In a recent exclusive interview to Business Recorder the Advisor to the Prime Minister on Finance denied that there was any interaction with the Opposition on economic policy matters. He added that while he shared economic policies with the Cabinet yet there are no such consultations with members of the Opposition.
These are rather disquieting statements of fact that must be taken cognisance of on an emergency basis. While it is the prerogative of the government to formulate economic policies - with their positive or negative fallout falling squarely and unequivocally on the shoulders of the ruling party - yet one would have hoped that given the deep economic malaise that besets us today the two major parties would have developed a consensus on the way forward as far as the economy is concerned.
Skeptics, however, argue differently. Pakistani governments, they point out, irrespective of military or civilian, Pakistan Peoples Party or indeed Pakistan Muslim League, have all relied on three interrelated elements that have formed the crux of their economic policies and seen their budgets passed by parliament - rubber stamp or not.
First and foremost foreign assistance has invariably been a major revenue source for our governments. The amount of assistance has varied and been a function of external factors linked to the changing perception of the international community about Pakistan's geopolitical importance - an importance that during the last three decades at least appears to be inextricably linked to events in Afghanistan.
Thus the Russian invasion of Afghanistan led to considerable US financial assistance to Ziaul Haq's regime; just as 9/11 or the American invasion of Afghanistan was the critical factor in America loosening its purse strings for Musharraf.
Ironically both these dictators were initially shunned by the international community for their lack of democratic credentials. At the same time our governments have remained blithely indifferent to the rising amount of budgetary allocation for debt payments as well as payment of principle which, in turn, has led to a smaller and smaller pie for other expenditures, including development expenditure.
Second, with respect to budgetary expenditure, actual allocations for different sectors have not varied greatly in percentage terms thereby reflecting a rather disturbing fact: the economic priorities of governments led by the military or by civilians have, by and large, remained the same.
The fact that defence continues to account for a major chunk of our annual budgetary expenditure, and that no government - civilian or military - has had the temerity to slash it reflects a mind set that has remained consistent throughout Pakistan's history and is not specific to the war on terror.
Failure to make a major change in expenditure targeted for development and non-development expenditure, the domain of the political government, may at best reflect resource constraints that our successive governments have failed to tackle, inclusive of their failure to tax the sacred cows, like the real estate sector, the rich landlords and the stock exchanges; and, at worst, reflect a laziness to challenge what is clearly acceptable by all as reflected by past budget debates.
It is little wonder, therefore, that even though the manifestoes of the major political parties do vary yet they invariably focus on ideal targets rather than specifics, for example, on achieving 100 percent literacy and not how much would have to be allocated each year for different sub-sectors in education that would achieve such an ambitious target.
There are of course some minor differences. Nawaz Sharif's sojourn in the Prime Minister's house was marked by heavy outlay on the road sector; however this trend appears to be continuing as the National Highway Authority is not only the largest recipient of foreign assistance today but is also targeted to be the major beneficiary amongst all sectors as regards identified projects by the Planning Ministry - projects that were presented in the Friends of Pakistan forum in Dubai late last year. This is considered unfortunate by the public struggling with the severe energy crisis.
Another traditional difference between the PPP and the PML (N) has been in terms of labour policy. The PPP has been known to be more labour friendly relative to its major political rival, the PML (N). This accounts for its reluctance to privatise, especially after a labour union announces a protest march against a decision to privatise a unit; as well as the recent decision of the Cabinet to reinstate all those sacked by the Nawaz Sharif government in the name of right sizing.
Third, heavy reliance on foreign assistance is invariably accompanied by a set of stringent loan conditions that are standard normal for International Financial Institutions (IFI) and include cost recovery as far as pricing utilities are concerned (an inherently anti-poor policy as it seeks to end subsidies), and liberalising the import regime (that may lead to burgeoning trade deficits).
Negotiating the size of the loan has been the overriding focus of our governments and not negotiating the terms of these loans. Loan conditions have, however, not always been met but reneging on conditions has not been based on improvements in the national economic indicators or indeed on a perception that the conditions are particularly harsh and not doable; but as a consequence of street protests.
The question then is: would a Nawaz Sharif government have done anything differently in the economic arena in 2008 and 2009? There is little doubt that the country would have gone on the International Monetary Fund programme as it is doubtful if the PML (N), like the PPP, would have been able to generate any money from bilateral sources. However the energy crisis, so insist the PML (N) stalwarts, would not have been as acute because the issue of the circular debt, that accounted for around 40 percent of loadshedding, would have been dealt with much sooner.
It is relevant to point out in this context that the PPP led government is at the stage of identifying ways and means to deal with this issue two months after eliminating circular debt was accepted as a condition of the IMF loan in the Letter of Intent submitted by our government to the Fund.
It is also thought likely that a PML (N) budget would have imposed a tax on the stock exchanges. It will be recalled that Ishaq Dar, as Finance Minister during the heady days when PPP and PML (N) were still in a coalition at the Centre, was proposing to tax this sector and a delegation at the time visited the then single portfolio holder, Co-Chairman of the PPP Asif Zardari, who decided to grant exemption for two years to this sector.
The PML (N) further claims that they would have taxed the income of the rich landlords, however their inability to do so when they formed the government in the past reflects this: maybe political chatter; but the PML (N) may have imposed a tax on the real estate sector. More tax revenue, therefore, would have been generated under a PML (N) government. But whether it would have been adequate to increase tax to GDP ratio significantly enough to enable us to move towards lower deficits is debatable.
It is also a foregone conclusion that privatisation would have gathered momentum under a Nawaz Sharif government and there too revenue would have increased putting less pressure on reducing the budget deficit through ways identified in the Letter of Intent, like withdrawal of subsidies that are anti-poor.
With respect to expenditure allocations it is unlikely that PML (N) would have allocated any differently. In spite of this consensus of sorts it is to be hoped that the two major parties are represented in the experts' panel that advises the government. At the present stage of our economic history a consensus approach is pivotal to ease the suffering of the people.
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