Road to Nowhere

A charge-sheet against the Finance Minister, a harsh critique of how the economy is being managed, and a retaliation in kind … such charges and counter charges are the norm when an Opposition is opposing the sitting government’s policies. But they are certainly not par for the course when two members of a ruling party— in this case, the current and former Finance Ministers of the running government — get into a feud over who is responsible for the rot that has set in. Such is the state of affairs in the government. First former Finance Minister Miftah Ismail wrote an article in a daily newspaper highlighting the dangers to the economy, tacitly implying that the current economic team was responsible for the situation. Then, in interviews that followed, the current Finance Minister Ishaq Dar rebutted Miftah Ismail’s charges and squarely pinned the blame on him.

This is perhaps the clearest admission of failure by members of Shehbaz Sharif’s kitchen cabinet.

It is also an admission of how clueless the government is, and indicates the free fall of the economy, leading to what seems increasingly like almost inevitable bankruptcy, sooner or later.

Coalition governments are difficult to manage and control. The PDM is a network of all but a few parties that matter. Getting 13 parties to agree, please, and serve is tough and very costly. To add to the complexity is the fact that the main ruling party is itself divided into two family divisions. That the PML-N London and the PML-N Pakistan do not see eye to eye on many matters is now out in the open. The ongoing tug-of-war to establish supremacy in relation to party affairs has always been evident. But the battle to govern policies from distant shores is now creating hurdles that are making the process virtually dysfunctional. Nowhere has the damage been more evident than in the country’s economic mismanagement. This has, and will affect all 13 parties in the government. And it will affect the political capital of the PML-N. Yet, despite the writing on the wall, the PML-N apparently wants to keep doing what they have been doing — till death by politics do the coalition part.

The reasons for the Shehbaz Sharif government’s march to its own guaranteed decline owes to a number of factors.

Economic indicators are based on forecasts. Forecasts are based on trends and speculation. As the trends slide and speculation starts on the future shape of the economy, economies fumble and crash. COVID19 was a straight case of demand and supply shut-downs and then an inevitable price spike. This caused huge stress on economies the world over. Pakistan fared much better than many developed countries as it recovered to register a GDP growth rate of 5.74 per cent in 2020-2021, which rose to 6 per cent in 2021-2022.

So, with COVID on the decline, why has the growth rate declined to less than 1 per cent in 2022-2023?

The reason is political uncertainty. The change of regime was sudden, unpopular and controversial. The resulting unrest and reaction of the Opposition and the people of Pakistan have made the future uncertain and unpredictable. The government has failed to create economic policies that provide any assurance of economic recovery or social well-being in the country. Major rating agencies like Fitch, Moodys and SP have downgraded Pakistan to a negative. The IMF has refused to lend us any more money. When the IMF withdraws, other donor agencies also hold back. This has and will create huge pressure on the rupee, downgrading it even further, and on inflation and reserves, etc. That will in turn create more political unrest, leading to more uncertainty, and a depressed economy. This vicious cycle has to end if we are to survive. The government is hoping for a miracle. Some near-miracles have presented themselves such as the price of oil falling below US$ 80, but the government has been unable to provide any relief to the masses. And as speculation about the future and predictions of doom mount, investors and creditors both local and global, continue to shy away.

And yet, with almost no growth in revenues and huge growth in non-development expenditures, the only way to treat this deficit is by more borrowing. And so, the search for other sources to borrow from. One area the government has been actively pursuing is aid for flood damage. They sent an estimate to the IMF, which was immediately rejected on the basis of being unsubstantiated. The Prime minister’s appeals to countries and agencies across the globe are reminiscent of a damsel in constant distress. And if they do get the funds, the government announces the aid as a major economic feat they have achieved. For example, the jubilation over the establishment of a global ‘Loss and Damage Fund’ for climate change-affected countries at COP 27. That was undeniably a good step, but reforestation among others are the long-term mitigation strategies we need to focus on. By cutting the Climate Budget by 30 per cent, the government has actually given a clear signal that it has no internal climate strategy, and just relies on an external funding policy to deal with the issue. This already has, and will continue to result in donor fatigue and the avoidance of loaning institutions, leading to what Miftah Ismail has already warned us of: impending default.

The vote of no-confidence against Imran Khan was engineered by the Establishment through the withdrawal of their sponsored parties like the MQM, the BAP and others from the government and their joining the 13-party coalition, the PDM, now constituting the government. The nature of this coalition was, from inception, bound to create chaos and a lack of accountability. Secure that the Establishment would ensure the continuance of their government, their focus has been on legislation almost solely aimed at providing relief to themselves, rather than to the general public. The NAB laws were amended in a way that has led to all the references against them being dismissed. Electronic Voting Machines and overseas Pakistanis’ right to vote has been made null and void. And resultantly, they believe they have secured their seats. They seem to have lost sight of the fact that they have to deliver, at least on some score. Elections will be held sooner or later, and their reliance on the Establishment to help them win the elections may not work, as proven in the July 17 and October 16 elections.

On of this government’s huge fixations is getting rid of Imran Khan. Their meetings, conferences, statements, press conferences, talk shows, etc are all about trying to devise ways to somehow justify a minus Imran Khan strategy. Now they have embarked on a legal witch-hunt of somehow disqualifying him on technical grounds. To this end much time is spent on engaging institutions like the ECP, FIA and NAB to prepare cases/references that will disqualify Imran Khan.

Ultimately, one needs to recognise that the fate of this government and of the future of this country is dependent on what the direction the establishment is likely to take. The decisions taken by the Establishment’s former supremo backfired badly. The miscalculation with regard to Imran khan’s popularity and public reaction came as a rude shock. But it was too late to rectify the mistake. The reality has however registered, and been discussed behind closed doors, as disclosed by members of the Establishment. So the question then is why has there been no course correction?

All eyes are now on the political chessboard, the play between the government, the Establishment and the PTI, to see who will blink first.

The writer is a columnist, consultant, coach and an analyst