111 510 510 libonline@riphah.edu.pk Contact

Seizing the moment

It’s been almost a month since Nawaz Sharif took oath and we’re still waiting. The first big opportunity for the new government to demonstrate its tough new approach was the budget, and by most accounts that opportunity has been fumbled.

The government raised expectations that it has big energetic plans ready to be unveiled when they went public from high party offices saying there will not be an approach to the IMF for at least three to six months. This was stated by none other than Sartaj Aziz himself, adviser to the prime minister and former finance minister.

The venerable Mr Aziz had a nice take on how this would be accomplished. “First get our own plan implemented, raise revenues, narrow the deficit, then go to the Fund with a dynamic situation rather than a static one,” he said. Now that the government has comprehensively climbed down from the position, they’ve gone ahead and climbed up another tree: no new taxes.

The finance minister is right to emphasise that he will negotiate with the Fund on his own terms, but one wonders whether he’s really gone into these meetings prepared with an economic road map. Coming up with one is typically a long exercise requiring input from dozens of qualified economists. If we can’t take a “dynamic situation” to them, can we at least know what sort of letter of intent the government has carried to the parleys?

Absent such a policy statement — and many of us were thinking the budget was going to be this statement — it’s hard to see what our terms really are in these negotiations, except that there will be “no new taxes”.

Frankly speaking, most taxpayers I’ve spoken to don’t fear taxes as much as they fear the taxman. And here they’ve found little to be relieved about. The incremental powers handed to the tax bureaucracy are stupendous — they can paw through bank account details for example — but nothing stupendous has been done to reform tax administration or to remove discretionary powers of issuing SROs.

So is another climbdown in the works? Might the government have to eat a few more of its words before the fiscal year ends?

The key words for the IMF are: “prior actions”. It’s possible that for a while to come these words will prick the new government the same way two other famous words pricked their predecessors: “do more”.

Prior actions means that the IMF will ask for some conditions to be met before any funds are disbursed. Thus far in its various pronouncements, the Fund has stood by this position. Many in Pakistan have sought comfort in the thought that the IMF does Washington’s bidding, and as in the past, this government will also get its conditionality softened by offering other forms of support to the US government.

It may not work this time. Wiser counsel in D.C. frowns on such thoughts, and patience with Pakistan parading its problems before the entire world is thin today, compared to 2008.

Besides, relying on such forms of comfort would be a colossal failure of the PML-N’s own election promise to do whatever is necessary to wean Pakistan off its addiction to foreign-funded bailouts.

Which brings us back to the fast-eroding honeymoon period that the government is currently enjoying. This moment will not last much longer. Soon the commentary in the media will get increasingly critical, and the fatal moment when people ask aloud “what is the difference between this government and the last” may not be that far off.

For the PPP government, that moment came somewhere around August when Naveed Qamar managed to persuade his cabinet colleagues that it had become necessary to pass the international price of oil to the consumer at the pump.

In one fell swoop, as prices hiked, the inevitable words poured forth and it was said all over the channels that this government was turning out to be exactly the same as the previous one.

This government must do everything it can to avoid running into that cul-de-sac. This is the moment to act and failure to seize the opportunity will see the initiative pass to the opposition, which is waiting for its own ‘I told you so’ moment.

They can start by expediting the announcement of the new energy policy. It’s good that they are talking and thinking on a large scale, and it’s good that below the radar, in the meetings of the Economic Coordination Committee (ECC), some crucial decisions have been taken, such as diverting 60 mmcfd of unused gas from the Guddu thermal power stations’ supply to the fertiliser network gasping for its vital feedstock. This proposal has sat in limbo for around a year now and movement on it is a good sign.

It’s also good that the same ECC has decided to import 300,000 tonnes of urea, sending a signal to the fertiliser companies that the days of subsidised gas are running out. Minister Water and Power Khwaja Asif spoke of the “bloated balance sheets” of these companies in an interview he gave to me a few days ago.

So below the radar, some movement is definitely taking place, and decisions long stuck are being cleared. But at the top there appears to be stasis. The impression one gets is of a great deal of energy bottled up at the cabinet level, unable to find its way out because the valve at the top is shut.

Khurram Husain, "Seizing the moment," Dawn. 2013-07-04.
Keywords: Economics , Economic relations , Economic issues , Government-United States , Policy making , Government-Pakistan , Taxpayers , Bureaucracy , Taxes , Naveed Qamar , PM Nawaz Sharif , Sartaj Aziz , Khwaja Asif , Washington , Pakistan , United States , IMF , PPP , ECC