ARTICLE: Political parties within democracies propound different economic models to achieve the same objectives, growth and an improvement in the quality of life, however in Pakistan the link between preferred economic models and political ideology has varied little, be it during a military dictatorship or civilian dispensation, though there have been significant differences in the mode of implementation of some policies, particularly those pertaining to containing the budget deficit notably privatization and debt.
The public associates different economic ideologies with the three main national parties. The Pakistan People's Party continues to raise the same slogan of roti, kapra aur makaan (bread, clothes and house) during its two full tenures - led by Z A Bhutto and Asif Ali Zardari - and two incomplete tenures led by Benazir Bhutto. During its last tenure (2008-13) the party launched Benazir Income Support Programme (BISP) envisaging direct cash injections to the poor and vulnerable households with a projected annual rise in allocation, depending on available resources, leading to a widening of scope to include health, education etc. - a programme monitored and fully supported by multilaterals.
The PPP leadership faces charges of corruption and money laundering and has been accused of using state-owned entities (SOEs) as recruitment centres, a decision held responsible for their subsequent financial collapse. In response to changing economic paradigms the PPP began to support privatization however it preferred the stock market as the medium of sale rather than sale to a strategic investor.
Borrowing was incurred mainly from multilaterals after an unsuccessful attempt by the then President Zardari to seek assistance under Friends of Democratic Pakistan - unsuccessful because while pledges amounted to 5 billion dollars actual disbursements were much less; however his tenure witnessed the launch of President Xi's One Belt One Road initiative and its critical component China Pakistan Economic Corridor (CPEC) though the actual projects were firmed during Pakistan Muslim League-Nawaz (PML-N) government.
PML-N manifesto pledge has been overwhelming support to the private sector as the engine of growth, divestment and/or sale of SOEs, and launching of mega physical infrastructure projects under the Public Sector Development Programme (PSDP) to jump-start the economy. Privatization mode has been through sale to a strategic investor fuelling allegations of nepotism. Disturbingly, Ishaq Dar, the Finance Minister, was allowed to run amok between 2013-17 by: (i) incurring debt equity through issuing sukuk and Eurobonds at rates more than double those prevalent in the international market, and (ii) converting domestic debt to foreign debt on the pretext that the interest rates were lower internationally while artificially controlling the rupee-dollar parity. The result: a historically high current account deficit.
PML-N also heavily relied on the trickle-down theory defined as promoting economic activity through incentives, fiscal and monetary, to businesses - small, medium and large - that would eventually lead to higher employment levels and higher quality of life - objectives that have remained unmet. In this context, it is relevant to note that Senator Elizabeth Warren, a Democrat from Massachusetts maintained that "the trickle-down experiment that began in Reagan years failed America's middle class....pretty much the whole Republican party and if we're going to be honest too many Democrats, are overly cozy with the financial industry and make decisions that benefit the wealthiest 10 percent while leaving others to struggle. Over the past 32 years every penny of America's economic growth has benefited the top 10 percent of earners while the bottom 90 percent has been squeezed."
Like the PPP the PML-N leadership also faces charges of nepotism and corruption however the party built on the two good programmes launched by its predecessor PPP - CPEC and BISP and needless to add these two programmes continue to this day though BISP has been subsumed under Prime Minister Imran Khan's Ehsaas programme.
PTI's manifesto focused on social sector development in contrast to PML-N's mega physical infrastructure projects. In the past two years however the allocation for roads under PSDP has been the highest, reminiscent of allocations during the Nawaz Sharif government, and while this may be attributed to completing projects already begun yet the rise in social sectors has not been significant due no doubt to lack of resources. Imran Khan has repeatedly denigrated the incurring of loans with a focus on accountability, reform and clean government. And yet two years down the line the country's indebtedness continues to rise with domestic debt rising by a historic 43 percent and the economic team leaders pledging to the IMF that 38.6 billion dollars (before the pandemic) would be incurred as foreign debt during thirty nine months of the programme - again an historic high. This, no doubt, is in response to the IMF stipulating for the first time ever in its 2019 Extended Fund Facility programme that "financing support from Pakistan's international partners will be critical to support the authorities' adjustment efforts and ensure that the medium-term program objectives can be achieved."
Domestic loans have been re-profiled at 13.25 percent which would bode ill for the country's finances as and when they become due. The Prime Minister's more recent statements indicate that he supports the trickle-down theory whereby the private productive sectors must pave the way for economic growth however he sees no conflict with his constant refrain that a mafia is controlling production sectors and sub-sectors (wheat, sugar, cement etc).
To conclude, good programmes are carried over by subsequent governments and BISP and CPEC are prime examples. It is as yet unclear what the PTI legacy would be other than continuing these two programmes.
(This is the first of a two-part series of article on the subject of little change in policy in spite of different economic and political ideologies of those at the helm of power. Next week would highlight the commonalities in terms of budget making exercise with respect to expenditure and revenue.)
Copyright Business Recorder, 2020
Comments
Comments are closed.