THE absence of a decision-making centre in Pakistan’s economic management is now being felt acutely. A string of news emerging in the past week or so illustrates this perfectly.
The finance team tried to hike gas tariffs to meet an IMF requirement and found itself mired in a court case in Sindh, as well as a dispute on the magnitude of the hike as measured by the Pakistan Bureau of Statistics versus the energy ministry.
The former reported that people are seeing a tariff hike of around 1,100 per cent in their latest bills, whereas the former insists this figure should not be more than 100pc. This may sound like a minor, bureaucratic quibble, but it has important ramifications for the reported inflation out-turn, and hence any monetary policy decisions, among other things.
Earlier, another policy exercise turned into a dispute and escalated into threats of a strike, when the finance ministry tried to bring about a deep-rooted change in the structure of the FBR. The idea was to separate the Internal Revenue Service from the Customs unit, a change long advocated in tax administration reforms, and long resisted by the tax bureaucracy. It is a little puzzling why the finance ministry sought this measure at this point in time.
But in any case, once the matter was pressed, it took the shape of a conflict between the finance ministry and the FBR, with officials from the latter threatening a strike if pressed further.
In yet another example, the finance ministry approached the provinces with a plan for sharing the burden of a few expenditure heads. The plan basically saw spending for the Benazir Income Support Programme (BISP) and the Higher Education Commission (HEC), along with one or two other minor heads, being devolved down to the provinces.
By some estimates provided by people in the provincial governments, the plan might have pared something like Rs400 billion from federal government spending and passed these off to the provinces instead.
Real leadership in any organisation is about removing orphaned disputes from the system.
Not surprisingly, the plan met with instant opposition from the provincial governments, who pointed out that the caretaker government lacked the authority to undertake this expenditure devolution. Article 230 of the Elections Act, 2017, was amended in July to grant additional powers to caretaker governments, but even those additional powers did not empower them to undertake the kind of devolution of expenditures they were seeking, according to the reply they received from the provincial authorities.
The amendment empowered caretaker governments to “take actions of decisions regarding existing bilateral or multilateral agreements or the projects already initiated under the Public Private Partnership Authority Act, 2017… the Inter-governmental Commercial Transactions Act 2022 and the Privatisation Commission Ordinance, 2000”.
It was pointed out to the federal authorities that BISP and HEC fall under neither of the aforementioned acts, and are governed by their own acts of parliament which will need to be amended for their expenditure burden to be shifted from federal to provincial governments. That response effectively stalled the plan until some authority could break the dispute.
In all cases, the finance ministry’s response was to take the matter under dispute to the Special Investment Facilitation Council (SIFC), arguing that it had the authority to compel compliance from the other party. The latter may yet have the legal authority, although this is not yet clear, but it certainly does not have the political wherewithal that will be required to broker a productive settlement on any of these fronts.
Under normal circumstances, matters such as these would routinely be resolved within the normal functioning of the federation. Forums such as the Council of Common Interests (CCI), the National Finance Commission and the federal cabinet could provide the decision-making centre where these matters could be coordinated, discussed and resolved.
But currently, there are no functioning decision-making centres and many matters requiring coordination between centre and province, government and autonomous body, are turning into a dispute which either stalls, or lands at the doorstep of the SIFC, which is not equipped to replace the federation as a decision-making body in such affairs.
This state of indeterminacy will continue producing orphaned disputes of this sort. Orphaned disputes can be thought of as disputes that arise in the discharge of routine government functions that nobody in the set-up has authority or interest in owning and resolving.
Real leadership in any organisation is about removing orphaned disputes from the system. The fewer of them there are, the more smoothly the organisation will be able to function and discharge its routine tasks.
The more orphaned disputes pile up within an organisation, or an amalgamation of organisations like the federation, the more dysfunctional it steadily becomes. As this process unfolds, the objectives towards which policy action is aimed become harder and harder to fulfil.
At the moment, for example, the federation’s policy action is aimed at the simple objective of maintaining a fiscal balance, for which they need continuing expenditure restraint and an aggressive revenue effort. In both areas, their efforts are snagging due to orphaned disputes, that are in turn landing at the doorstep of the SIFC for guidance, coordination and action. And the council will not be able to substitute for a functioning government in order to advance these disputes.
As policy action grinds down under the accumulating weight of these orphaned disputes, the temptation mounts within the system to tackle the problem with a strong hand.
That is the danger here. The longer this state of affairs is allowed to persist, the more the council is dragged into the routine functions of government, the more the situation creates the impression that only a tough guiding hand can manage the road ahead.
This is why it is imperative to hand over executive powers to a functional government, with a credible mandate that is accepted by as many political players as possible within the polarised limits of our time.
The writer is a business and economy journalist.
Published in Dawn, January 18th, 2024
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