The Finance Minister sees the economy turning the corner. Advisor Commerce says it has. Notwithstanding the cautious tone of their optimism, the idea seems to be to impart a sense of confidence to the market.
It is not working. The general impression that persists is of low business confidence, immersed in an aura of uncertainty. Both fundamentals and sentiment are under stress.
Had they stopped short of quoting specific numbers, and opted for 'a clear direction has been set out', their credibility would be less at risk. People would be willing to grant 'there is only so much you can do in the first hundred days'.
Ministers continue to quote numbers to show the game is on - and should they flounder the Spokesman on Economy is always there to prop them up with 'Good News'. Someone needs to tell them it's not helping their case.
First, the numbers haven't changed much - current account deficit down to $ 4.8 billion (July- Oct18) from $ 5.1 billion same period last year (in fact CAD is higher if you ignore SBP's recent upward revision of last fiscal's CAD by $ 1 billion); exports slumped 6% (YoY) during November to end up with a 1.29% gain during the first five months; and import growth has decelerated but not by much.
None of this sets a trend. Improvements could have been for any number of reasons, which may or may not be sustainable. Besides, the real elephant is the fiscal deficit (first quarter 1.6% of GDP) that the FM avoids talking about but the SBP does not. (The 'elevated' fiscal deficit is at the heart of its recent monetary policy statement).
Second, it is never wise to count the chicken hatched by someone else. For FDI (proudly presented as confirmation of multinationals' confidence in this government) or information on bank accounts abroad (testimony to government's resolve to bring back looted wealth)the credit belongs elsewhere. If remittances have grown 12.6% (July-Nov) can you seriously tell us it is because of you? Would you also say the sharp drop in November is due to you?
Third, there is a lesson to be learnt from the cliché "other than that, Mrs. Lincoln, how was the play?" A leader has to be able to tell the really important from the less important. Praising a Minister for selling 200 cars, or chicken and egg lectures, is just like talking about the quality of play as President Lincoln lay dead in the theatre.
'Setting direction right', as the FM kept insisting in the early days, would have been the wiser communication strategy. People will let you get away with it - and it gives you much greater room for manoeuvre.
For a government that came in on the pledge of greater transparency it is astounding how little of the official narrative on 'direction' is available. Platitudes - export-led growth, a better performing FBR, export-oriented FDI, merit-based appointments and strengthening of institutions - can't be argued with. But where is the politically owned policy matrix? Can anyone show us at least the contours of the plan?
Do the much-touted FDI proposals fit in with the stated aims of the government? Is this really the kind of investment we should be celebrating? In one case (the colas) it will mean a greater outflow of foreign exchange (profits/dividends) and in the other (Suzuki) shifting the goal posts of green-field auto policy.
Was that entire furore over SBP autonomy really necessary? Did the leaders forget their own manifesto? Were they not communicating with each other - or chose to distance themselves when it hit the fan? Even total outsiders know SBP always sounds out Q-block before taking any major decisions!
Also, aren't we calling SBP autonomy into question by entrusting to the Governor tasks that have traditionally been handled by Ministry of Finance?
We keep hearing of the inevitability of 'deep structural reforms' without anyone telling us what these might be, much less sharing the timelines. The issue is not IMF or not IMF. The issue is not averting a financial crisis. The real issue is sustainable reforms.
What is delaying the Trade Policy, already six months overdue? Have we identified the causes of our poor FDI record, despite attractive incentives? Is the answer to our pathetic agricultural productivity throwing more money at the problem? How do we leverage import tariffs to make our manufacturing more competitive?
If the government cannot come out with a clear roadmap that the entire Cabinet is committed to there will always be talk of division in the ranks - and quarterly exams for the Ministers to pass!
We know you need a holistic approach to reforms, but it is always good politics to pick some low-hanging fruit while you work on the larger picture. Just think agricultural tax (the law is already there), security of tenure to civil servants (Supreme Court decision in Anita Turab case), sharp reduction in the number of Federal Ministries (lots of studies on the shelf), making the police take street children home with powers to prosecute the parents if they don't end up in school (even developed countries do this)......
Hope the policymakers are incorporating into their plans the decline of the 'informal economy', perhaps an unintended consequence of the AML/documentation drive. There are lots of jobs and 'multiplier effects' here - and a lot of locked up capital. It is the most 'people-centric' segment of our economy.
Take real estate business that has come to a standstill. It represents a huge 'dead weight loss' in economic terms. Wouldn't it be wise to provide some kind of immunity (about source of funds) to allow people to take their money out of real estate into something more productive?
As the leader of the house, it is squarely the responsibility of the PM to make parliament functional. It cannot really govern through ordinances, and hoping for a much greater majority through a snap election is fraught with serious existential risks.
For a government with the kind of political capital it has it is strangely lacking in confidence. It doesn't seem to realize how much we want it to succeed, even at the risk of some initial pain.
By the way, we would rather have the dam than our jails full. A trade-off possible?
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