This government has been in office for more than two months now and one is trying to make sense of its economic strategy, if any, for Pakistan’s economic sustainability. Let’s try and analyse the economic developments thus far to help ascertain whether or not the finance minister or rather the economic managers per se are working toward a plan or do we just see some random initiatives, as we have essentially seen in the past, that simply tend to be ad hoc fire-fighting measures without really a determined route to laid down or the ultimate objectives. So, let’s begin with what have we seen so far.
It seems that the finance minister and his economic team for now are mainly concerning themselves with five conversations in finding some quick solutions. First, it is mostly about how to get another program from the IMF, in any which way one can. While one can understand the necessity of such an arrangement, at least as things stand today, one is not clear what exactly we want to achieve, once we do get one.
IMF programs are mainly about budgetary support for economies that have landed themselves in trouble and face difficulty in meeting their foreign exchange commitments. Additionally, with IMF being on board it also helps the country to fruitfully engage with other international financial institutions, which otherwise may be reluctant to come forward. The IMF arrangement though overtly financially structured invariably has some political strings attached to it and so naturally some underlying geo-political connotations accompany the terms and conditions. We just saw that in its recent report on Pakistan where on one hand they praise Pakistan for the economic steps it is taking, but on the other hand in a footnote of the report it brackets Pakistan with some of the most unstable economies of the world (namely six) terming them as high risk on social unrest and civil war. Implying that whereas, a loaning to Pakistan is a very high-risk proposition for the IMF, it does plan to look into favourably provided Pakistan continues to follow IMF’s directions. In another they want Pakistan to not use IMF loans to meet its CPEC obligation, which by the rule book seems rather strange since it is tantamount to cherry-picking the Pakistani obligations that the IMF will help with – nothing beyond.
Naturally, beggars cannot be choosers and by now countries like ours (who economically make a mess of themselves) should know that the support comes with a price on one’s sovereignty in a manner where economic decision-making slips from Pakistan’s hands to those of the IMF – Now after all, the IMF has to ensure that it is paid back the money that it lends and by the way, never mind the different yardsticks it sometimes chooses to apply! Anyway, not belittling Finance Minister Aurangzeb’s efforts, it would indeed be an important and timely success if he in effect negotiates a doable new IMF program of roughly $8 billion layout, however, the real work starts after. And here we see very little action other than PIA’s privatisation bid. It is this post-IMF strategy where more clarity is needed, because unless we can genuinely find a sustainable revival formula to run our financial affairs, this Ghana-style lover affair with the lender of the last resort may remain never-ending!
Going back to the second point on evaluating the government’s prevailing mindset on foreign investments and privatisation drives, it seems it is convinced that for now the immediate or perhaps the only remedy for buying a ticket out of trouble borders on either quickly selling the family silver (whatever is left of it) or by leasing out the country’s resources to foreign bidders - regardless of any adverse long-term repercussions – as long as it brings in dollars and that too quickly. Ironically, graphing say a 2 to 3 decades outlook has never been a forte with our leaders.
On privatisation itself, if PIA does indeed gets privatised it should be a good ice breaker paving the way for more SOEs to come under the hammer, the ones that tend to be consistent resource drainers on the national exchequer. Having said this, the real litmus test on the success of such sell-offs would lie on the following elements: how transparently are they sold, who buys them, and the related terms and conditions. Sadly, most privatisation exercises in the past have lacked all three. We do not want to again be in a position where a paltry investment comes into pick-up strategic entities and then goes on to subsequently become a regular foreign exchange drainer by way of repatriations against profits, royalties, technical fees, license fees, etc. For example, the caveats in divestments of entities like PTCL and Karachi Electric haunt us to this day.
Dr Kamal Monnoo
The writer is an entrepreneur and economic analyst. Email: kamal.monnoo@gmail.com