By Staff Reporter
So this is what the multiple crises staring Pakistan in the eye from all sides boil down to: Who is responsible for the mess we are in?
Finding a consensus answer to this question is necessary before we can look for solutions. That, at least, is the position towards which Prime Minister Shehbaz Sharif – and indeed the entire Pakistan Democratic Movement (PDM) coalition – is gravitating.
Here is the situation: When he took the hot seat after Imran Khan’s ouster in a vote of no confidence, Prime Minister Shehbaz Sharif inherited an economy that was a complete shambles crying out for corrective action.
The stocks were dipping and the dollar soaring. The country was running a staggering trade deficit contributing to a record-breaking current account deficit. There was a double-digit inflation, and the forex reserves held by the central bank had plummeted to as low as USD 10.4 billion. Petroleum prices were overdue for a hike, and a bailout program signed earlier by the Khan government with the International Monetary Fund (IMF) was on the rocks.
Buffeted by economic hardship over the past four years, the masses (as well as the markets) pinned their hopes for betterment on the new government. But when adequate improvement in economic conditions did not materialise in short order, their mood started to turn sour. Stock and forex markets that had initially welcomed the new government by rallies resumed their downward slide.
The ousted Prime Minister must have jumped at this opportunity to shift blame for the mess made under his watch. It had already been mooted in some pockets of public opinion that his ouster had been staged “by the powers that be” to help his bid for re-election.
The PDM government has been brought in to take the blame for all the hard decisions, it was argued, and would pay the price for this blunder at the ballot in the next general election, paving the way for Khan’s return to power with a bigger mandate.
Now that Khan and his political cohorts have started blaming the PDM government for everything, the scenario looks all too real, especially as the Sharif government is reportedly under pressure to do whatever it takes to put the IMF program back on the rails.
‘What it takes’ starts with the withdrawal of a subsidy on petroleum products causing petrol, diesel, and electricity prices to rise, a measure expected to send inflation into the stratosphere and hugely exacerbate an acute cost of living crisis in the face of which the lower and middle strata of the society are already struggling.
On the other hand, any attempt to set Pakistan’s economy on even keel must start with this step. There is simply no way Pakistan can foot the bill of this subsidy to the tune of billions of rupees per day. But whoever said doing the right thing wins a politician brownie points? In fact, unless executed with extreme care, the withdrawal of this subsidy is almost certain to set off a political upheaval.
In fact, this is precisely why the ousted prime minister not only went back on his commitment with the IMF over the matter but also relaxed pump prices by a little ahead of his ouster. Finance Minister Miftah Ismail has since confirmed it was an unfunded subsidy that has broken the budget beyond repair.
Prime Minister Sharif’s market-minded finance wizard is convinced this subsidy has to go, and he launched an informal lobbying campaign for it, arguing over Twitter how the government had no business subsidising Land Cruisers and factories of the high and mighty.
But Sharif had to weigh the political costs of the measure – as did his elder brother Nawaz Sharif, the London-based former prime minister who was instrumental in orchestrating Imran Khan’s ouster from power, making background compacts with former president Asif Zardari’s Pakistan Peoples Party (PPP) and other coalition partners.
Thus came the informal three-day conclave in London between Nawaz Sharif and his younger brother, Prime Minister Shehbaz Sharif, and his key cabinet colleagues. After emerging from their meetings with the elder Sharif, the political outlook of PM Sharif and his party colleagues seems to have somewhat evolved.
Some PML-N stalwarts were jittery at the whole enterprise of no-confidence from the beginning. They found the prospect of their government taking all the tough decisions to rejuvenate the economy and then taking a drubbing in the subsequent election all too real.
They would feel reassured, for instance, if someone could guarantee Imran Khan would not march on Islamabad and camp out at D-Chowk at the first sign of upheaval following an unpopular call by PM Sharif.
But who is to hold out such an assurance to them? Surely, not our freshly neutral military leaders – who in the final reckoning are responsible for creating the whole mess by “defeating the enemy through vote” in the 2018 general election – when all economic indicators were positive and the world was starting to see Pakistan as an emerging market.
Right now, Prime Minister Sharif is in the middle of parleys with his PDM partners over the matter. Party sources say he has conveyed to the establishment as well as his PDM allies that PML-N could not take unpopular decisions alone, and that any tough calls would require political ownership by all PDM partners.
The question ultimately is, can the coalition shoulder the burden of the requisite but unpopular tough calls together? A second but equally important question would be if the neutrals can be kept that way.
If the PDM parleys can answer those two questions in yes, PM Sharif will bite the bullet on economic reform and aim to complete the current national assembly’s term. If not, he is likely to veer towards early polls. The determination will be made in the next two to three days.
If the answers are in no, PM Sharif will have no option to dissolve the National Assembly and force a general election ahead of an overdue population census. If this is the case, the fresh delimitation of constituencies will also be abandoned.
On the other hand, with the dissolution of the National Assembly and installation of the caretaker setup, Pakistan will see a repeat of history from the 1990s when a caretaker PM Moeen Qureshi, who was in charge of Pakistan’s affairs for a few months in 1993, negotiated a deal with the IMF.
The PPP’s then chair Benazir Bhutto, who followed as the elected Prime Minister, had kept the deal struck with the IMF by Qureshi.
The urgency of the situation from the point of view of pulling Pakistan out of this quagmire cannot be overstate. On economic front, the balance of payment crisis is just round the corner and we have mere weeks to act before it becomes a foregone conclusion.
Back at the pump, the government has to hike prices to unprecedented levels and increase electricity tariff by over PKR 7 per unit. Both these measures will increase inflationary pressures.
Going into the process of budget making for the next fiscal year, the economic managers will have to follow IMF prescription, resulting in tough taxation measures. The political managers will then provide political ownership by an appropriate of narrative.
When all is said and done, the costliest option by far at this point for Pakistan is inaction. If corrective measures are not taken now, the mess will simply accumulate but will eventually have to be adjusted with certain lag.
The current crisis is also unprecedented in how it encompasses not just the economic or political but also social and moral aspect of the lives of the citizenry. In fact, the very fabric of our society is at risk from its onslaught.
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