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PTI’s solo flight

Updated January 14, 2019

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THE PTI-run Federal, Punjab and Khyber Pakhtunkhwa governments decided on Jan 4 to jointly provide equivalent to three per cent of the federal divisible pool for uplifting the erstwhile Fata region following its merger with KP.

The decision is stated to have been prompted by the delay in formation of the National Finance Commission (NFC) and expected reluctance by Sindh and Balochistan to tinker with the 7th NFC award. When Fata was a federal territory, provinces had opposed diversion of funds from the NFC’s divisible pool to finance the region’s development needs.

Stipulated to be enforced from the next financial year, the decision is projected to raise Rs108 billion, including Punjab’s contribution of Rs38.3bn The ad-hoc decision indicates that it will be tough for the PTI government to forge a consensus for the next NFC award.

Since the PTI has come into power, the Sindh government has been criticising some of the federal government’s proposals for exceeding the constitutional limits.

On Jan 5, Sindh Chief Minister Murad Ali Shah told the prime minister’s Special Assistant on Power Shahzad Qasim, who called on him in Karachi, that the decision of the Federal Cabinet Committee on Energy to reduce the life of solar and wind projects from 20 to 15 years was illegal and unconstitutional. He pointed out that the Council of Common Interests was the only constitutional forum to decide electricity policy issues and sought withdrawal of the decision.

In this age of networking, unilateral and arbitrary actions can deliver, at best, only partially

During the same week, the Senate Standing Committee on Planning, Development and Reforms demanded that Rs9bn donations collected for two mega-dams be diverted for building small and medium ones for water-starved Balochistan to support agriculture and livestock development and create job opportunities in the province.

The panel felt the collected amount was meagre, considering the cost of the Diamer-Bhasha dam was estimated at Rs1 trillion and Mohmand dam at Rs300bn. With the same amount, the committee estimated that the number of dams planned for Balochistan could be increased from 100 to 500.

Unlike big dams for which foreign loans are required, the Rs9bn could best be invested in the province to bring virgin lands under plough and boost output of fruits and meat for exports.

The building of the mega-dams has also been opposed by Sindh where the provincial government has announced its intention to set up two desalination plants for Karachi, owing to water scarcity, both for household use and irrigation purposes. Sindh wants a policy shift to modern methods of water conservation including increased usage of drip and sprinkler systems.

Even within the ranks of the PTI and its coalition partners, there seems to be no consensus on the party’s heavy agenda.

The PML-Q , an important coalition partner, shares views with PML-N on the creation of Bahawalpur province and the party does not subscribe to the creation of South Punjab as envisaged by PTI.

Finally, the PTI’s recent perceived move to impose governor rule in Sindh and destabilise Chief Minister Murad Ali Shah’s government was not supported by coalition partner MQM-P and fellow traveller Sindh Democratic Alliance leader Pir Saheb Pagara. PTI has failed to recognise the sway of participatory federal democracy over the country’s politics after the 18th Constitutional Amendment.

A second mini-budget within a short span of time, due later this month, reflects PTI’s ad hoc-ism that is not a part of an implementable long-term plan

To quote Fitch,’political headwinds are growing in Pakistan’ which, it may be added, requires consensus building for resolving agitating problems so far defying solutions. A second mini-budget within a short span of time, due later this month, reflects PTI’s ad hoc-ism that is not a part of an implementable long-term plan.

Official data bears this out. During July-December 2018, the net dollar reserves of the State Bank have fallen from $10.2bn to $7.3bn and those held by commercial banks are stagnant at around $6.5bn.

Simultaneously, budgetary borrowings have soared by 86pc to Rs722bn owing to a shortfall of Rs112bn in targeted federal tax revenue and surge in non-development spending. Though the trade gap is reducing, the increase in exports and home remittances are not fast enough to plug the hole in external sector accounts to a comfortable level anytime soon. There is little prospect for an export rebound, says an international research agency.

As it is, Prime Minister Imran Khan has taken over the reins of the government in difficult times. He has to grapple with enormous domestic and external challenges.

No doubt the PTI manifesto promises the nation wide ranging, virtuous reforms, but for that to happen, economic agents, bureaucracy, sub-federating units, district governments and farmers have to be energised with widest political and civil society support.

The entire nation needs to be mobilised on a practical common agenda and a coherent strategy for resolving deep-seated problems facing the country. In this age of networking, unilateral and arbitrary actions can deliver, at best, only partially.

Mr Khan has succeeded in securing financial support from Saudi Arabia ($6.2bn), UAE ( expected $6.2bn) and trade financing ($1.5bn) from the International Islamic Trade Finance Corporation amounting to $13.9bn. Another $2bn has been pledged by China raising the total expected borrowings to $15.9bn in six months.

But the festering problem still remains: there is no significant boost in foreign exchange earnings insight to service ballooning external debts. External sector pressures are not expected to go away.

And business confidence is sinking in a rudderless economy despite Mr Khan’s pledge to provide an enabling environment for wealth creation.

jawaidbokhari2016@gmail.com

Published in Dawn, The Business and Finance Weekly, January 14th, 2019