Election results took everyone by surprise. The PML-N won beyond expectations, perhaps on account of its better management of the Punjab. The ANP was routed in KPK. The PPP and the MQM retained their mandate in Sindh, despite gross governance. The mandate in Balochistan was split.
This is a disturbing situation. The PML-N can comfortably form governments at the Center and the Punjab, but it has got no mandate, or a very small one, in the other three provinces. This has put a great responsibility on the PML-N leadership which will have to take the other provinces along. The PML-N got their mandate primarily in the Punjab, which elects the largest number of members to the national assembly.
The economy is in disarray. Reviving the economy would be the major responsibility of the government. The economic revival is also linked to the law and order situation. So the government would have to improve security and law and order in the entire country. However, the responsibility to control law and order lies with the provinces. Any interference in provincial affairs would not be tolerated by the opposing parties in the provinces. The federal government would have to move carefully and take the provinces into confidence. The provincial governments would be formed by the same forces outside the Punjab, by the same parties who were booted out of power by the PML-N. They know that if this party delivered in the next five years, it might capture all the other provinces as well.
Politics is a dirty game in Pakistan; the election campaign was dirty. The PPP crossed all limits in negative propaganda against the PML-N through the print and electronic media advertisements. The PTI leadership did the same in its public meetings. This, perhaps, backfired and benefitted the victorious party. The PML-N also cleverly passed on all its failures to deliver in the Punjab on to bad governance at the federal level.
This time around, the PML-N will form the governments in both the Center and the Punjab. There will be no chance to pass on failures to anyone else. It will have to deliver in the Punjab and, at the same time, help the other three provinces as well. If it fails to help the other provinces, it would be accused of a Punjab bias. So the economic situation will have to improve tremendously at the federal level.
The new ruling party is very well aware that the real problem lies at the federal level. The state owned companies are bleeding out Rs. 500 billion per year. The power sector is in disarray. Appointments at key posts were made on political considerations. Merit would have to prevail. The tax to GDP ratio is much lower than even in the Sub- Saharan African states. The tax base would have to be extended. Investment in the country has completely dried up. Even the domestic investors have stayed away. Their confidence would have to be restored.
The question is that does the PML-N have a competent financial team to take the country out of the current mess? They have nominated Ishaq Dar as the Finance Minister. He served in the same position for a few weeks during the PPPP-PML-N coalition in 2008. His hasty decisions accelerated the economic decline. As the federal finance minister he was supposed to safeguard interests of the state, but he was carried away by emotions and in order to defame the Musharraf regime he admitted at the annual IMF meeting that the country's finances were in disarray. That prompted all rating agencies in the world to downgrade Pakistan's economic ratings. He cancelled the launch of the sales of around $4 billion shares to foreign buyers of public sector companies when the stock market of the country was bullish. After his outburst against Pakistan's economy, the meltdown started. By that time the PML-N pulled out of the coalition leaving the mess to the PPP to handle.
As finance minister in 1998, he was the man responsible for freezing of foreign currency accounts in Pakistan. That eroded the confidence of the overseas Pakistanis in the government. One could only hope that he has leant from his past mistakes and he will run the ministry of finance more prudently this time. The economy cannot be run on whims or hasty decisions. One has to plan every move after considering the pros and cons of one's decisions.
Balancing the budget would be an uphill task for any finance minister in Pakistan. The government expenditures are much higher than the government revenues. The revenues have to be doubled to balance the budget. It is simply impossible to double the revenues immediately. We generate Rs, 2,100 billion tax revenues every year (if this year's revised revenue target is achieved). We need Rs. 1,100 billion for debt servicing, Rs. 600 billion for defense expenses and Rs. 500 billion annually to finance the losses of public sector companies. So the entire revenue is consumed under these three heads. There is no money left for running the government and for public sector development programs. The government has to resort to debit financing to the tune of Rs. 1,700-1,800 billion which puts pressure on the economy, the rupee and inflation.
The first objective should be to reduce this deficit. For achieving this objective the new finance minister would have to cut non-development expenses by at least 30 per cent (baring salaries). This would save at least Rs. 150 billion. The government would have to make sure that the tax collection increases at least by 15 per cent. This would add Rs. 300 billion to the kitty. At the same time, the new finance minister would have to ensure that the bleeding in public sector companies declines by Rs. 200 billion in the first year. This way the government would be able to reduce the budget deficit by Rs. 750 billion in the first year. If this objective is achieved it would be a positive signal to the outside world that the government is reforming the economy. It would restore the confidence of investors and pave the way for new job creation.
The entire economic team of the PML-N would have to work in unison. The Ministry of Commerce would have to devise ways to discourage luxurious imports; it will have to bring down the import bill by at least 10 per cent in its first year and initial policies to increase exports by 20 per cent to reduce the budget deficit. The Ministry of Petroleum would have to motivate the private sector and public sector companies to increase the production of oil and gas in the country. The Ministry of Water and Power would have to put its house in order. The postings in the power distribution companies would have to be on merit and be performance-based. The targets to reduce line losses and increase recoveries should be achieved by all means and the staff should be made responsible for any lapses.
The Textile Ministry would have to find new markets for the textile sector. Incentives should be provided to restart investments in this sector.

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