Choosing reforms over politics

Talks and efforts to oust the government by the opposition forces are heating up. Option of vote of no- confidence is on the cards. The premise is that the PTI government is incompetent, while opponents (especially PML-N) are the harbinger of reforms. The claim is that opposition has the capacity to drag the economy out of crisis and ensure smooth sailing.

Before delving into the calculus to gauge the chances of success of turning the tables, let’s take stock of the situation of what reforms PML-N undertook during its tenure, and what efforts has PTI made in power.

PML-N undertook no meaningful reforms. There was no privatization. It acted like headless chicken during the first 18 months — PTI was no different - before it received tailwind from low oil prices and CPEC (which is part of Belt and road initiative — BRI). Yet, it still left the country with a massive current account deficit. It created the perception of growth and governance by piling up debt. However, in essence, exports fell, and the energy sector circular debt was bound to pile up. The stage was set for a crisis which PTI embraced.

When the PML-N government came to power, the economy was neither growing nor in was it in crisis. Oil prices were hovering over $100 per barrel. Growth was low and confidence was shaken. The government came up with experience under its belt and had reform plans. The claims were to sort out energy issues (especially gas) in weeks. But PML-N was clueless during its first year. One example is Gadani Power Park Project- which was all over the news and wasn’t doable from the day one.

Ishaq Dar went to the IMF in 2013 even though there was no need for it. The current account deficit was 1.1 percent of GDP in 2012-13 (versus 5.4 percent of GDP in 2017-18 or 8.2 percent of 2007-8). The idea was to obtain cheap loans. Then it received $1.5 billion money in 2014 without any cost from a friendly country. And the real party started in 2015 with oil prices coming down to $40-50 per barrel. Later, a flurry of projects under the CPEC kick-started an investment boom.

An illusion of sustainable economic growth path was created. Geopolitics was in country’s favour, and PML-N received 18 waivers from the IMF. The currency was kept artificially overvalued and interest rates were maintained low. Exporting sectors were cornered by Dar, while trading boys became darlings of Sharifs. Development spending was skewed towards political hub of PMLN –half of the Punjab development budget during 2013-18 was spent in Lahore whose population is 10 percent of the province. Moreover, every Pakistani shares the loan burden of Orange Train line that benefits only the inhabitants of Lahore.

The economic governance could be gauged by the appointments of SECP (Securities and Exchange Commission of Pakistan) Chairman and Deputy Governor of SBP – their qualification was being old pals and confidantes of Dar. And when an Acting Governor of SBP (a thorough professional) dared to show independence for a day, he was axed.

PML-N gurus claim that they know the formula of lowering power tariffs by using idle capacity. They also claim that resolving gas circular debt is a piece of cake. Well sirs, why did not you do when you were still in power? Why did you ring-fence RLNG and treated it as a petroleum product when the WACOG was the only sustainable way? Why did you not increase the electricity tariffs to tame CD? Why did you not increase and rationalize gas prices?

PML-N probably did not have the courage to undertake tough economic reforms due to their high political cost. It didn’t have the courage to correct the currency as it was more interested in gaining political brownie points by creating economic illusion. The question is how why it would act differently if it were given another chance.

On the flipside, PTI’s resolve towards reforms is better. Its focus is on promoting exports and boosting industrialization. It is eying growth in ICT sector. It took a hard bullet of adopting flexible exchange rate. It has also rationalized power tariffs. Recently passed WACOG bill would also help in lowering gas circular debt through rationalizing gas pricing. All these were politically tough decisions, and did not come without cost.

Nonetheless, the slow speed of reforms — especially in energy, is a failure, and governance in Punjab is weak. Moreover, the worst policy of the PTI is making monsters out of incapacitated accountability institutions — such as NAB (National Accountability Bureau) and FIA (Federal Investigation Agency). That policy is making reforms even more difficult as bureaucracy is unwilling to take decisions.

PTI is losing its popularity and masses are searching for someone to take them out of the inflationary environment. The question is whether the change in the government can make that happen. It might not in the short run. The way global commodity prices are moving amid growing balance of payment and fiscal constraints, no one with a sane mind would be willing to take government in the next few months.

2022 is a tough year. PML-N gurus know it. They may not want to be in power, as they would like someone else to take the brunt. Then why all the fuss about vote of no-confidence? One theory is that they fear that if PTI sustain still the end of 2022, celestial beings (khalai makhlooq) support would swing back towards Imran Khan. Opposition would of course want those blessings for themselves instead.

That is why efforts to topple the government are heating up. However, opposition parties are not on the same page. PPP wants to continue in Sindh till elections. Coalition parties (PML-Q, MQM and GDA) are better off in power than betting on an uncertain future. And if they agree to join the movement, they may demand more power in Punjab and that doesn’t suit PML-N. Then, the so-called ‘celestial beings’ have influence over smaller parties. There are many ifs and buts in the equation. Not all the interests are coinciding so far.

There are pros and cons for opposition in bringing vote of no confidence in the next month or two. However, there is no clarity on what to do after that. Parties have conflicting interests. However, after building the euphoria, swaying away from the movement may have political costs. Hence, opposition may still go ahead with it. Chances of ousting IK and PTI are not very high. Having said that, odds of opposition getting something out of it are not too low either. Interesting times ahead.

Copyright Business Recorder, 2022