The Prime Minister's claim about elements bent upon overthrowing his regime has triggered wild guesswork. While he alone knows these elements, besides allegations of corruption, a petition in the Supreme Court seeking acceptance of MQM parliamentarians' resignations (and later, on the same basis, resignations of the PTI parliamentarians?) foretells trouble for him. In reality, the Prime Minister's fears reflect the momentum acquired by the demands for investigating the alleged fund misuse and corruption that escalated the cost of the Nandipur and Neelum-Jehlum power projects, Bahawalpur's Solar Energy Park, LNG storage terminal at Port Qasim, and the controversial pricing of the LNG being imported.
Equally amazing is Minister of Petroleum & Natural Resources' reference to an unidentified 'oil mafia' that opposed the import of LNG and initially offered him bribe and then threatened him with dire consequences. All these disclosures did was to strengthen the suspicion that this mafia, in league with which the last PPP regime kept oil prices artificially high, does exist.
In the context of corruption, Imran Khan has bluntly, though justifiably, demanded third-party audit of the Nandipur and Metro Bus projects, and the LNG import deal with Qatar because "Punjab is in desperate need of action against corruption.... and Rangers should conduct an operation in Punjab [along the lines of their operation in Sindh] to expose corruption".
While the Prime Minister didn't respond to Imran Khan's demands, Minister for Interior responded to it saying that "It is against the law and unconstitutional to extend an invitation to the Rangers for accountability." True, but wasn't this done in case of Sindh? Besides, doesn't his response make the operation in Sindh unconstitutional? Or, "what applies to Sindh doesn't apply to Punjab?"
What the exposure of corruption - latest being irregularities worth Rs 980 billion in WAPDA - leads to is unclear, though it is obvious that Pakistan's fiscal deficit is not solely the product of tax evasion but as much of the waste of state revenue, and it's plundering that progressively became more damaging, as proved by the daily exposure of mega frauds and corruption in state offices.
The latest mega fraud was exposed by Sindh Board of Revenue's demand for cancelling all land allotments made in the province since 2010 under Section 17 of the Colonisation of Government Land Act-1912 because this Act was grossly misused to benefit 'the influential' for whose allotments the deputy commissioners did not obtain approval of the revenue board or its overseeing committee.
Oddly, in this backdrop, on the 'International Day of Democracy' former president Asif Ali Zardari issued a statement wherein he asserted that the foremost demand of establishing true democracy is that all state institutions respect the limits imposed on them by the Constitution. Do these "limits" imply "refraining from detecting and investigating mal-administration and punishing the errant?"
The exact quantum of Sindh's state land allotted illegally is unclear yet, but insiders estimate that it could be thousands of acres worth billions of rupees - yet another indicator of the many revenue losses that contributed to the escalating fiscal deficit, and consequent public borrowing which is now the biggest constraint delaying critical infrastructure development projects.
Not cancelling the allotment orders issued until the end of 2009 implies that the concerned law being complied with until 2009 (or the beneficiaries of its violation are too powerful to punish). If indeed the law was being complied with until 2009, why its violation became a rampant practice thereafter? Who ignored this gross mal-administration that went on un-checked?
The unfolding administrative crisis and its scaring effect on policy-makers suggest that the economy won't grow as fast as required by population growth, and the ongoing slide in exports will continue. Consequently, external debt servicing will become a tougher challenge, as manifested by the Finance Minister's plan to raise another $500 million through fresh issue of Eurobonds.
In 2014, Pakistan issued 5-year maturity bonds worth $1 billion offering a return of 7.5 percent and for another $1 billion with 10-year maturity at a return of 8.5 percent. These hefty returns had to be offered due to the terrorism threat that Pakistan confronted. Although since then interest rates have fallen globally, benefit of this drop won't accrue because of the administrative chaos Pakistan now confronts.
While issuing bonds may temporarily prevent a decline in exchange reserves due to repayment of the IMF debt, there are no signs that export growth or import substitution - strategies that alone can plug Pakistan's huge annual trade deficit - are the government's focus. Beginning November 1, denial of natural gas supply to the industrial sector will worsen the prospects of increasing exports.
Atop thereof, decline (Rs 121 billion beginning July 2015) in the banking sector's deposit base poses another challenge, given the government's over-reliance on bank borrowing. Banks are facing a consistent shortage of liquidity, which is being plugged by huge weekly liquidity injections by the SBP - a trend that should worry all stakeholders, not just the government.
Banks had been facing liquidity shortage for several months due to low deposit growth (courtesy state-denied inflation), but the hike in WHT on banking transactions of the non-tax filers pushed many of them to enter the un-documented economy along with their savings. The strong reaction of the retail and wholesale sectors to this tax hike confirms it's being counterproductive.
Cancellation of land allotments in Sindh has seriously undermined the credibility of the state. Should investors still rely on the state's commitments? What about thousands of un-suspecting citizens who bought houses, flats and shops in the multi-storey structures built by companies in the real-estate sector? Will these citizens now pay for the sins of the bureaucracy, or will the corrupt bureaucrats pay for their deeds?
The last question is of utmost importance since on the answer thereto depends the future profile of confidence of the investors in the real-estate sector on whose growth depends the growth of the entire economy. Exposing corruption is crucial, but so is ensuring that investor confidence is not damaged. What is happening is just the opposite because build-up of a negative sentiment among the investors is being ignored.
The key question is "when will the recovery of stolen wealth begin" whose answer remains mere guesswork because, till today, courts seem unable to charge even Ayyan Ali. Nor do we hear about Uzair Baloch or about issue of red warrants for the arrest and return of the identified corrupt bureaucrats and politicians. Aren't we trying to achieve too much too soon without a prudent, loss-limiting plan? Let us not forget that the escalating administrative chaos is hurting investor confidence irreparably, which could become Pakistan's biggest loss.
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