Ditching the patchwork on Pakistan’s ailing economy
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Even by the standards of erratic practices that have become its governance hallmark, the Imran Khan government outdid itself last month. The federal cabinet praised the policies of macroeconomic stabilization pursued by Finance Minister Hafeez Shaikh but failed to get him elected senator by even the ruling party members to allow him the legal cover required to continue as minister.
As replacement, Khan notified as finance minister Hamad Azhar, a youngish, upcoming star in the ruling party ranks. He swore by Shaikh’s flagship achievement of a three-year $6 billion IMF bailout program for Pakistan and pledged to stick to its stabilization theme. Two days later Azhar was sacked and rank outsider Shaukat Tarin was brought in as new finance minister.
Barely a fortnight in office, Tarin has shredded Khan’s economic policies and vowed to alter course drastically including renegotiating with IMF its central condition of macroeconomic stabilization saying the economy can’t prosper through “strangulation by stabilization.”
The free hand given to Tarin to remold economic policies as he pleases is being seen as Prime Minister Khan being fed up by the incompetence of his team that has seen government unpopularity rise as evinced in a slew of recent opinion polls. It seems he has abandoned his own propaganda of how good his policies are and is finally putting the cards of a new policy on the table as his new finance czar reveals a radical new makeover. Will Khan be fourth time lucky with his fourth finance minister in three years in his bid to finally turn the economy around?
First, who is Tarin? He is a banker by profession and has served as finance minister from 2008 to 2010 for the Pakistan People’s Party government of Prime Minister Yousaf Raza Gilani, headed the Karachi Stock Exchange twice as well as served as adviser to Nawaz Sharif government in 1997, helping it resurrect nationalized commercial banks as profitable entities and changing the face of banking in Pakistan.
Tarin has in the past broached the necessity of a ‘national charter of economy’ underwritten and supported by all key political parties, including the largest three: Khan’s PTI, Sharif’s PML-N and Bhutto’s PPP. Polarized and bitter politics, of course, make that difficult even though all three big parties support this grand concept.
Adnan Rehmat
Trashing Khan’s policies of the last three years, something no other minister dare do, Tarin says the economy has trapped itself into a crippling debt pile and can no longer survive by over-taxing citizens out of the quagmire. Instead, he has thrown himself into a 16-hour workday routine to abandon “stabilization” (slashing expenditure) in favor of “growth” (spending streak). His first major assignment is presentation of Khan’s fourth national budget in less than four weeks.
To this end, Tarin is ordering a halt to increase in tax rates – a hallmark of Khan’s government, which has failed to meet even downward-revised annual tax targets for three years running – and announcing stimulus packages and public sector financing to reverse current negative growth. For three years running, the Khan government’s economic growth rate has increased only negatively, down now barely one percent from 5.8 percent when he assumed office in 2018. Tarin is promising to take it to 3 percent by this time next year and double that the year after.
The big question is whether Tarin’s proposals constitute a case of too little too late, or a realistic way out of impractical policies that have stifled the economy made worse by the devastating impact of the pandemic? Tarin’s proposals make sense but in themselves may not be enough. An economic turnaround would have to be bankrolled by trust in the policies on the back of political consensus without which market sentiments remain cannibalistic.
Tarin has in the past broached the necessity of a ‘national charter of economy’ underwritten and supported by all key political parties, including the largest three: Khan’s PTI, Sharif’s PML-N and Bhutto’s PPP. Polarized and bitter politics, of course, make that difficult even though all three big parties support this grand concept.
But Tarin is uniquely well-placed to make this a breathtaking possibility by using his direct personal relations with the parties of both Bhutto and Sharif, who he has served in the past with distinction, to generate broader consensus on the next best steps to shore up the economy on a long-term basis, rather than Khan’s interest in the short-term to help him gain back his eroding popularity with general elections just two years away.
Pakistan needs to stop patchwork treatment of its ailing economy and instead inject it with a long-term twin purpose of growth-and-stability instead of perennially pendulating between the two without achieving either.
*Adnan Rehmat is a Pakistan-based journalist, researcher and analyst with interests in politics, media, development and science.
Twitter: @adnanrehmat1
