While the regime is dropping hints about an overhaul of the ministerial cabinets, it doesn't admit that the move has been triggered by the fallout from its governance failures. Then why the hints about an overhaul; is the public rage against Middle East's corrupt rulers foretelling bigger trouble for the regime, or is it something else?
During the past three years, almost every state office was accused of indulging in corrupt practices or recklessly wasting precious state resources. Rarely were these evils unearthed and punished by the state; mostly, they were disclosed by frustrated state employees and concerned citizens, but the judiciary's efforts to punish the culprits were thwarted by the regime.
The fact is that a cabinet overhaul is now imperative; a near bankrupt Pakistan cannot fund the regime's exuberance without its image being repaired to again appear creditworthy, start borrowing, and serve the regime's ends. According to the State Bank of Pakistan (SBP), in the last three years, public sector debt grew at the fastest pace ever, and now forms a record 64 percent of the GDP.
Credit crunch is "the" reason for the regime's overhaul, because even the SBP is unwilling to lend to the state. International Financial Institutions will lend to the regime only if the International Monetary Fund (IMF) provides them letters of comfort (moral guarantees against default by Pakistan), which the IMF won't do, nor disburse even the remaining $3.2 billion of the economic restructuring facility it had agreed to provide.
The SBP has revealed that, of the $1.8 billion aid committed by the 'Friends of Pakistan' (FoP) after last year's flood tragedy, the sum received so far is $489 million, or just 26 percent of the commitments. This had nothing to do with the impact of the global recession on the FoP because the sums committed were small; what hindered the inflow of even those small sums was the donors' lack of trust in the regime.
The only lenders that (per force) may go on 'trusting' the regime are Pakistani banks that are now replacing SBP as the reluctant lender to the state - a negative development courtesy which credit-rating agencies down-graded the rankings of Pakistan's big five banks. This shift will stop even the trickling of credit to the private sector, let alone meeting its genuine needs to assure the targeted 2.8 percent GDP growth.
Given the trust deficit - fallout from the regime's sidelining of the recovery of billions siphoned off from state offices and public sector enterprises (PSEs) - how can the trust of lenders (the lone life-support) be revived if the 'overhauled' regime too is led by those responsible for Pakistan's current state? In this backdrop, will any attempt at whitewashing just the face of the regime really deliver?
No cabinet, big or small, will deliver without what it will need most - funds - because it can't levy more taxes; for a start it will need the wealth that has been stolen to go on paying state employees' salaries, honour the state's huge debt repayment commitments and plug the massive fiscal deficit, let alone revamp or restructure PSEs, for privatisation to unburden the state. But will this regime permit the recovery of that stolen wealth?
Pakistan's sovereign and country risk perceptions have worsened as portrayed by the huge discounts (over 800 bps) at which Pakistan's existing sovereign bonds are trading. In this backdrop, launching convertible bonds in foreign markets without a credible overhaul of the regime defies reason because the bonds would (if at all) sell at even higher discounts making their effective cost phenomenal.
The regime's intention was clear from the outset, the clear manifestation thereof being the induction of large ministerial cabinets at the federal and provincial levels that indicated that it intended to use ministries as rewards for its party leaders; improving the performance of the state to undo the economic mess left behind by the Musharuff regime wasn't the priority.
IMF chief Dominique Strauss-kahn now sees "the prospect of a lost generation of young people, destined to suffer their whole lives from worse unemployment and social conditions." It took Strauss-kahn a while to see this emerging reality though it was building up since early 2005. But Pakistan's self-proclaimed 'people-friendly' regime refuses to see it even now, as reflected in the Prime Minister's denial of the chaos he presides over.
Rumour has it that Saqib Shirani, who recently quit the regime's council of economic advisors, had concluded that unemployment was close to 34 percent although the Federal Bureau of Statistics (FBS) was reporting a far lower level thereof. But aside from unemployment, are the FBS-reported levels of core and consumer inflation any closer to reality? So much for the facts, the regime bases its claims on!
There is no dearth of good economy managers in Pakistan to replace the lot now occupying the high offices. But will these managers agree to serve under a regime that cannot suppress its desire to accommodate cronies, overload organisations with workforces, serve vested interests, and interfere in the day-to-day affairs of even the privatised (eg KESC) organisations?
This is the big stumbling block. If the competent won't agree to accept undeniably the toughest challenge since 1947 - revamping and restructuring virtually every state office and organisation - any make-believe 'overhaul' of the regime won't work. If that overhaul doesn't appear 'credible' to the Pakistanis, how will the rest of the world believe in it?
Above all, the credibility of the regime's overhaul will remain suspect as long as Yousuf Raza Gilani remains the Prime Minister because, impliedly, every government action in the past three years had his sanction. If bad governance was propelled by someone else (you know who) then, impliedly, defying the terms of his oath, Gilani opted not to act as the head of government.
Finally, except for the foreign exchange reserves (and that too courtesy IMF borrowing), every economic indicator crashed during the past three years while state borrowing kept rising at a phenomenal pace - a contradiction that hardly strengthens the credentials of Gilani to continue as Pakistan's Prime Minister.