PPP or PML-N?

There’s a severe balance of payment crisis; the SBP is running out of dollars. As a consequence, international investor sentiment is negative. Fiscal indiscipline – the difference between government revenue and expenses – is as bad as it can get. As a consequence, domestic investor sentiment is also negative. GDP growth is pathetic and so is tax collection. Inflation is high and there is no job creation. The post-election economic policy environment will have three overriding vectors: the IMF, coalition politics and the PPP’s hold over the Senate. There are three post-election scenarios: a single party gaining a two-third majority (226 seats); a single party gaining a simple majority (172 seats); or a coalition government. The most probable of the three scenarios is a coalition government led either by the PPP or the PML-N.
A PPP-led coalition government will have no option but to sign on the IMF’s dotted line. A $5 billion to $7 billion IMF bailout package will turn international investor sentiment from negative to positive. On the domestic front, investor sentiment will turn from negative to even more negative. GDP growth will remain pathetic and so will the tax collection.
A PML-N led coalition government may resist but will have no option other than the IMF. A $5 billion to $7 billion IMF bailout package will turn international investor sentiment from negative to positive. On the domestic front, the PML-N is perceived to be an ‘investor friendly’ political entity and that will rekindle domestic investor sentiment from negative to positive. And that will provide a boost to GDP growth along with a hike in tax collection.
Yet another post-election permutation could be a PPP-PML-N coalition government. Whether it’s a PPP-led coalition or a PML-N-led coalition, the IMF means three things: a lower rupee, higher rates of interest and a lower budgetary deficit. A lower rupee could mean higher exports and a tight monetary policy means lower inflation. Coalition politics, whether it’s a PPP-led coalition or a PML-N-led coalition, means no radical reforms – neither taxation reforms nor expenditure reforms. In the energy sector, under the PPP-led coalition things have gone from bad to worse. In the state owned enterprise sector, under the PPP-led coalition things have gone from bad to worse.
Under a future PML-N led coalition government the energy sector remains a wild card. But if the PML-N is able to make just a marginal dent, a 10 percent to 15 percent improvement, they’ll win both hearts and minds. And that would mean additional productive capacity, lower inflation, higher tax collection and a lower deficit.
To be certain, elements of national success are known both to the PPP and the PML-N. They are: an educated labour force, domestic savings and a fiscally responsible government that ensures competition. To be sure, the prerequisites to GDP growth are also known both to the PPP and the PML-N. They are: low inflation, fiscal discipline (read: a balanced budget) and a stable current account (read: export-import gap). Knowledge, will and vision are the three things that can turn Pakistan around. The PPP and the PML-N both have the knowledge and the vision. The only thing that is missing is the will.
The writer is a columnist based in Islamabad. Email: farrukh15@hotmail.com. Twitter: @saleemfarrukh