The last PML-N government had succeeded in achieving moderately high economic growth with subdued inflation and relative stability of exchange and interest rates. But the then balance of payments (BOP) position deteriorated.

Prime Minister Mian Shahbaz Sharif, while using his Twitter account for the first time as the prime minister said: “If the stock market and strengthening currency is any indication the journey towards our goals has already started.”

Seeing an end to political instability, the Pakistan Stock Exchange benchmark index recorded the highest day-on-day increase of 1,700 points last Monday. During two sessions on the same day and earlier on Friday the rupee recovered by Rs5.20 to a dollar or by 2.8 per cent. In the third session last Tuesday the local currency gained another 91paisa.

While conscious of the rough road ahead, the business community across the country expressed confidence that Prime Minister Shahbaz would be able to take the country out of the crisis by engaging the industry. Leaders of trade and industry have also almost unanimously demanded a cut in interest rates and expressed their deep concern over the free fall of the rupee.

There is no sense in allowing the rupee to depreciate recklessly and then trying to overcome its adverse impact with unaffordable subsidies, particularly on industrial inputs and foodstuff

Looking at the short-term, there is some room for doing away with excessive devaluation and linking the exchange rate to core inflation. This would save money spent on the surging rupee cost of debt servicing which has soared to an all-time record. Let exporters benefit from the hike in international commodity prices. Mr Shahbaz has also promised to address the issue of energy prices.

While approaching the International Monetary Fund for help to tide over the balance of payments problem, former PML-N financial advisor Miftah Ismail says we will try to persuade the Fund to ease the tough conditions so that the government could provide relief to the nation.

A stronger rupee and lower interest rates would help bring down the cost-push inflation rate.

There is no sense in allowing the rupee to depreciate recklessly and then trying to overcome its adverse impact with unaffordable subsidies, particularly on industrial raw materials/inputs and foodstuff. Productive industrial investment is stifled owing to volatility in the exchange rate. The solution lies in increasing savings, investment, production and exports as well as in import substitution.

The prime minister, who is reputed to be a competent administrator, has promised to make Pakistan a ‘paradise for investment.’ Just a day after assuming office he presided over a meeting attended by prominent economists to deliberate on the ways and means to find a solution for the country’s financial stability.

The proposals would be devised in line with the existing situation in consultation with stakeholders in such areas as agriculture, trade, investment and banking.

While promising to encourage investments, Prime Minister Shahbaz has increased minimum wages and pensions for civil and military personnel and urged industrialists to hike wages of those earning less than Rs100,000 per month. It is an effort to compensate the workers for the loss of wages due to double-digit inflation. He also stressed the need for comprehensive corporate policy options to overcome inflation.

“There has been zero increase in average income and Pakistan never got out of the balance of payments crisis,” Atif Mian, an internationally acclaimed Pakistani-American economist and head of the Princeton School’s Center for Public Policy and Finance Affairs wrote in a tweet. He said, “Pakistan is back in serious trouble.”

A formidable challenge for the PML-N government is to maintain unity among its allies in the first instance on a minimum two-point programme: electoral reforms and the schedule for the next elections.

Mr Shahbaz says he would consult each and every party in the parliament on developing a consensus on electoral reforms. He said the word ‘victimisation’ does not exist in his dictionary. PPP leader Syed Khursheed Shah advised the PTI parliamentarians not to resign but play the role of constructive parliamentary opposition. The prime minister also recalled that his previous call for a charter of economy went unheeded.

The PTI’s confrontationist approach may also help the opposition, with its diverse views and interests, maintain unity as it did to unite them in an alliance.

Yet another imperative for the incumbent coalition government (being formed) for maintaining unity is that none of the mainstream parties has a significant presence in all the four provinces. Ruling out any major upset in the next national polls, PML-N, PPP and PTI may emerge as the largest or majority party in Punjab, Sindh and Khyber Pakhtunkhwa if PTI’s performance in the second phase of local bodies is any indication. Baluchistan is likely to send local parties to the parliament with the influence of mainstream parties weakened in the province.

The situation demands that the representatives of all four provinces actively cooperate to evolve a common agenda to strengthen democratic and fiscal federalism. For this to happen the National Finance Commission (NFC) should further refine the formula for the distribution of horizontal resources from the NFC pool to spur regional development. Let participatory federal democracy come into full play to ensure political stability.

The vote of no-confidence is a milestone in Pakistan’s constitutional democratic journey, to make the whimsical executive subservient to a sovereign parliament.

With the constitutional powers of the legislature restored and arbitrary extra-constitution decisions of the executive declared illegal by the Supreme Court, parliamentary politics has been put on a correction course. If this trend is sustained, which looks likely, it would have a positive impact on the democratisation of the economy.

Pakistan is not an exception in trying to shake off authoritarian rule. Just a few days earlier Kuwait’s prime minister resigned ahead of a vote of no- confidence. The Sri Lankan president is facing a revolt from his supporters and allies in the parliament owing to a worsening economic crisis. They want a new prime minister. This is a trend that can further destabilise authoritarianism over time.

Published in Dawn, The Business and Finance Weekly, April 18th, 2022