Pakistan’s coming elections and the economy

Pakistan’s coming elections and the economy

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Uncertainty about the upcoming general election in Pakistan has somewhat subsided after the Election Commission announced that polls would be held in the last week of January 2024 and also notified the preliminary delimitation of constituencies – a major milestone before the poll. 

Although an overwhelming majority of people in Pakistan demand timely elections, a large percentage of them see elections through the prism of the economy. A recent public opinion survey conducted by Gallup Pakistan has reported that the top six out of 12 major problems identified by the survey’s respondents directly related to the economy with the topmost being inflation, identified by 89% of the respondents. Poverty (88%), unemployment (88%), corruption (82%), electricity prices (82%) and electricity shortages (78%) were the other five top problems. 

People generally expect that the new elected government will have the mandate and five-year term to focus on and solve the economic problems of the country. The government will have to take tough and somewhat unpopular decisions to put the economy back on track and only a government which has received a clear public mandate can take such decisions at least in the first few years. 

The country lacks representative governments both at the federal and provincial level at this time. It is true that without elected governments, key decisions especially the ones relating to economy cannot be taken. Even if the caretaker government takes such decisions, it is highly unlikely that international financial institutions, foreign governments and potential investors would take such decisions seriously. The long-term economic decision-making and negotiations with such institutions would, therefore, begin in earnest after elected government is in place.  

Pakistan would need to enter into a long-term agreement with the International Monetary Fund (IMF) to secure sustained financing over the next three to five years and that can happen only after an elected government takes charge and the parliament is willing to undertake necessary legislation for required economic reform.

If Pakistan has to come out of its current economic mess, the new government will need to privatize these SOEs efficiently no matter how unpopular the decision proves to be. 

Ahmed Bilal Mehboob

Pakistan’s economic indicators have unfortunately deteriorated to such an extent that routine economic management may not cut much ice. Some difficult, painful and unpopular decisions may have to be taken such as doing away with almost all un-targeted subsidies, passing on the actual price of imported fuel to the consumers, strictly enforcing the collection of utility bills, taxing sectors like agriculture, real estate and retail business which are considered highly influential and traditionally provide support to various political parties and top political leaders. Various past governments have, therefore, understandably hesitated to adequately tax these sectors and instead allowed the problems to compound over time. 

A number of State Owned Enterprises (SOEs) have been running despite huge losses for the last many years, but successive governments have been unable to either run them efficiently or privatize them despite strong pressure by the lenders. Privatization is generally resisted by the employees of such enterprises who fear greater discipline and possible laying off by new private owners. These employees and their families form a huge pressure group for any government and one political party or the other takes up their cause. If Pakistan has to come out of its current economic mess, the new government will need to privatize these SOEs efficiently no matter how unpopular the decision proves to be. 

Political governments tend to indulge in shiny, highly visible and expensive projects especially closer to the election. Often the real utility of such projects is questionable but the temptation to attract votes leads to spending on such projects even after procuring expensive loans. Such temptations will need to be resisted by future elected governments irrespective of the political cost.

Elected governments generally focus on projects which have a chance of completion during their term of office which is constitutionally five years but is generally cut down to three or four years for various reasons. A case in point is the inability of successive governments to initiate hydro-electric projects in time because these typically require over ten years to complete. Power plants using expensive imported fuel were constructed instead because these could be completed in two to three years.

The coming election may lead to economic improvement if a political party wins sufficient seats to form a stable government without the need of a large coalition which slows decision-making and imposes expensive compromises. Ideally, the future ruling party should come to power after thorough homework, so that it is able to efficiently implement the painful but necessary reforms in the initial two to three years, and then ease the unpopular measures in the last one to two years of its term to be able to face the next election. 

Whichever party forms the next government; it will have to prefer long-range economic reforms over short-term political benefits to extricate the economy from a huge mess.

— Ahmed Bilal Mehboob is the president of Pakistan-based think tank, PILDAT.

Twitter: @ABMPildat

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