The Cabinet reshuffle and Pakistan’s economic destiny
A major change in Pakistan’s federal cabinet within the first eight months of Prime Minister Imran Khan’s party in power hasn’t gone down well with his voters. Three things came to light from the subsequent media content following the reshuffle.
First, while Prime Minister Khan defended his decision and said that he would not shy away from removing ministers who did not perform, he didn’t go the extra mile and accept responsibility for appointing incompetent cabinet members in the first place. Simply put, Khan owes the country an explanation about what exactly prompted the reshuffling of major cabinet portfolios in the middle of an IMF negotiation.
Second, if the cabinet members were indeed incompetent, then why have some of them been retained in the federal government and parked in seemingly unimportant ministries? For example, Chaudhry Fawad Hussain, ex-Minister for Information who is now the federal minister for science and technology. Even former Finance Minister Asad Umer was offered the ministry of energy which he declined to accept, at least for the time being.
Third, the TV shows have been less than kind to newly appointed finance adviser to the Prime Minister, Abdul Hafeez Sheikh. The media has been alight with statistics that illustrate a less than desired performance by Sheikh the last time he was in the same position — a tenure marked by the deterioration of capacity at the finance ministry and all other economic ministries including the planning commission. The governor of the central bank resigned in the face of pressures from Islamabad and the state bank’s autonomy was compromised. His ministry was also unable to support a power sector reform, the outcome of which was 22 hours of load shedding in several parts of the country, and was unable to implement Sheikh’s own plan for the reform of bleeding public sector enterprises, many of which now have unsustainable debt stocks. In the face of this recent history, Pakistan’s economic fate looks far from bright.
Now that an agreement with the IMF is claimed to be just around the corner, the new economic team will need to demonstrate and convince the markets that they do in fact have a strategy for macroeconomic stabilization, sustainable growth and job creation. The draft of medium-term economic frameworks launched by Asad Umer have been met with criticism and it remains to be seen if Hafeez will only tweak the same document or come up with an out-of-the-box solution.
Simply put, Khan owes the country an explanation about what exactly prompted the reshuffling of major cabinet portfolios in the middle of an IMF negotiation.
Dr. Vaqar Ahmed
During his last week in office, Umer failed to sell a tax amnesty scheme. The recently launched Pakistan Banao Certificate, which was supposed to be an easy investment avenue for overseas Pakistanis has proven unsatisfactory and indicated the low confidence of local investors and diaspora in the current government. Tax revenue targets have been missed and made it difficult to sustain even the most essential welfare spending by the public sector. Likewise, progress on initiatives to stop public sector enterprises from bleeding out further is slow. It is up to Hafeez, with a less than perfect track record to show for himself, to cohesively execute the government’s already announced initiatives.
The real litmus test for Hafeez will be the federal budget of 2019-20, which is now just around the corner and wherein one can only cautiously hope lies a focus on fiscal discipline, ease of doing business, increasing the competitiveness of Pakistani exports and helping Pakistani firms integrate in global value chains and in line with the PTI election manifesto.
So far, federal and provincial governments have remained unable to expedite the progress on special economic zones (SEZs). The promised one-window facilitation for tax, labor, environmental and municipal permits is not off the ground. Delayed land acquisition in case of some SEZs and pending disputes and cases in business courts have led to doubts on the competence of the state to actually facilitate foreign investors.
And yet, amid all of the above, data from the securities and exchange commission of Pakistan still indicates strong numbers on new business registrations. A youth bulge, rising levels of literacy and a more connected and technology savvy urban class is translating into a rising number of startups in agro-based, manufacturing and services industries. This youth represents the cohort which is not seeking greener pastures in other countries, but will continue to make an effort to sustain themselves locally. The fate of these business initiatives must be different from existing small and medium enterprises in Pakistan — those which continue to face prohibitively high costs of doing business, harassment from tax and customs’ authorities, and weak facilitation from a government that has thrown its entire ethos into question.
— Dr. Vaqar Ahmed is an Economist and author of ‘Pakistan’s Agenda for Economic Reforms’ published by the Oxford University Press.
Twitter: @vaqarahmed
