EDITORIAL: The date for the elections is under considerable debate with Pakistan Tehreek-e-Insaf (PTI), one of three national parties and as per general perception riding a popularity wave, is calling for them to be held by March 2023. This would imply dissolution of the assemblies this month, an unlikely prospect, arguing that the fragile state of the economy necessitates a government able and willing to take politically challenging decisions during the first two years of a five-year tenure.
The eleven-party coalition government that includes the two other national parties, notably the Pakistan Muslim League-Nawaz (PML-N) and the Pakistan People’s Party (PPP), want elections deferred till the end of the assembly’s tenure in September 2023.
While there is only a six-month difference in the suggested election month (that must be preceded by a three-month caretaker set-up) yet what is roundly and rather conveniently ignored by all political parties is the fact that all three national parties have enjoyed a stint in power since 2008 – PPP (2008-13), PML-N (2013-18), and PTI from end August 2018 to first week of April 2022 – yet none of the three administrations was able to arrest, leave alone reverse, the prevalent pro-elite policies.
And while politicians from all parties periodically refer to elite capture yet not a single administration, nor the three previous governments and nor those that preceded them, have undertaken any significant measures to deal with the situation.
The pro-poor Benazir Income Support Programme (BISP) envisaging cash disbursements was launched in 2008 and has since been strengthened each subsequent year but while it has helped thousands of families yet the following data uploaded on the Asian Development Bank website should be a source of serious concern: proportion of people living below the national poverty line in 2018 was 21.9 percent and proportion of employed population earning less than 1.90 dollar purchasing power parity per day was 3.9 percent.
Subsequent to the floods it is feared that poverty rate may increase from between 2.5 percent to 4 percent, which implies pushing 5.8 to 9 million people into poverty.
The critical question is therefore what constitutes elite capture: (i) power sector inefficiencies coupled with severely flawed policies that account for a 2.4 trillion rupee circular debt today, an ever-rising drain on the scarce resources of the government. In October 2022, the government decided to provide cheaper electricity to exporters (19.99 rupees per unit) to ostensibly enable them to compete internationally and 13 rupees per unit to tube wells with the general public paying as high as 40 rupees per unit (that includes tariffs to achieve full cost recovery as per the lender demand and massive taxes).
As per Azour of the International Monetary Fund (IMF), director of the department dealing with Pakistan, subsidies must be targeted towards the poor with the subsidy on electricity defined as regressive. He has added that “we are encouraging Pakistan as well as also other countries to move from an untargeted subsidy that is a waste of resources and to dedicate those resources to those who need it.” If one adds the losses of other state-owned entities that include periodic payment of salaries for the staff of Pakistan Steel Mills even though this mega steel-making unit has been non-operational for almost two decades, the annual budgeted allocations to keep these entities afloat are in trillions of rupees; (ii) the tax structure remains unfair, inequitable and anomalous.
The rich farmers, with major representation in our provincial parliaments and at the federal level, ensure that tax on their incomes, significantly higher than say those of the salaried class in general, is very low while the retail and wholesale sectors remain largely exempt due to their ability to launch very successful protest movements against any tax-related measure that would document their business and more importantly their income.
In addition, tax revenue is heavily reliant on regressive indirect taxes whose incidence on the poor is greater than on the rich with petroleum levy seen as a low hanging fruit that prompted the government to budget a whopping 750 billion rupees under this head for the current year; (iii) the amnesty schemes launched even during the Khan administration which provided unfair advantage to the non-taxpayers; and (iv) an artificially strong rupee, a policy associated with the incumbent finance minister, which may understate the country’s indebtedness but its negative effects far outweigh any short-term positive impact on the budget deficit, including loss of competitiveness of our exporters as well as a reduction in remittance inflows as the official channels are abandoned in favour of the hundi/hawala mechanism.
What is particularly onerous for the common man is the periodic resurfacing of politically lightweight technocrats, whether unelected or selected and given cover of senate membership, as finance ministers, with some of them coming at the helm more than once, in spite of the fact that the economy has become ever more fragile during this period due entirely to their policies (which to be fair have also been a function of their capacity to convince their cabinet colleagues to place economic reforms above politics).
The ninth review talks remain stalled for the same reason that the sixth and seventh/eighth reviews were stalled: failure to reverse economically flawed decisions violative of the agreement with the IMF and to meet the timeline to implement reforms.
In this milieu if elections are scheduled for the PTI’s suggested month, then caretakers would have to receive the carte blanche to implement IMF reforms in letter and spirit from all parties, including PTI, which is not in parliament and therefore not in a position to suggest names for caretakers. Deferral of the IMF programme till after elections would imply failure to procure the 36 billion dollars that are budgeted to be borrowed from abroad in the current year.
If the incumbent government’s suggested date is adhered to then the IMF programme scheduled to be over by June 2023 (a date which will depend on when and not if the government begins implementation of the agreed conditions) and the caretakers can be installed without recourse to difficult decisions; however, without abandoning the policy of sustaining elite capture policies, which have so far not been in evidence, the coalition government must be wary of a general global principle: rising poverty levels, eroding incomes as the rupee loses its value in the open though not in the interbank market, presage social unrest.
Copyright Business Recorder, 2022