EDITORIAL: World Bank in a policy note has recommended ceasing federal spending on provincial mandates, including through its ministries, vertical programmes and the development budget, which would generate significant fiscal savings; and emphasised weak implementation capacity due to coordination/overlap problems among the around one million public sector federal, provincial and local employees (including in around 200 state-owned entities at the federal level leave alone in around 340 autonomous agencies).
But the most damning indictment in the World Bank note against Pakistan’s politico-economic framework is that policy decisions are heavily influenced by strong vested interests and politics is dominated by patronage with political elite mobilising support through regulatory concessions (tax exemptions), public sector rent flows (tariff subsidies to zero rated industry) and private goods to constituents and allies (inclusive of budgeted disbursements to parliamentarians) rather than through improved service delivery.
This proclivity is no longer sustainable politically, given the ongoing economic impasse that has contracted private sector activity, leading to large-scale manufacturing sector registering negative growth for the outgoing year that accounts for a rise in unemployment and a rate of inflation of over 27 percent in August this year.
World Bank data indicates that almost 40 percent of Pakistanis are now living below the poverty level, defined as under 3.2 dollars a day or at the present rupee dollar parity around 920 rupees. Disturbing as this percentage is, it pales into insignificance given that: (i) the number of unemployed has risen dramatically in recent months indicated by a massive contraction of private sector activity with many unable to save during the past year due to high inflation and few eligible for the Benazir Income Support Programme (BISP); and (ii) BISP (kifalat) amount to only 8,500 rupee per quarter (three months) cash disbursement to a beneficiary or around 95 rupees per day – grossly insufficient to meet the requirements of an individual leave alone a family of five.
Therefore, today there is extreme pervasive financial hardship within the general public that is the root cause of violent street protests increase in street crime.
The days when information to the general public could be filtered through a muzzled or pliant media are gone, given the proliferation of social media in the daily lives of the people. And, in this context one should have seen some let-up in the elite capture of limited resources and budgeted allocations as far as the caretakers are concerned and an understanding of the travails facing the public by political parties eager to claim victory in the end January to early February 2024 elections.
The caretaker Commerce Minister, Gohar Ejaz, recently proposed special incentives to zero-rated industry (operated by wealthy families) though it is patently clear that such concessions are not possible under binding commitments with the IMF while reforms in the Federal Board of Revenue with reference to reducing the heavy reliance on indirect taxes (whose incidence on the poor is greater than on the rich) remain pending to this day.
While the caretakers are not representatives of the people of this country what is truly baffling is the fact that major political parties today are also not focused on the plight of the general public.
The Pakistan Muslim League-Nawaz’s (PML-N’s) focus is on giving Nawaz Sharif the numbers on his return to the country after a four-year absence that rival the rallies of Benazir Bhutto and Imran Khan and regurgitating the economic successes of his previous tenure by comparing macroeconomic data of 2017 with today – a comparison that ignores the fact that today’s data is the by-product of the policies of not only August 2018-April 2022 but also from 2013 to 2018 and April 2022 to August 2023.
The Pakistan People’s Party (PPP) is focused on the lack of a level playing field and cites the induction of several PML-N loyalists in the caretaker setup as proof positive in support of this assertion.
Regrettably, it has been the usual practice to accuse one’s predecessors of the steady deterioration of our major macroeconomic indicators; however, until and unless an administration (be it of a short or medium term duration) begins to implement structural changes enunciated in the World Bank note that are targeted to end the elite capture of resources and expenditure as opposed to passing on significant sectoral inefficiencies onto the consumers; the economic impasse will only worsen bringing the dangerous prospect of a widespread socio-economic upheaval closer.
Copyright Business Recorder, 2023
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