The Pakistan Muslim League-Nawaz (PML-N) lost the Faisalabad seat PP-72 after a 20-year period to Pakistan Tehreek-e-Insaaf (PTI) in the recently held by-elections by 5,716 votes. This seat was won by PML-N in the May 11 general election and was vacated by the winning candidate Khawaja Mohammad Islam following his disqualification in a fake degree case. His brother Khawaja Liaquat secured 18,256 votes and lost to PTI's Sheikh Khurram Shehzad. PP-72 houses small businesses and traders and was considered a stronghold of the PML-N which accounted for PTI leader Imran Khan to crow over the victory and aver that the PML-N was losing ground by not fulfilling its election promises. In spite of claims of large-scale rigging during the May 11 general election that are gathering strength and were further fuelled by the recent declaration by National Database and Registration Authority (Nadra) about NA-256 there is a growing perception that democracy has somewhat graduated in Pakistan due to two factors: the PPP-led coalition government's abysmal five-year performance may have played a role in its political misfortunes and electables, without performance, may lose elections.
A comparison between the PML-N manifesto and the budget/Letter of Intent (LoI) submitted to the International Monetary Fund (IMF) reveals that the party has done little to implement its pro-business election promises. There is a countrywide consensus that the five years of PPP-led coalition government left the economy in shambles which is indicated by a budget deficit of over 8 percent in 2012-13 (with the PPP inheriting a deficit of 7.6 percent) and a rise in overall external debt to 58.5 billion dollars (provisional estimate in the Economic Survey) from 44.9 billion dollars in 2008 while domestic debt rose from 3.2 trillion rupees in 2008 to 8.7 trillion rupees in 2013 (provisional estimates). In addition, poor governance and appointments on the basis of nepotism with the additional flawed policy of recruitment of party loyalists in state-owned entities (SOEs) led to a 600 to 700 billion rupee leakage from the narrow revenue base for annual bailout packages. Thus the challenges facing the PML-N government were acknowledged to be numerous and it is the contention of the Nawaz Sharif economic team led by Finance Minister Ishaq Dar that unpopular decisions need to be taken in the first year to ensure improved economic performance in the second. The question is whether Dar is correct in his assessment given the economic policies that he has begun implementing? The government's policies can be labelled anti-business and against the precept of the party's manifesto given that not a single policy decision can be termed pro-growth. The enhanced taxes on existing taxpayers, with the government having withdrawn the proposals that sought to bring the undocumented sector into the tax net, a highly controversial levy of 0.5 percent tax on moveable assets, and his decision to massively upgrade energy rates of industrial units resulting in a highly significant increase in their costs of production rendering many unable to compete internationally are all flawed decisions. Needless to add, he glosses over the fact that energy rates include a tax component as do the price of petroleum products or in other words, escalation in the production costs also increases government revenue which he should have foregone to encourage growth. At the same time, Dar has not proposed any belt-tightening measures in the budget which would have reduced the budget deficit with the exception of subsidies which would impact on the purchasing power of each rupee earned by the lower to middle income earners. Prime Minister Nawaz Sharif has unveiled his vision for mega projects by the government, including roads and infrastructure projects that may be pro-growth and increase employment opportunities but, if implemented, may increase the country's indebtedness further. A recent report by the IMF indicates that agricultural output, reforms in the energy sector, remittances and multilateral/bilateral support would play a critical role in country's ability to support growth efforts in the medium-term. It is relevant to note that farm output is subject to the vagaries of weather, energy sector reforms are increasingly being opposed by the bulk of the consumers notably the lower to middle income earners, the eroding rupee value which may reduce remittances and Pakistan's reduced relevance with the departure of US/Nato troops from Afghanistan are prospects that loom large on the economic horizon. One can only hope that Nawaz Sharif begins to revert to the party manifesto, a good document, to determine the way forward.