In what he would probably term a scathing attack on donors for their failure to support Pakistan's 20 million flood victims, Federal Finance Minister Dr Hafeez Sheikh stated that "there are some countries that do not want to bail out Pakistan and...are using the pretext of transparency."
At the same time, the Minister of State for Economic Affairs Hina Rabbani Khar stated in the Senate that those advising the government to reverse the recent hike in price of petroleum products must come up with plans to bridge the resource gap; and sanctimoniously stated, "let's talk something which makes sense."
These two statements have been made by two individuals, who are in sole charge of our economic affairs; it bears reminding that these two also held portfolios during Musharraf's eight-year period of dictatorship. While there is a consensus that the two are not known for having strong political principles, yet some argue that their area of expertise is not politics but economics. The question is: have they exhibited economic integrity? Or in other words do the above two statements reflect the truth and provide an adequate defence of an economically viable strategy. Unfortunately, however, the response to both questions is in the negative.
It is a matter of great concern that Dr Hafeez Sheikh's accusation fails to take note of three pertinent facts that no doubt he is fully cognisant of. First and foremost, it is the United States, the single largest donor of grant assistance to this country for the next five years that has led the chorus of lack of transparency in Pakistan. This has accounted for the US government's decision to set up its own monitoring mechanism to ensure that the US taxpayers' money does not find its way into the pockets of those who are complicit in flouting the public procurement rules. In this context, it is relevant to note that third party audit on the rental power projects concluded that the procurement rules were violated as do many reports in the ongoing award of post-flood reconstruction contracts.
The number of cases in which the Supreme Court is being compelled to take suo motu notice is rising each month, which is a matter of public record. The cases include multi-billion dollar corruption scams (National Insurance Company/Pakistan Steel Mills to name just two) and/or appointing patently unqualified people to head the state institutions' (former chairman of OGDC). Requests by the court to initiate an inquiry against the accused has been marked by summary transfers of investigating officials, who have shown a willingness to carry out a transparent inquiry to allowing some of the main accused to escape the country.
In such an environment, no other excuse by the bilaterals is required. Dr Sheikh stated during the press conference that the government has constituted an oversight committee comprising 15 reputable personalities, who will be able to check anything pertaining to utilisation of funds. There is such a committee, Business Recorder learnt, which has met a couple of times, however, none of the personalities appointed are well known, in contrast to the names suggested by Nawaz Sharif, nor indeed is there any news of how many field trips this committee has undertaken in response to allegations of fraud in the allocation of reconstruction contracts.
The second major fact that Dr Sheikh, no doubt, knows and is directly responsible for is the continuation of the flawed tax structure that he inherited. His tax proposals to meet the resource needs of the flood victims are not rooted in sound economic theory (as the proposals do not envisage taxing the elite), as correctly advised by the bilaterals once again led by the US. Additionally, his attempt to slash development expenditure by 50 percent, instead of the earlier directive to Planning Commission to reduce it by 25 percent, may either reflect his inability (i) to convince his cabinet colleagues to defer the 50 percent salary rise to bureaucrats, or reduce some other current expenditure item; or (ii) to initiate restructuring of state owned entities in an effort to divert 300 billion rupees budgetary support towards the flood victims; or (iii) to end rampant corruption in the Federal Board of Revenue and other government departments. Such critical 'inabilities' would compel many an honest technocrat to resign.
And the final factor that the Finance Minister chose not to consider when making the statement is the most obvious: bilaterals do not need to give any excuse for not extending assistance to Pakistan, especially given the ongoing global recession that has compelled Western governments to slash their own social expenditure much to the chagrin of their populace. This is exacerbated by the lack of a cohesive policy within the cabinet.
During the recent US-Pakistan strategic dialogue, it was reported that the agriculture minister sought assistance for those farmers, who lost everything during the recent floods to which Hafeez Sheikh took exception and insisted that all the money must be used for budgetary support - or in support of an expenditure priority that did not attempt to check profligacy and corruption and rely on a revenue base that did not tax the elite. Not exactly a stance that would raise confidence level in foreign capitals about the government's commitment to the flood victims!
With respect to Hina Rabbani Khar's statement to the Senate advising them to talk sense or advise the government on how to bridge the resource gap, the response is quite simple: tax rich landlords like herself, decrease the number of ministers from over a 100 to around 20 and ministers of state such as herself must be made redundant, restructure state-owned entities and stop budgetary support to them and last but not least end corruption through the passage of an accountability law as well as strengthening the investigating branch of government.
To add insult to injury, Khar recently stated that the government would not reprioritise pledged pre-flood assistance by diverting it to flood victims and that any aid commitment to the flood victims must be new. This again reflects a priority that is incomprehensible to not only the general public but also the donors. She did not insist that all flood assistance must be concessional, if not in the form of grant, a condition that she would have found across the board support for.
The economic team of Sheikh and Khar is at best unable to use its technical expertise to formulate policies that are in the country's long term interests or, at worst, actually complicit in the continuation of the status quo in terms of flawed policies much to the chagrin of the public and the donors. We know what a Shaukat Tarin would have done in such an instance! Just as we know a Sheikh and Khar duo would not do the honourable thing! It is, therefore, high time for Dr Sheikh to think about a careful examination of his own thoughts, feelings and reasons for behaving or acting in a questionable professional way.
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