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Old Thursday, January 20, 2011
Viceroy Viceroy is offline
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Default From Crisis To Crisis - Shakeel Ahmed

From Crisis To Crisis

Shakeel Ahmed

Islamabad this morning is enveloped in a thick rolling fog. There is no gas in the house. Earlier in the morning there was load shedding of both the scheduled and un-scheduled type. Life appears to bring no relief— misery having started from the first day of the new year when a steep increase in POL prices was announced. The earlier price increases, specially in the price of diesel oil led to conversion of public transport wagons from diesel to CNG. Shortage of CNG developed and has forced the closure of CNG stations for two days in a week. There are huge waiting lines at the CNG stations not witnessed before. It would not be surprising if an announcement in the increase of CNG prices is made as soon as the Petroleum Minister Naveed Qamar wakes up to take advantage of the situation.

The government of President Zardari does not possess a magician such as private banker Shaukat Aziz who could perform abra cadabra with the economy and actually convince the outside world that Pakistan was attaining great economic heights. Shaukat Aziz could not have been a reality. Like him, his much vaunted economic miracle has come and gone. It was with Gen. Musharraf’s approval that the unprecedented and mysterious step of a 30% upward revision in the GDP was undertaken. It was Shaukat Aziz who claimed that he had doubled per capita income from $400 to $800. This was a cruel joke played on a hapless nation. It was obvious to everyone except the General that for the claim to be credible, per capita income would have to grow at 25% plus the rate of growth of the country’s population. It is true that mobile phones became popular. It is also true that banks lent billions for the purchase of cars and other toys. But such developments simply conveyed to the world that some people had become very rich and poverty was rising. The manipulated economic data did nothing to enhance the well being of the common man. The biggest disappointment is that the magician Shaukat Aziz was unable to change the structure of the economy.

The rich became richer and managed to remain out of the tax net. Their ill gotten wealth was stashed away in foreign banks. Agricultural incomes were not taxed. Land reforms did not take place. The problems that plagued the economy in October 1999 persisted through the Musharraf regime and were there for the new democratic government to face—a task to which they were supremely unqualified. The economic crisis was building up during the Musharraf era. The widening trade gap would have forced a decline in the value of the domestic currency. POL prices were artificially maintained at unsustainable levels. Most of the unpleasant decisions were left to be taken by the popularly elected government. Private banker Shaukat Aziz packed the few belongings he had and evaporated in thin air. The new government had to tackle multiple economic crises. It found itself totally ill-prepared and clueless in addressing the challenges arising out of the shocks. While rest of the world was taking corrective measures and adjusting to higher food and fuel prices, Pakistan lurched from one crisis to another. For a protracted period after the 2008 elections, there were no finance, commerce, petroleum and natural resources and health ministers in the country.

The government lost six precious months in finding its feet. Mr. Zardari was ill-equipped to lead the nation. With effort and devotion he could have managed a country farm. Pakistan was never easy to govern. He gave the impression of having little sense of direction and purpose. A crisis of confidence intensified as investors and development partners started to walk away. The stock market nosedived, capital flight set in, foreign exchange reserves plummeted and the Pakistani rupee lost one-third of its value. In short, Pakistan’s macroeconomic vulnerability had grown unbearable. It had no option but to return to the IMF for a bailout package. There were no road maps, no contingency plans, no options. There was only one plan, that is, to return to the IMF.

The fact is that Pakistan’s economic problems are chronic, endemic and systemic, beyond the capacity of Pakistan’s present rulers to fix. Military rule simply brushes the problems under the carpet. Due to lack of vision and leadership qualities, Pakistan’s democrats have failed to solve these problems which are becoming insurmountable year by year. Debt has become the ugly hallmark of Pakistan’s economy together with rising poverty. This debt burden which has simply increased over time has now reached the tipping point where it is overwhelmingly suffocating and crushing Pakistan’s economy. As the debt crisis in Europe currently shows a point will come when lenders will stop lending to indebted borrowers; in Pakistan’s case the much hyped ‘Friends of Democratic Pakistan’ has been an abysmal failure with only $700 million materialising.

Pakistan has so far failed to cut the budget deficit. Even cosmetic changes have not been made. The economy continues to remain in intensive care unit and is breathing thanks to the injections from the IMF, World Bank and Asian Development Bank. The economy is not on the radar screen of the government and as such the economic managers have no relevance in the current political set up. That could be a prime reason for the invisibility of the current Finance Minister, Mr. Hafeez Sheikh.

Action needs to be taken quickly to bridge the budget deficit. As pointed out by the State Bank of Pakistan in its latest report, the printing of notes at their current levels cannot be sustained. If resources cannot be increased in the short run, government can take measures for a drastic cut in expenditures. This does not seem to be on the cards. Pakistan does not deserve to face another crisis on this account. Should Mr. Yusuf Raza survive the present crisis he should move to correct some of the structural imbalances.

—The writer is a member of the former Civil Service of Pakistan.

Source:
http://pakobserver.net/201101/05/det...s.asp?id=69715
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