Need for a strategy
IN his review of the current state of the national economy, federal Finance Minister Ishaq Dar made two important points about putting the economy back on the right track and rectifying the widening budgetary and current account imbalances. It hardly needs to be emphasised that the economic agenda should be the government’s first priority given the hardship people are facing. Rising food and energy prices have fuelled inflation which was at an all-time high of 14.12 per cent in March. Mr Dar said the new coalition would have to take some harsh steps in the next 75 days of the current financial year to restrict the fiscal deficit — which threatens to balloon to nine per cent of GDP — to the manageable level of six per cent. The proposed measures include one or more hikes in domestic oil prices and rationalisation of taxes. He did not say how the coalition planned to shield lower-income groups from the negative impact of further increases in oil prices. The issue of rationalisation of taxes was also left unexplained.
The second point he made was that the government would seek to arrange $2.5bn from external sources to shore up the country’s dwindling foreign exchange reserves. But he did not elaborate whether the government intended to raise the present stock of foreign exchange by seeking assistance from multilateral donors or by bringing fresh foreign investment, or pursuing some other strategy. One doesn’t have the slightest clue how the economy or the common man will be affected if the government fails to arrange this amount.
The remaining part of the minister’s briefing was mostly devoted to criticism of the previous PML-Q and caretaker governments and their mishandling of the country’s finances, and a repetition of what we already have learnt from the State Bank’s last report on the performance of the economy during the first half of this year. The previous PML government and the caretakers were accused of presenting an inaccurate picture of the true health of the economy. The SBP too has stated so in its last report.
The minister also promised accountability of the economic managers of the previous government, including former Prime Minister Shaukat Aziz, through the Senate’s Finance Committee and the new Public Accounts Committee for bringing the economy to this critical point. Will this principle of accountability apply to those who are going to manage the economy from now onwards? It would have been much better if Mr Dar had told us about the steps the new government might be contemplating — if it is indeed thinking along these lines — to make the processes of economic policy formulation and budget making really transparent through wide-ranging debates in parliament and the media to ensure that the finance ministry baboos do not dare fudge figures to show growth when there is none.
