Both steps have been sharply criticized by the so-called guardians of reforms. Not surprisingly the IMF saw the initiation of these moves as a potential threat to its agenda of reforms to which the previous administrators/policymakers had spinelessly agreed.
In particular reference to the power sector, the IMF officials have launched a hectic move to warn the present regime of the possible consequences that may arise in a situation of non-conformance with the laid down conditionalities.
The seriousness rose to such a level that a top regional functionary of the IMF decided to meet the Prime Minister to personally brief him about the entire situation. During the ongoing briefings and consultations, the representative was able to sufficiently warn the Cabinet members about the fallout in case ‘populist policies’ were developed, negating the reform framework.
Needless to say that the premier financial and monetary institutions of the country are already converted to the reform agenda. The State Bank was toeing the same line. Its management which was already baptized to the reforms package, had earlier signalled to the ascending regime about the dire outcomes if any trace of reform agenda was even considered for the slightest of modifications.
On more than one occasion, the hawks on the reforms package had warned the regime to keep religiously following the prescribed procedures of managing the economy or face the music. While the focused and detailed analysis of the policies and reform package remain the domain of experts in macroeconomics, commonly prevailing outcomes need to be reviewed in the backdrop of realities surrounding them.
The application of reforms has brought about many changes that are directly related to the various strata of the society, particularly lower income groups.
Privatization of utilities, enterprises, service delivery organizations, financial institutions and strategic assets; swift reduction and eventual removal of public subsidy even from the most important social sectors such as health and education; down-sizing the staff strengths and effecting massive layoffs under various schemes from government, semi-government and autonomous organizations; drastic reduction in the rate of return of the various savings schemes prescribed by the banks and national savings schemes and the fast escalating rates of indirect taxes on goods and services are few highly visible outcomes of reforms.
All the false hopes and mirages of these reforms that are unabatedly pursued by the government functionaries, have failed to provide reasonable answers to various pressing issues.
As any smart lender, the international financial institutions have made privatization a key component of reforms. However the approach of privatization is applied in a ruthless manner without any logical basis.
In a rationally-drawn framework for decision-making, privatization may be applied as a strategy to meet any national socio-economic targets. Need for essential capital reserves, re-vitalization of sick units, enhancing the efficiency by changing the management or outsourcing such components of an enterprise which can potentially perform better in private hands can be possible reasons for adopting privatization as a strategy option.
In our case the focus is entirely skewed. Privatization means a nascent sell-out in favour of the highest bidder who agrees to pay the price swiftly. The future nature and scope of operation of the said enterprise would not bother the government.
The donors concerned are obviously happy as this situation ensures a smooth pay-back of the big time loans that the succeeding regimes have accumulated. Benefit to the society, price of service or strategic importance does not matter in the final decision.
Whether people lose jobs as an outcome or the price of the services or products rise are issues of no consideration.
Various studies done by the government departments and the independent organizations depict a dismal picture of social and economic sectors’ performance. For instance, the national literacy rate is 36 per cent, access to piped water supply is 18 per cent and sanitation is 10 per cent. In majority of the regions, these and many other socio-economic indicators are moving from bad to worse.
There are already areas where spending and public sector input is negligible. However, the government has decided to swiftly withdraw most of the meagre subsidies. This shall eventually mean that basic education would become expensive and finally unaffordable at least for the lower income group.
It also entails that a sizable cross-section of the population shall be forced to drop the idea of educating their children. Thus the spiral of illiteracy will inflate, giving rise to crimes, violence and unrest in the society. Similarly, ongoing reduction of subsidy in health sector shall hit the lower stratum of the society in the worst manner due to their already limited options.
One can well imagine the performance of a society which is incapable of extending even basic health care to its citizens.
Developed countries traditionally adopt hi-tech options for productions in the prevailing times. One reason for this choice is the scarcity of labour and its high cost.
However, the developed countries have reached to this option after resorting to labour intensive approaches in their history when there was abundant labour to be adequately employed.
There were such situations where these countries created conditions that led to increase in job opportunities in their respective societies, even not hesitating to complete with other nations or subjugating their controlled colonies.
Even today, the US is resorting to the same approach by taking a war-path to enhance resources and employment opportunities for its citizens. Contrarily, our regimes have agreed to lay off staff in situations where options of basic livelihood are bare minimum and where even basic survival is the most pressing question in consideration.
Mindlessly following the dictates of the donors and emulating the West, our policymakers are curtailing employment options in the name of ‘right sizing’.
Obviously in a context where options of employment and attaining basic livelihood are extremely limited, one fails to understand the logic behind this approach.
The rate of return has been drastically cut on the saving schemes and common purpose investment options. While the champions of macroeconomic reforms have reasons best known to them, this single move has hit the common white-collar men in the worst manner. This move would drastically reduce the possibility of domestic capital formation.
Small and medium scale depositors are the worst hit. Widows, disabled persons, retired government/private workers are at a tremendous loss. Even the piecemeal relief recently granted to pensioners on savings scheme may not prove enough to make their ends meet!
On the other hand, lower mark-up rate has hampered in the expansion of equity based business operations. Such businessmen, instead of collaborating with each other to raise capital for a business, now find extensive borrowing as a better option to obtain cheap capital from banks and DFIs. With the present pseudo-political government in the office, low income rates shall also serve as attractive for cronies of the regime to access huge purposeless loans as was done in the past.
Another outcome that the people have to deal with is the high rate of indirect taxes. Cost of certain essential commodities such as petroleum and power are several folds lower than their selling prices. At one end this increases the cost of living, while on the other, it raises the cost of input putting severe burden on the expansion of trade and industry. Even a marginal relief is snubbed down by the IFIs tooth and nail.
If the reformers and their faithful agents are allowed to continue to follow the prescriptions, the down-end of the society will continue to erode swiftly. Fundamental challenges lie ahead of the new regime to assert itself. If the regime wishes to be considered as a democratic institution, it must take full cognizance of the issues that have emanated due to the enforcement of the so-called reforms. No macro economic stability can sustain if the broad segment of the population is persecuted by the fallout of its ill-conceived actions. The regime must address the issues realistically in a bid to devise people friendly policies that ensure basic and uniform benefits to the masses.
No matter how stringent the dictates of the IFIs are, the regime needs to draw a line to safeguard the basic survival of its people. If we continue following the prescriptions spinelessly, the real prosperity will never emerge. For it is the level of benefit and scale of satisfaction to the common people that should reign supreme. After all this country was not founded by and for the vested interests of the donor agencies.