SPRING is in the air for Pakistan and the PTI government. Just when things looked irredeemable, with the wheels of economy grinding to a halt due to the pandemic and no reserves to tide over bad times, there is continuous good news from unexpected quarters.
The IMF decides to disburse $1.38 billion to contain the economic impact of Covid-19; the G20 group announces postponement of debt servicing for 76 countries including Pakistan; seeing inflation decreasing because of the economic slowdown or perhaps the State Bank governor maturing in the job, the central bank announces a steep cut in interest rate by 4.25 per cent; the government declares a tax holiday for the construction industry and another amnesty for money invested in construction. The result: the dollar becomes cheaper by almost Rs4, the stock market goes through the roof and there is a perception of benefits of debt relief, resulting in all-round clapping by businessmen.
Exports are going nowhere because of internal problems and diminished demand from a world hiding from the virus. Mercifully, imports are going down too, due to declining oil price and reduced demand for machinery, etc on account of a slowing economy, thereby reducing pressure on balance of payments.
On the virus front, after the earlier bumbling in Taftan and a lack of clarity whether to take the pandemic seriously and the prime minister seemingly disagreeing with his own government’s decisions on a lockdown, the rulers seem to be settling down and taking control of things. Matters have been helped by the virus not hitting us as hard as it could have, so far. But then spring is short, followed by a gruelling summer. The government needs to take advantage of this heaven-sent respite, especially when both the political and chattering classes are somewhat distracted by Covid-19.
The government should not waste a heaven-sent respite.
On the policy side the government needs to concentrate on the following areas:
When it had discouraged quick transactions in real estate, there was a feeling it wanted to divert money from unproductive real estate to more job creation and export-oriented businesses. In going back to the real estate sector one assumes (a) the incentives are for the builders and not plot developers and (b) the government has not forgotten the importance of making investments in new industries lucrative. So it needs to also encourage industrialisation rather than only real estate because without manufacturing there will be neither any increase in exports nor decrease in imports and controlling balance of payments and job creation will remain a dream.
Secondly, the current sugar subsidy scandal is only an operational issue. The real crime is how the agriculture policy has been manipulated to encourage growing of sugar cane and production of sugar (available cheaper globally most of the year) and treating cotton as a stepchild, simply because the clout of the cotton growers is no match for that of sugar barons. From 15 million bales in 2014-15, cotton production has gone down to 8m without anyone batting an eye, despite costing the country an additional $2 billion in imports for something we are best suited to grow. On issues such as lack of research into cotton seed, or why farmers are happier growing sugar cane, the government should take firm policy decisions, keeping in view the best utilisation of national resources like water. It should prove that no lobby is able to influence it.
Thirdly, the initiative of probing undue profiteering by the power sector should be taken to its logical conclusion. This fleecing of the country due to the greed and haste of past decision makers must stop. It is unfair to stake the country’s future for the sake of a few investors, for fear they can take you to court. Trillions piled up in circular debt will never be repaid, driving the country into a deeper debt trap. The irony is that with our over-invoiced plants and pass-through fuel cost, the country ends up with the priciest electricity in the region. Surely a country of 220m is more important than a handful of investors who have already made many times more than they invested.
Fourthly, the government needs to fix the commercial banks who make billions each year without having to lend to industry — the need of the economy — simply because they have demand from a cash-strapped government which gives them a sovereign guarantee. They take no risk and make tons of money at government expense. That is unfair.
On the administrative side, in a cabinet of 49, including five advisers and 15 special assistants, one can count the visible on the fingers of one hand. Are the others not doing important enough work to be shared with the public? Why is it necessary to only see the information minister a number of times a day? All cabinet members should be required to tell the nation what they are doing, both for optics of governance and to hold them to their targets.
The writer is a former civil servant.
Published in Dawn, April 23rd, 2020