What does a leader do when what must be done is the last thing that can be done? That’s got to be what’s keeping Prime Minister Shehbaz Sharif up at night — not that he’s been known to sleep much even in the best of times — because right now he needs to go back to the IMF (International Monetary Fund), which would require a rollback of subsides and a sharp increase in fuel prices and perhaps even hyperinflation. Nobody’s going to like that and everybody knows it.
And he’ll get murdered, politically, especially with PTI (Pakistan Tehreek e Insaf) waiting on the streets and counting the days till the inevitable announcement.
And that’s still the lesser evil for the longer term. Because, otherwise, the subsidies will stay, fuel prices will remain capped, and people will be happy for now.
But this crucial public goodwill will come at the cost of the IMF programme, of course, and practically all other loans as well. Other IFIs (International Financial Institutions) are not going to lend till the Fund does, and now it turns out that friendly countries are also reluctant to commit any more funding till the $6 billion EFF (Extended Fund Facility) is sorted out.
Problem is, with reserves declining to $10 billion, and the trade deficit alone flirting with $50 billion by the end of the fiscal, you can’t keep the people happy for too long if it increases bank borrowing, pushes up interest rates and squeezes the life out of the rupee. That’ll ensure enough bad press, and enough pressure from the opposition, to wonder if sticking with the subsidies was even worth it. So far the Shehbaz Sharif administration has been erring on the side of caution not just because of these factors, but also because of internal pressures; which makes things much worse.
Finance Minister Miftah Ismail clearly wants to work this out the right way. There was no justification for the fuel price cap in the first place because it not only suspended the IMF loan, but also potentially jeopardised the Saudi facility which was contingent upon continuing the EFF, and all but set us on the road to default just because the politics of the time demanded a political gambit from PTI (Pakistan Tehreek e Insaf). That’s why he’s been talking about removing it, although carefully and cautiously, ever since he went to Washington to meet with Fund officials.
But former finance minister and close Nawaz aide Ishaq Dar has other ideas and seems to retain enough clout with the Shairfs to confuse the finance ministry even at this crucial juncture.
Everybody knows how little appetite the economy has for another dose of his controversial ‘Darnomics’ which wrecked it by blatantly interfering in the monetary sector, artificially bolstering the rupee and creating an unnecessary current account glut that is still hounding policymakers and donors alike.
And it’s bound to invite scathing attacks that will further rally PTI as it marches on the capital to press for early elections. Yet he’s still been able to get some in the government to talk about renegotiating the bailout package with the Fund and start engineering a home-made turnaround formula for the rupee.
And now everybody’s had to court yet another round of bad optics and go flying to Nawaz Sharif in London for the answer. That’s because it’s always about the party, never about the people. To be sure, Imran Khan didn’t suddenly drop and freeze fuel prices, effectively abandoning the bailout programme, then fiddled with the constitution and plunged the entire country into a constitutional crisis because he was desperate to save the people; but because he was desperate to save himself. Otherwise he wouldn’t have raised petrol prices by Rs12 per litre less than a fortnight before he reduced them by Rs10 per litre.
And PML-N isn’t quite bending over backwards to choose the lesser evil for the people, but for itself.
Shehbaz Sharif hasn’t continued the petrol price freeze, despite the collapsing rupee, collapsing equity market and an unsustainable current account deficit, so the people of Pakistan can spend a few less rupees at the pump for a few more days. It’s only and only to protect himself from being sliced by a bitter, belligerent and resurgent opposition. And if Nawaz figures that ditching the subsidy and letting the discontent spill over into the streets will keep PML-N at the top for longer than keeping it, then Shehbaz will do it in a jiffy.
And people who think they’ve benefitted from this battle of big parties and giant egos by saving a few extra scraps will soon find out that it’s already blown a big enough hole in the current account to make sure that they end with the worst bargain of the lot, as usual, because they’ll have to foot this bill as well at the end of the day.
Copyright Business Recorder, 2022
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