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Signalling change

Updated July 30, 2018

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Regaining macroeconomic stability is the need of the hour. Since there is no time to wait for the political dust to settle, the Pakistan Tehreek-i-Insaf (PTI)-led government will be required to act as soon as it assumes power.

Experts in Lahore, however, believe that the biggest challenge for PTI chief Imran Khan’s government will be the management of public expectations.

People who voted PTI to power will expect a tangible change in their quality of life while legislators who won a PTI majority in the parliament will demand a freehand to make good on the investment they made during the campaign.

“The new leadership will have to work hard if it wants to build on the economic progress achieved under the PML-N government”

“In a phase where stabilisation is expected to be the priority under a harsher International Monetary Fund (IMF) programme, delivering on the public’s expectation of cost effective and prompt delivery of social and physical infrastructure facilities will pose a huge challenge.

“At the same time, for a party that won elections owing to its stance on corruption-free governance, keeping its legislators from abusing power is not going to be easy for it. More so as the government will be cash starved in the foreseeable future. The reliance, therefore, is expected to be on optics more than meaningful measures for the first two years,” an economist in Punjab commented anonymously.

Independent economists and high placed sources in the Ministry of Finance now project an $11 billion gap against $2.5bn anticipated earlier, after accounting for all possible sources of foreign exchange inflows during the current fiscal.

The country expects to receive foreign exchange through foreign direct investment, pledged loans from bilateral and multilateral donors, commercial borrowing, export earnings and issuance of sovereign bonds.

Against the $12bn required to foot two months’ import bill, the country’s foreign exchange reserves currently at $9bn barely cover one and a half months of imports, way below the critical level.

“Both signalling and taking concrete steps will be important. The new leadership will have to work hard if it wants to build on the economic progress achieved under the PML-N government. Three months of political and macroeconomic instability has already cost the nation dearly,” a senior economist in Karachi commented.

“The situation is tolerable on the inflation front and the Pakistani investor has been mobilised after a very long time. They are looking seriously at local options instead of planning to move assets and family abroad,” he added.

On the economic agenda of the incoming government, experts think that the road ahead is bumpy. The growth rate could initially slowdown before bouncing back if the ruling party succeeds in staying the course.

Mr Khan’s maiden public statement hinted at altering the orientation of the economic policy in Pakistan to make it ‘people-centric’.

Without going into specifics on immediate pressing challenges including vulnerabilities on the external front, Mr Khan pledged to strengthen institutions and revive investor confidence to broaden the base of the economy and achieve inclusive development.

In his refreshing brief address he touched on almost all issues of concern for the electorate including the availability of clean drinking water, affordable health, quality education, skill development and the provision of employment for youth. He mentioned equal opportunity for all and pledged to champion poor famers and the working class.

Mr Khan further promised to promote meritocracy to achieve efficiency, chop wasteful government spending and ensure that public resources are used effectively..

“He won the popular vote and deserves a chance to prove his worth as a leader of the parliament. All he said was music to our ears but everything is easier said than done,” said an economist who declined to be named.

“Economic readjustment is not merely difficult; it also has a social and economic cost. There will certainly be resistance from elements who thrive on the current decadent system. If Mr Khan means what he is saying his political support-base will alter during his rule. He may win over liberal progressive segments but deeply entrenched interest groups and their cronies will not volunteer to step aside. They will resist any blow to their interest tooth and nail,” he added.

Analysts also appreciated the stance of the main opposition party PML-N not to boycott parliament.

“The peaceful transfer of power to the winning party is in itself a great achievement. I have my reservations on the process and late announcement of results in this day and age but it would be unfair to discard elections altogether. Yes we need not shy away from pointing out lapses. I hope that the government and the Election Commission will heed the complaints and try to address concerns of candidates and parties but the show must go on,” commented a business tycoon.

“The country needs an unconventional leadership committed to a more balanced economic order in order to raise the standard of living rather than accentuating class divides,” he added sounding like a statesman.

Published in Dawn, The Business and Finance Weekly, July 30th, 2018