EDITORIAL: Federal Finance Minister Miftah Ismail has yet again contended that the rupee will stabilise vis-a-vis the dollar soon — a claim that, yet again, was ignored by the market and the rupee lost further in the interbank and open market by over 3 rupees to a dollar.
This singular lack of success by the country’s economic managers — Finance Minister and Acting Governor State Bank of Pakistan — to calm market fears is clearly not mending the frayed nerves of the business community as well as the general public in spite of the staff-level agreement uploaded on the International Monetary Fund (IMF) website on 13 July, which heralded the implementation of a politically challenging economic reform agenda fully supported by independent economists as well as Business Recorder.
The writing on the wall should now be evident to all the political players in the country: that the continued rupee erosion is a function of the sustained political turmoil that began when the vote of no-confidence was tabled by the then Opposition on 8 March 2022, followed by its success in the late hours of 9 April and the subsequent cobbling together of an 11-party coalition with each party’s objective distinct ranging from the threat of litigation to security concerns which, in some instances, is simply undeliverable by the political leadership.
In this politically highly charged environment for the Shehbaz Sharif-led administration to claim that it is taking harsh economic decisions at a political cost to steer the economy towards economic sustainability has not found any traction for three reasons: (i) National Assembly passed the amendment to the National Accountability Bureau Act on the same day — 27 May — as the decision to partly withdraw the unfunded economically unsustainable relief package announced by Imran Khan on 28 February (supported by his government for five and a half weeks and by the incumbent government for six and a half weeks) while the remainder of the relief package ended on 3 June.
In addition, while the government has announced a NAB Chairman only earlier this week yet it still has to announce a full-time governor of SBP; (ii) while the BR has consistently maintained that irrespective of whoever is in power in the Centre the possibility of changing the existing severely contractionary monetary and fiscal policies is slim because any deviation will lead to the suspension of the IMF seventh/eighth review that, in turn, would freeze expected inflows from other multilaterals and “friendly” countries including China, Saudi Arabia, the UAE and Qatar (for gas on deferred payment) as it has been reported that these inflows are contingent on the Fund package; yet this narrative too is not visibly echoed in public sentiment; and (iii) neither Shaukat Tarin nor Miftah Ismail exhibited any inclination towards reducing current expenditure in the budgets they presented — the former raised it by a trillion rupees and the latter by 1.1 trillion rupees that no doubt eroded any leverage with the Fund to reduce taxes and which in turn implies more taxes on the hapless public.
What seems to be the main driving force in general public sentiment today is Imran Khan’s narrative of corruption at the expense of the common man in decades past. The Panama Papers, irrespective of the PML-N defence being that Nawaz Sharif was convicted for not accepting a salary from his son, did hurt the party’s prospects in 2018 elections and continues to be a factor today.
Maryam Nawaz, the lead campaigner for the PML-N in the recent by-elections in Punjab, has still to live down her claim on national television that she or her siblings had no property in Pakistan leave alone abroad. And there are credible reports that the money trail in some of the pending cases against senior leadership of the PML-N and the PPP has been unearthed by the investigating agencies, though the amended NAB law may make any conviction a challenge.
To conclude, it must be borne in mind that Imran Khan was unpopular at the time he was voted out of government after 3 years and eight months due to flawed economic policies which accounted for inflation in double digits and placed a heavier burden on existing taxpayers as well as on the more vulnerable.
That he has clearly resurrected his popularity may be because of his narrative that is not focused on his own performance but on the conduct and perception of corruption of the party heads of the major parties in the incumbent government.
Given the previous economically chequered history of the country, perhaps the time has come for each of the contenders for power to explain their wealth and come up with an economically viable national strategy rather than promising the moon and failing to deliver.
Copyright Business Recorder, 2022
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