied all charges that he accumulated assets and funds through unfair means.

The PML-N has cold-shouldered opposition demands for Dar’s exit and has decided to continue his economic and financial supervision till the end — to ensure consistency ahead of elections — unless forced otherwise on a legal basis.

The fragile PML-N government appears to be moving towards a phase where dealing with day-to-day affairs has become a priority rather than long-term policy direction. Businesses are getting nervous and investor sentiment eroding

An Islamabad-based accountability court has indicted the finance minister on the request of the National Accountability Bureau (NAB) for allegedly accumulating assets and funds beyond his known sources of income.

Political uncertainty has taken root since then, affecting the country’s economic outlook at a critical juncture. The benchmark 100-share index of the Pakistan Stock Exchange has plunged almost 7,000 points since the July 28 decision of the apex court.

This reflects adversely on the country’s long-term economic and financial transition ahead of political change eight to 10 months down the road. While domestic investor sentiments have yet to take off as the country moves closer to ending chronic energy shortages, the lack of equilibrium in different pillars of the state is likely to take its toll on the nascent macroeconomic recovery.

Still hanging on his shoulders is the potential reopening of the Hudaibiya Paper Mills case that involved a confessional statement Mr Dar is reported to have made during retired Gen Musharraf’s early days in power, suggesting he transferred funds abroad on behalf of the Sharif family through benami accounts.

Until the Panama Papers controversy, Mr Dar expressed anger if anyone asked him about the confession that, according to him, was “a piece of trash written under duress” and “thrown in the dustbin by the high courts” in 2014.

Without its own investigation, the National Accountability Bureau (NAB) has filed a case against Mr Dar on the basis of a report prepared by a specially constituted six-man joint investigation team (JIT) probing allegations of money laundering against the Sharif family.

The case states that “the accused acquired assets and pecuniary interests and resources in his own name and/or in the name of his dependants of an approximate amount of Rs831.678 million”, showing 90 times increase in a few years which were “disproportionate to his known sources of income for which he could not reasonably account for”.

In the interim reference, however, NAB appeared not fully convinced with the evidence against Mr Dar when it told the accountability court that foreign countries had been requested to provide certain records which, if materialised, would be produced before the court.

The accountability court under the direction of the Supreme Court is required to complete the trial in six months.

In the meanwhile, the fragile PML-N government under the short-term prime minister, Shahid Khaqan Abbasi, appears to be moving towards a phase where dealing with day-to-day political challenges and economic affairs has become a priority rather than long-term policy direction and a proactive approach. Businesses are getting nervous and investor sentiment eroding.

There are already indications about a possible delay in the launch of a planned $1 billion sukuk bond because the government is busy firefighting in the evolving political and legal environment. The primary focus remains on fighting a legal battle for survival, rather than going the extra mile to leave a stable plate for the successor.

That, in a manner, appears to be a repeat of 2008 when Pakistan had to postpone a couple of transactions in the international capital markets to offload some blue chips at the eleventh hour under the coalition government of the PPP and PML-N. What followed was a serious balance-of-payments problem and a tough bailout programme from the International Monetary Fund (IMF).

The pattern returned ahead of the 2013 general elections as political uncertainties returned amid growing tensions among various state organs, energy projects stalled, reforms were blocked, and the national kitty is now facing the brunt leading to another IMF injection.

Even if the government goes ahead with the bond launch, its price would keep growing with each passing day as a premium for the uncertainty.

On top of that, roadshows and investor conferences not only require a confident team, with an unblemished reputation, of economic managers to respond to critical questions from outsiders, but also a couple of stable weeks to smoothly sail through the process. When you are questioned at home for integrity, what message would a foreign investor get?

A unified national stance can build on the country’s weaknesses and strengths with resilience but the message of a divided house is a recipe to a free fall.

The biggest sufferers, as always, would be the common people, who deserve a better standard of living after a long, back-breaking low-growth journey.

Published in Dawn, The Business and Finance Weekly, October 9th, 2017