Efficient Team -- A Must To Steer Economy

By Amir Zia
The News
January 16, 2011

It remains an irony that the PPP has no person to offer from its ranks for the key slot of finance minister.

What are the foremost requirements to run an economy or to pull it out of a crisis? The answer, perhaps, is simple — a vision and a dedicated team. Sadly, the Pakistan Peoples’ Party (PPP) government lacks both.

Barely three years in the office and this government has already given us four finance ministers, five finance secretaries and three central bank governors. A continued state of flux in the key members of economic team means uncertainty and instability. For both foreign and local investors and businessmen, stability and consistency in policies remain a prerequisite for committing money in any country. Pakistan under the PPP has failed to meet this basic requirement, let alone tackling bigger issues that include providing clean governance, implementing the International Monetary Fund (IMF)-backed reforms and combating terrorism and crime.

It remains an irony that the PPP has no person to offer from its ranks for the key slot of finance minister. It banks on outsiders or stop gap measures to run the economy that speaks volumes about the lack of this government’s economic vision.

While PPP old guards stay committed to the jargon of Zulfikar Ali Bhutto-era, those who lead the ministry today are for privatisation, deregulation and economic liberalisation. No wonder this internal contradiction is hurting the policy-making and its implementation.

Let’s begin the story from the beginning. The first finance minister of this government, Ishaq Dar, was borrowed from the Pakistan Muslim League (Nawaz), who in his zeal to criticise Pervez Musharraf, declared that Pakistan’s economic numbers were fudged. This was the first self-inflicted blow to the economy, creating a crisis of confidence. Dar’s early exit from the scene, as a result of PML (N) differences with President Asif Ali Zardari, brought PPP stalwart Naveed Qamar as a stopgap-measure. Qamar kept finance minister’s chair warm as PPP hoped against all hopes that the PML (N) would return back to the federal cabinet. More than six crucial months were lost in indecision at a time when the country needed aggressive management to counter the impact of rising food and oil prices.

Shaukat Tareen, a veteran of banking sector, but not a PPP ranker, entered the scene as finance minister when the country was facing a gnawing balance of payments crisis. Tareen went to the IMF for $11.3 billion standby arrangement, which many analysts say was a far bigger programme than Pakistan’s actual requirement.

Dr. Ashfaque Hasan Khan, director general NUST Business School, Islamabad, and a former Finance Ministry adviser, said that the country needed not more than $2.5-3.0 billion IMF programme.

“A smaller IMF programme would have worked. It was enough to show to the world that the IMF remains engaged with Pakistan,” he said. “The big loan package from the IMF has pushed Pakistan deeper into debt.”

Tareen, however, left the cabinet on a sore note because of his inability to implement reforms, which he thought were crucial for the economy. From privatisation to cutting government expenses to that of expanding the country’s tax-base, the PPP veterans and old-guards remained firmly opposed to his proposed policies.

Tareen also overestimated the flow of funds coming from Friends of Democratic Pakistan and failed to foresee the impact of the National Finance Commission Award under which resources and powers have been transferred to the provinces. That resulted in the widening of budget deficit to 6.3 from the targeted 4.7 percent.

Abdul Hafeez Sheikh, the fourth finance minister, was part of the Musharraf government and remains a PPP outsider. He faces more or less the same challenges confronted by his predecessor -- the top one remains politics overriding the economy.

The way government has withdrawn the recent rise in fuel prices over the pressure of opposition and disgruntled allies and backed away from implementing the reformed general sales tax (RGST) underlines that Sheikh has been alienated in the cabinet.
But it is not just the opposition within the PPP ranks that is holding back the current economic team from delivering and implementing the process of reforms.

The current team has failed to come up with any mid- to long-term plans to arrest the present slippage on the economic front and convince the government not to go for an increase in its expenses that includes the recent hefty raise in the salaries of government employees.

A senior Finance Ministry official, who spoke requesting anonymity, said there appears a complete disconnect within the team. “Finance Secretary does not know what Finance Minister is doing. The State Bank of Pakistan governor instead of just focusing on its core responsibility is involving himself with the restructuring of state-run institutions, while the Planning Commission has yet to focus on planning.”

Many in the Finance Ministry complaint about what they call ‘lethargic’ and ‘laidback’ attitude of the finance minister. “He hardly interacts with the private sector or media. On crucial economic issues when the government was being attacked from the right, the left and the center, there was no one to present the government’s point-of-view,” the official said.

The long foreign trips of key officials -- sometimes stretching up to three weeks -- also hurt the effective management of the economy. Some key officials of this team, including Deputy Chief of the Planning Commission, Dr. Nadeemul Haq and Chief Economist Dr. Jaffer Qamar, have lived most of their professional careers abroad. This leaves them out of touch of Pakistan’s ground realities.

“Some members of this team do not have their families and homes in Pakistan. Till recently they have been living in clubs and hotels in Islamabad. They hardly have any stake in this country. They have to just pack their bags and go,” said the Finance Ministry official.

As the PPP government drifts from one crisis to another, economic management continues to remain low on its priority list. Its actions and words hardly boost the sagging confidence or offer any ray of hope for the beleaguered economy.