It is the same old, damaged car. Only the driver of the car has changed. This is the perception that is gaining traction about the newly-elected government – two months into the latter’s tenure. Why is such a perception – or misperception – gaining strength within opinion-makers?
It is an undeniable fact that no government in Pakistan has ever inherited an economy in as terrible a shape as the one we have right now. It is equally true that important institutions like the Ministry of Finance, the State Bank of Pakistan and the Planning Commission have been severely weakened in the last five years. Expecting a reversal in the declining trend or recovery in the economy in a span of two months is nothing short of asking for a miracle to happen. I have stated time and again that given the extent of damage, it will take at least three years for the economy to come out of the woods.
The previous regime and its weak and frivolous economic team truly damaged the economy of Pakistan and inflicted miseries on hapless millions. Through the power of the ballot, the people of Pakistan gave a mandate to the PML-N not just to head the country but also steer the economy out of the mire and morass of economic attenuation. Managing the expectations of the people is, therefore, the greatest challenge for the present political leadership. If there is a perception of inactiveness or maintenance of the status quo within two months of its tenure, it means that the political leadership is failing to manage the expectations of the people. Such a perception must be changed with a proactive approach.
Lamenting the state of the economy and the country’s finances that the new government had inherited, Finance Minister Ishaq Dar commented during his budget speech that his “enthusiasm, however, [was] seriously dampened as [he] discover[ed] that the new government [was] inheriting a broken economy”. He further stated that “from economic growth to prices, from revenues to expenditure, from public debt to circular debt, from monetary expansion to interest rates, from exchange rate to foreign exchange reserves and sustainability of balance of payments, I wish I could identify one single area where their economic management was in the best national interest.”
This was an accurate summary of the performance of the three key institutions and their leaders by the finance minister, yet it is mind boggling that he expects to turn the economy around with the same set of people who were partners in crime during the tenure of the previous regime. By keeping those people in his fold, what kind of message is he delivering to the people of Pakistan? Is it not the same as maintaining the status quo yet expecting miracles to happen? Such actions lead to the perception of non-seriousness on the part of the government.
Restoring the confidence of the private sector should have been the topmost priority of the government. The private sector was upbeat over the victory of the PML-N. They waited for Budget 2013-14 to get a sense of the direction and priorities of the new government. Since the budget was prepared in a few days, it did not come up to the expectations of the majority of the private sector. They were also expecting that the prime minister would visit all the Chambers of Commerce and Industry to boost their morale. The PM was in Karachi but did not get the time to meet members of the private sector. Members of the association of foreign investors were also expecting Prime Minister Nawaz Sharif would meet and address them. That too has not yet happened. All this gives the impression that the economy is not on the radar of this government either.
Budget 2013-13 did not leave a good impression as well. Prepared in haste, it left much to be desired. It was prepared by those who had prepared five previous budgets with the same philosophy of treating revenue as a residual item. All the five budgets failed to achieve their revenue, expenditure and budget deficit targets. Should we expect this budget to be different from the previous budgets in achieving targets?
The new numbers for key macroeconomic variables released for the month of July are disturbing indeed. Inflation has surged to 8.3 percent in July 2013 as compared to 5.1 percent in May and 5.9 percent in June. A major contribution to this surge has come from wheat prices. A wheat crisis is looming ahead. The price of wheat and its products with combined weight of over 4.5 percent in CPI basket is up by over 22 percent in July. The country is facing a shortage of wheat to the extent of 1.5-2.0 million tons. This news is sufficient enough for the international price of wheat to go up. Corrupt elements consider this a perfect opportunity to make money. The government must take this crisis seriously lest a further blow is dealt to the economy. It has the potential to take the inflation over the double-digit in the shortest possible time.
The exchange rate has depreciated from Rs98.5 to Rs102 per dollar in a few days’ time thus adding to public debt by over Rs200 billion in the first two months of the government. It will raise the price of oil as well as the cost of electricity generation. Certainly, this is not a good beginning. In fact, this adds to the perception that the government is finding it difficult to manage the economy despite the claim that it had prepared itself to handle the multi-dimensional challenges facing the latter.
On the governance front, people do not see any perceptible difference from the previous regime. The law and order situation continues to deteriorate. Jail breaks appear to be a norm rather than an exception. Karachi continues to bleed even in the holy month of Ramazan. Divergent views on outcomes of the meeting of the Council of Common Interests are emerging between the centre and the provinces. Conflicting views on subjects that matter for the finalisation of the IMF programme are not a good sign.
Finally, a few words for the finance minister. It appears that he is not giving quality time to the finance ministry. He has involved himself on political matters, which are affecting his performance as minister. He must bring his economic team, a vibrant and knowledgeable spokesperson for the ministry, and must not spread himself thinly on political matters. His performance will be judged by outcomes on the economic front.
In the end, no one expects any miracles on the economic front in two months. However, the government must be seen to be making efforts. It must improve its communication strategy with the people of Pakistan, particularly those who mould public opinion. Failure is not an option for the government and the country. The perception of being inactive or maintaining the status quo must be removed through acts and not statements.

The writer is principal and dean of NUST Business School, Islamabad.
Email: ahkhan@nbs.edu.pk
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