WEB DESK: It is in the nature of sitting governments, especially political governments which depend on popular vote to remain in power and also for getting re-elected, to defend their policies including economic policies, with all the political strength they wield, no matter how faulty these policies are and they seem compelled to continue to defend them even after having seen the faults themselves.
The same goes for the multilateral aid bodies as well like the World Bank, the International Monetary Fund and the Asian Development Bank. But they do not defend their assistance policies because of their political compulsions but they do it because of the dictations of the politically and economically powerful members of their respective boards which actually ‘help’ design the policies of these multilateral aid agencies aimed at promoting their own global political and economic interests.
That perhaps explains in brief why the PMLN government of Prime Minister Nawaz Sharif and the IMF bureaucrats find it impossible to agree with the list of faults in the Fund prescribed policies of the last three years identified not by political forces opposed to the PMLN government but by independent and politically neutral economists of international repute.
The very fact that the Fund had allowed the government as many as 16 waivers during the course of its three-year $6.5 billion Extended Fund Facility (EFF) programme reflects either an admission on the part of both the donor and the recipient that the conditionalities with regard to these waivers were economically unfeasible or perhaps the Fund bureaucrats were made to allow this concession to the government on the pressure of the powerful members of the Fund’s board to politically bail out the sitting government in Islamabad.
The same perhaps goes for not making the government deliver on the Fund’s privatization conditionality. And perhaps for the same reason the Fund has consistently refused to explain why it has allowed the government to remove the burden of the energy related circular debt which, in the meanwhile, has gone up to Rs 656 billion (Rs 335 billion in arrears and a fresh burden of Rs 321 billion) from the budget.
This concession has allowed the present government to achieve a near ideal budgetary deficit figure for the outgoing year as opposed to the over 8% that the previous government could show in 2013 when the circular debt amounting to more than Rs 450 billion was shown as a budgetary burden. Not only this. An outstanding amount of Rs 622 billion that this government had borrowed from commercial banks during the outgoing year for commodity operations too has been allowed to be removed from budgetary obligations.
What is a matter of even greater concern is that both the recipient and the donor do not seem to be much concerned about the declining exports. Nobody in the government including its highly educated commerce minister Khurram Dastgir is ever found discussing the issue with any degree of anxiety. According to various sources not acknowledged by the government, the exporters are said to have been denied as much as nearly Rs 300billion the government owes to them over the last year.
There are reports that many textile mills have closed down or are operating at far less than full capacity because of either declining export orders or because of short supply of power or because of having been beaten by regional competitors on price due mainly due to the governmental concessions on inputs that these competitors are enjoying. It could be one of these reasons or a combination of them that is said to have affected the interests of our exporters, especially those that export our textile which are responsible for 60% of our total exports. This plight of our textile sector has also seriously caused the national employment picture as the sector caters to about 45% of our work force.
Both the Fund and the government seem to be very happy to see accumulation of foreign exchange reserves equivalent to four weeks of import bill. But most of this amount comprises commercial loans carrying heavy interest. And part of it is also perhaps a spillover from remittances. But with the oil income of the oil rich Middle East countries plummeting in recent months, there is a possibility that the millions of Pakistanis gainfully employed in the Gulf and who have been sending in substantial amount of remittances annually may start losing jobs-one can discern the trend already in Saudi Arabia where thousands of expatriate workers including hundreds of Pakistanis have been left destitute because not only they have lost their jobs but are said to have been denied the salaries due to them for months.
So, with the declining exports and remittances likely to shrink in the coming months, any shock, no matter how slight – perhaps an increase in oil prices by say $10 – is likely to set off the landmines that have been planted jointly by the PMLN government and the Fund over the last three years and engulf the country into an economic nightmare.
As it is, the overall debt burden is said to have gone up steeply in the last three years making the country even more dependent on dole. But dole itself is likely to go down steeply in the near future because with no new IMF programme in the offing and the US having refused to sell us the much needed F-16s on concessional arrangement and stopping forthwith the Coalition Support Fund (CSF), the dole prospects for the future look too dark.
Of course, the China-Pakistan Economic Corridor (CPEC) does offer us a bailout. But we should always keep in mind that China is not spending its hard earned money to help us out of our economic troubles. It is doing this in its own interests and would do it at as economical cost as it can possibly do. So, the $11 billion it would be spending in Gwadar on improving the port and other infrastructure facilities would most probably it would take back in the shape of salaries to its own Chinese engineers, managers, consultants, financiers and skilled and non skilled workers and on purchase from Chinese sources of the needed machinery and equipment. So, not a single penny out of these $11 billion is likely to accrue to us to use it for covering our expanding budgetary or trade gaps.
Of the remaining $35 billion, all of it would be loaned to Chinese investors by the Chinese banks to set up power projects in Pakistan that would operate in Pakistan on the sovereign guarantees that all the power produced by these plants would be purchased by Pakistan no matter whether we need it or not and no matter at what the price (to be fixed on the basis of input prices of the day).
But let us not do the unnecessary nit-picking about the CPEC. The Corridor is likely to add immensely to our physical infrastructure and would give a significant fillip to our trade. But then we need to have exportable surpluses to benefit from this Corridor which we do not have and the government in its obsessive ardor for CPEC seems to have completely missed the obvious.
And instead of how best to make the most of CPEC we seem to be indulging in such unnecessary debates as to which of the provinces would get the best part of this assumed ‘free-lunch’.
Indeed, we seem to be a nation totally oblivious of our priorities. Instead of doing nation -wide debate on the state of our economy and how best to improve it we are discussing and debating the most unimportant issues at this juncture like who would be our next Chief of Army Staff (CoAS). If we claim that it is the most efficient and perhaps the best institution in the country, then why should there be any debate or discussion on the subject. Any among the senior most would do the job as efficiently as his predecessors heading an institution that does not, it is believed, tolerate non-professionals.
Source: Business Recorder