KARACHI, Sept 25: After October elections, President Pervez Musharraf will share power and responsibility with the prime minister, the parliament and the provinces.

In the changed political scenario he would have to be more receptive to domestic social and economic compulsions. It may have implications for economic reforms and would restore constitutional writ for rule of law.

The creation of a domestic political constituency, thrown up by the parliament, may impact on economic policies and decision- making to make it more socially acceptable. The politicians, now in the wilderness, would find institutional strength to challenge present policies.

It may prompt a shift in the focus of economic policies and adjustments in the economic reforms in the pursuit of a stable political system based on guided democracy and consensus. The direction of the reforms is unlikely to change, yet temporary delays may occur.

Compromises on various policy issues between the parliament and the president is one option. The alternative is confrontation and its adverse impact on the economy.

The major shareholders of the IMF may not be much averse to the domestic socio-economic dictates as they have been on the eve of the elections by providing waivers. The US needs President Musharraf for its war against terror. Of course, the World Bank and other IFIs plan wide-ranging discussions with the representative government on their own agenda for reforms.

In fact, economic reforms cannot be sustained by the commitment of any individual, however powerful. The reforms need a consensus and parliamentary politics requires reconciliation.

Security concerns and conduct of foreign affairs may be conceded to the generals by the representative government but it is more likely that political economy would gain supremacy.

With the external vulnerability reduced and IMF on board, the government as a whole, would become susceptible to domestic pressures to improve environment for economic growth and poverty reduction. There would be a more pronounced self- assertion of local economic agents and that would be expressed through elected representatives, particularly, the prime minister.

Industrial and agricultural lobbies may have a greater say in formulating policies. It would not mean the return of crony capitalism, weakened by economic liberalization. The changed environment would mean less avenues for political patronage and less opportunities for corruption. With major banks privatized, the government interventions at micro-level would be not as widespread as in the past. Corporates are expected to raise funds from the capital market for project-financing. The creation of quasi-judicial regulatory bodies would also make things difficult for the government to oblige the rentier class.

Yet the key issue of poverty reduction and unemployment would persist as the process of social exclusion is being reinforced. Neither the political parties nor the present government have a vision beyond trickle down effect of economic growth for the benefit of the poor. The poverty reduction programme operates on the margin and not in the mainstream economic activity. All that political pressure may work for, is to reduce or delay redundancies in public sector organizations.

If the president and the parliament work in harmony, there is bound to be adjustments in economic and fiscal policies. Both the development spending and current budget would have to be raised at least to the level of, say, around 5 per cent of the GDP that may be sustainable for 2-3 years.

And if the parliament and the president fail to make compromises, the set-up would be put to a strenuous test. National social and economic dictates are far more difficult to contain under constitutional rule. That is one reason why IMF programmes were not implemented in full by representative governments during the 1990s. Their task was also made difficult by multi-layer economic sanctions by the US and Europe which now stand withdrawn.

European diplomats have recently indicated that foreign investors may have a fresh look once the elected government assumes office after the October elections. Investors feel more comfortable in dealing with democracies.

As an emerging market, Pakistan has economic stakes in democracy and pluralism. Economic liberalism needs freedom and democracy to perform better.

Corporate governance becomes difficult with weak legal systems. If commercial contracts are not honoured or if the law and order situation is bad, it impacts on investment adversely. The move to annul sovereign guarantees, for example, given to Hubco, reduced the inflow of foreign investment.

Once the writ of the Constitution, the basic law, is restored, it would reinforce the legal framework for the rule of law and for enforcement of commercial contracts.

Often it appears that some economic progress has been made under military dictatorship but the economic development is not socially sustainable. The lack of consensus on basic constitutional issues gives rise to confrontation and political instability and economic progress suffers.

Instead of confronting the political parties, the military should support a constitutional dispensation of the choice of the representative of the people, to ensure social progress.

If the guided democracy of the current government fails, it would mean a political crisis and yet another setback to economic progress.