2015: the year of 'accountant'

I declare 2015 the Year of the Accountant. All stakeholders including politicians, members of the establishment, and the economic team were engaged in balancing their books with some distinctions: the politicians opted for what they perceived as decisions/actions with the lowest debit amount, the establishment relied on credits generated through goodwill in the public due to the operation Zarb-e-Azb and in Karachi and the economic team relied on data manipulation for the third year running.
Two out of three major Pakistani national political parties, PML-N and PPPP, perceived debits on both sides of the coin - one side of the coin representing the curtailment of the untrammelled exercise of their executive authority allowed in the constitution and the other raids (or in the case of the PML-N fear of raids in the party's stronghold Punjab) by law enforcement agencies - civilian and/or military. The Sharif administration voted in favour of what it considered was the lower debit amount or, in layman's term, the lesser of the two evils. Thus the recent escalation in tensions between the PML-N and the PPP subsequent to the restoration of the Rangers modus operandi by the Interior Ministry, namely not to inform or seek written permission from the Chief Minister prior to taking action as envisaged in the Sindh assembly resolution, has visibly angered the PPP leadership yet the debit amount is considered as smaller than a disgruntled establishment based on past precedence; and the icing on the cake, an establishment whose actions in Karachi are supported by the people of Karachi.
Interestingly the same principle namely to attack what is perceived as the weaker entity was followed by PPP chairman, Bilawal Bhutto Zardari, on the eighth death anniversary of his mother, where he directly targeted the PML-N for "political victimisation" seen in the light of the party's lack of accountability in its home province Punjab. Bilawal cited Dar's affidavit of money laundering for the Sharif's, Justice Najafi report on the Model Town killings implicating Shahbaz Sharif and Rana Sanaullah that remains suppressed and the Asghar Khan case that remains stagnant and only indirectly the establishment by mention of his grandfather's "targeted" killing. This was a pragmatic approach based on the lesson that the party no doubt learned after his father's attack on the establishment in general and on the Chief of Army Staff in particular June 2014 which, many believe, is the reason for his continued absence from the country for over six months.
Be that as it may, the strategy of reconciliation put in place by the two national parties namely the PML-N and the PPP that visibly deactivated federal agencies dealing with corruption, including the Federal Investigating Agency and the National Accountability Bureau from proactively pursuing the leadership of the two parties for the past seven and a half years is clearly in abeyance with political pragmatists maintaining that the leaders are awaiting the retirement of the incumbent army chief General Raheel Sharif. The reconciliation strategy, however, created space that establishment activism is seeking to fill within the boundaries of the Anti-Terrorism Act through a linkage between corruption and terror-financing.
The MQM remains under pressure with the ongoing Karachi operation but the party leadership's earlier tirades against the establishment have been publicly withdrawn replaced by support for Rangers' actions against the PPP leadership.
The establishment's balance sheet for 2015 has more credit than debit but history books no doubt reveal a massive debit amount that ranges from support of extremism resulting in terrorism to ill-advised engagement with the Taliban prior to 9/11 to the Baloch insurgency to support of lotaism amongst politicians that required looking away from past corruption and flawed economic policies that account for the country's failure to compete with India. And all this to prop up a military adventurer! One can only hope that the incumbent leadership sets up a system in place that would perpetuate the credits as opposed to debits.
In economics, however, politics clearly held sway and debit with respect to packages were the norm. Prime Minister Nawaz Sharif, as per traditional Pakistani politics, announced a 341 billion rupee farm financial package before the local bodies' elections that was regarded by analysts as pre-poll rigging. This reportedly led to a highly controversial assertion by Finance Minister Ishaq Dar to the International Monetary Fund (IMF) under the ongoing 6.64 billion dollar Extended Fund Facility (EFF) that the farm package would be budget neutral - an assertion without which the EFF may have been suspended given the commitment by the government to contain the deficit. An analysis reveals that the farm package would have a 120 billion rupee impact on the budget. So why did the IMF accept Dar's assertion? A lack of homework by the IMF team; or an assurance to the Fund that the revenue shortfall would be met through yet another mini-budget or a further reduction of the budgeted development spending. Or lose-lose situation for the public: pay higher taxes and suffer a dramatic decline in development expenditure. A mini-budget has already been announced and the government has already agreed to slash budgeted development expenditure by 25 percent this year.
Data manipulation, supporters of Ishaq Dar may credibly point out, has been the hallmark of most of our previous finance ministers. True, however, Dar's manipulation bears the hallmark of an accountant and not an economist. For example, Dr Hafeez Sheikh, an economist, manipulated data by changing the contribution of components of a macroeconomic indicator say by lowering the food component of inflation from nearly 40 percent to 34 percent. Dar simply took components of non-tax revenue (petroleum and gas infrastructure development cess and surcharge estimated at over 300 billion rupees) into the column other taxes to show a higher tax-to-GDP ratio. The former could not be technically faulted though mala fide may be implicit; however, the latter was fairly easy to spot by all.
A lack of transparency in senior appointments in state-owned entities (SOEs) was as evident during the tenure of the incumbent government as it has been in previous governments. Take the case of Pakistan International Airlines which claimed it had achieved operating profits but two facts dilute this claim. First, the fact that the costs of PIA came down massively because of a decline in a major input namely international price of oil and secondly, the report by Pakistan State Oil that PIA owes 1.3 billion rupees for fuel. The Pakistan Steel Mills restructuring sadly remains pending with zero output even after the expiry of half of the Sharif administration's five-year term.
Balance sheets do not require empirical research or analysis. And sadly neither the politicians nor the establishment nor indeed the economic team appear to be considering the long run ramifications of their actions. The focus is on minimising disruptions to the exercise of power. One would hope that a sustainable strategy to strengthen institutions is not only developed but adhered to in 2016.