Who manages the economy?

Shahid Mehmood was dismayed to see business community leaders complaining about the state of the economy in a meeting with the army chief

Who manages the economy?
Last week, I could not believe what I was seeing all over TV screens and in the press. Pakistan’s leading businessmen, industrialists and tycoons were venting their anger and requesting a course correction. There was nothing unusual about this, but for the fact that the person being asked to ameliorate the worsening economic predicament was none other than the chief of army staff. It was neither the prime minister, nor the finance minister nor any member of the ‘economic team’ that Khan has mustered under his leadership.

As a Pakistani, who like his fellow countrymen wants to see this country prosper, this was a bizarre sight. The thought of what message this meeting was sending out to the world kept me disturbed, and it still rankles me. We want the world to take us seriously, but how does one expect the world to take us seriously with such incidents? The icing on the cake came from the government which seemed over the moon that a meeting with the chief would pacify fears of the business community.

How did it come to this? For a leader and a government that came with so much promise and high expectations, what went so wrong within a year that the army chief had to intervene directly on economic affairs and take the unprecedented step of meeting business community leaders to pacify their problems?

From the very start of the PTI’s government, I have voiced my doubts about its capacity to handle a country as complex as Pakistan, and especially its economy. PTI’s solution to addressing the country’s economic difficulties came in the form of Asad Umar, their whiz kid who people took to be a messiah of sorts. With all due respect to him, he was never an economist and seemed to be out of sync with ground realities. Consider, for example, his ill-fated attempt to turn around Pakistan’s loss-making public-sector entities by instituting yet another company (Sarmaya-e-Pakistan), based on Malaysian ‘khazana’ model. The issue, as I had pointed out even at the time of its institution, was that Pakistan is not Malaysia, and neither are the economic realities of the two countries the same. Moreover, Asad underestimated the power of powerful groups, rent seeking lobbies and bureaucracy that has every incentive to keep these entities functioning as they without reforms. A year down the line, I have been proven right. The much touted ‘Sarmaya-e-Pakistan’ is now dormant and ineffective, public entities are now under record debt and bleeding public money continuously, and three serving secretaries of the federal government the only notified members of its board. These are the ground realities which Asad never grasped properly.
The icing on the cake came from the government which seemed over the moon that a meeting with the chief would pacify fears of the business community

Even more astonishing was the irrational exuberance surrounding foreign aid and domestic tax collection efforts. The PTI expected that Pakistan would be showered with colossal amounts of foreign exchange once the mighty Khan took over. This line of thought made them stringent in their resolve to avoid IMF’s help. But a year down the line, as the air fizzled out of that balloon and regular sauntering to Arab capitals and Beijing couldn’t fill our coffers, the expected deal with IMF did finally take place. Then there was the out of place expectation that gap between expenditures and revenue (standing at Rs3 trillion at present) would vanish as ‘tax thieves’ within the country would immediately repent their past sins, give up their illegal ways and tax collection would shoot through the roof. The real problem lies with trust gap between people and government, the steadily expanding footprint of the unproductive leviathan and the corrupt FBR machinery. None of these vexing issues have been touched. Yet, tactics of forced retrieval of money were tried, ultimately resulting in the spectre of business community taking recourse to the army chief’s intervention being played right in front of us.

I had also advised the government’s economic managers to be wary of the bureaucracy’s hold on directing economic management. The typical method revolves around painting the former regime as a villain, absolving themselves of any responsibility and taking a finance minister into confidence that he/she would find it impossible to work without their services. Along the way, they find a niche for themselves and ways to extract favours. That is exactly what happened in PTI’s case. Bereft of any innovative ideas and totally dependent upon the bureaucracy, they trudged along until everything fell by the wayside. There are, of course, exceptions like Younas Dagha who have the courage to take a stand. But they are rarity than the norm.

There was also the grievous, pronounced failure to appreciate that a large percentage of Pakistan’s economic problems stem from micro level issues, which keep getting ignored by every government to the detriment of the country. Suffice to say, a country cannot have a productive workforce when a major portion of their time is spent negotiating and navigating pressing issues like water availability, insecurity, rising crime rates, the suffocating culture of public sector organizations and the futile attempts to get something out of them, a compromised and incompetent justice dispensation system which leaves critical issues unresolved for long, availability of essential services, lack of secure property rights, sexual assaults on women and children, traffic congestion, air pollution, lack of leisure and entertainment avenues, etc. No amount of chicken rearing programs, Ehsaas or PM Citizens’ portals will solve these issues. How does one, for example, make a judge accountable who delivers questionable judgments or deliberately leaves cases undecided for long?

There is no doubt that within a year, this government’s economic policies have proven to be a failure. The country is back to where it has been before: in control of the establishment. Thus, we’ve completed yet another circle, albeit the fact that this time around, the circle hardly took a year to complete. But that’s what we get when governance fails, as is the case of the PTI. And this time, given the deep quagmire that we’ve descended into (Pakistan’s debt and liabilities, for example, now stand at 104 percent of its GDP), it is hard to see how we are going to climb out of this pit. Already, business and manufacturing activity has contracted, economic uncertainty has increased substantially (imagine what would happen when Maulana descends upon Islamabad), buying power has seen substantial erosion, and economic growth prospects of the future are depressed at best.

It is a gloomy, scary picture. I shudder to imagine the circumstances if this government and its economic team continues. May God have mercy.

The writer is an economist

The writer is an economist. He tweets at @ShahidMohmand79