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Manifestoes, subsidies instead of reforms

Media personnel were way more insistent on manifestoes from the three national parties in the run up to the 8 February elections than the general public – a demand met with the Pakistan Muslim League-Nawaz (PML-N) formally releasing the document on 27 January, Pakistan People’s Party Parliamentarians (PPPP) on 28 January and Pakistan Tehreek-e-Insaf (PTI) on 29 January.

The first page of the three national parties’ manifesto documents emphasized what is the pervasive consensus in this country: the party leader (barring electables) is the only magnet for voters. This view was strengthened by a slogan designed to conjure up the image of the party leader along with his photograph for the large number of voters unable/unwilling to read the manifesto or to whom past performance/pledges (diehard supporters) meant little. The option of uploading the photograph of Pakistan Tehreek-e-Insaf leader (PTI) founder was not possible as the party is currently represented by a titular head for legal reasons.

The PML-N slogan was “Bequeath Pakistan With A True Manifesto” (the use of the word Nawaz for bequeath not a very subtle use of the party leader’s first name), the PPPP’s slogan Choose/Select New Thinking emphasized Bilawal Bhutto’s youth and his first time bid for the position of the prime minister and the PTI pledged Medina ki riyasat (Medina’s administration).

One would have assumed that economics would have been the centerfold/slogan of the manifestoes of the three major national parties, given the following disturbing government data: (i) poverty is at a high of 40 percent as per a recent World Bank report – the same rate is cited for Burkina Faso; (ii) seven-month average consumer price index (July 2023 to January 2024) of 28.73 percent – higher by 3.33 percentage points against the same period in 2022 –a rise in spite of a staff level agreement (SLA) reached on the Stand By Arrangement (SBA) with the International Monetary Fund (IMF) on 29 June 2023, which effectively restored the suspended multilateral and bilateral assistance (suspended from November 2022 till the SLA on the SBA); (iii) large-scale manufacturing growth registered negative 0.80 percent growth in July-November 2023 against negative 2.33 percent in the same period of last year though the Finance Division in its December and January Outlook and Update insisted that there were “positive trends in high-frequency indicators,” – indicators that to the general public are as high frequency as the 50 kilohertz range that humans cannot hear; and (iv) while unemployment statistics are not accurate due to the lack of structured labour exchanges in the country yet industry closures due to ever-rising cost of inputs and dampened demand due to high inflation are constant laments by the industrial sector and labour unions.

Pakistan is currently on its twenty fourth IMF programme (the norm being three years per programme that would roughly account for 72 years out of the country’s 77 years of existence). IMF standard conditions have been meticulously, though selectively, adhered to as long as the money was desperately required for balance of payment support as at present: meticulous adherence reflected by administrative measures inclusive of passing on the utility sectoral inefficiencies onto the general public through ever-rising tariffs and sustained reliance for a rise in revenue generation on indirect taxes whose incidence is greater on the poor than the rich. Structural reforms were and continue to be ignored as they are deemed to upset the applecart, the applecart driven by the elite supported by statutory regulatory orders/export incentives, etc.

Subsidy as a means to stave off street protests by providing relief to the common man has never ever been endorsed by multilateral lenders on the grounds that they create market imperfections/imbalance impacting negatively on output; and untargeted subsidies even less so. If past precedence is anything to go by all governments, civilian/military/hybrid, have favoured subsidies, mostly untargeted subsidies on essential kitchen items (wheat, sugar), or issuing subsidized credit through the banking sector (schemes which have largely fallen by the wayside due to the applicants’ lack of collateral or else hijacked by the rich) or issuing cards to a specific group (farmers, youth, etc.), or cross subsidies whose impact is akin to indirect taxes, with their onus more on the lower income levels relative to the rich.

The following table shows subsidies (budgeted and revised) for the past five years:

As revealed in the table during an ongoing IMF programme subsidies are contained in the budget while the revised figures reveal the extent of the containment. Be that as it may, there has been a steady rise in the budgeted allocation for subsidies as a percentage of total expenditure, a fact that reflects escalating domestic political competition between the three national parties in an election year and perhaps less so due to rising poverty levels. The rise in inflation continues to this day due to flawed government policies, particularly the massive sustained rise in government borrowing to fund current expenditure, and only partly due to external factors – climate change, the ongoing conflict in Russia-Ukraine and the widening conflict due to the Israeli-Gaza war.

However, disturbingly, the following table reveals that a major share of subsidies is for the power sector and within that sector for tariff differential in Wapda/Pepco and the privatized K-Electric. In other words, the taxpayers have been funding a long-standing government policy spanning all administrations, barring none, to equalize tariffs throughout the country irrespective of major differences between distribution companies’ performance or the flawed decision to locate a coal-based generation company away from the source of coal, or whether a distribution company is privatised (K-Electric).

To conclude, political competition has and continues to give rise to pledges of increasing subsidies for example the PPPP’s pledge to provide free electricity to those consuming less than 300 units (a subsidy incidentally that would also apply to the rich spending their summer vacations abroad) and PML-N’s pledge to reduce electricity rates, at the taxpayers’ expense, instead of implementing structural reforms that would challenge the existing elite capture. That must needs change and on an emergent basis.

Anjum Ibrahim, "Manifestoes, subsidies instead of reforms," Business recorder. 2024-02-05.
Keywords: Political sciences , Economics , Media personnel , National parties , Government data , World Bank , Finance Division , Monetary fund , Government policy , Russia , Ukraine , Pakistan , PML-N , PTI , PPP , IMF

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