Now that speculations over early elections – since the vote of no-confidence movement – are over and we have a caretaker government, let’s spell out the expectations plain and simple.
It’s crystal clear that the transition period until next elections would easily last beyond five to six months. In a fragile economy as ours, every month’s competence or the lack of it matters. There is no time for complacency.
A formidable rectangle is being formed. A highly respected central banker (the only female cabinet member), a veteran bureaucrat to navigate intricacies, the architect of energy dossier against IPPs and an expert planning commissioner is tasked to spearhead the much-touted Special Investment Facilitation Council (SIFC).
The huddle seems competent and apparently empowered to weather the storm of political interferences of an erstwhile electoral politicking. What their priorities are matter the most.
Initial depreciation of the rupee against USD is warming speculators again. There needs to be a clear stern message and action if hoarding has started again.
Under IMF’s bailout, precious dollars are not to be squandered to defend the rupee and need sweeping the market to build up net international reserves as well. Thus, honouring commitments of fiscal discipline, trustable market-determined exchange rate and war against inflation are battles that need to be won.
Even tougher challenge is ensuring energy security. Of paramount importance is immediate, full, equitable and unbiased pass through and recovery of costs in the gas and power sectors.
The poorest have been getting subsidised bills for too long now and to plug the hole, direct cash transfers should be made. Most of Pakistan is on LPG cylinder regardless. Similarly, electricity pass through and full recovery of taxes, margins, incidentals, etc would also need to be made from consumers in petrol and diesel prices. Despite the kind-heartedness, these tough calls must be taken without delays.
The base case scenario assumes a new IMF programme would be negotiated by the incoming government once the current nine-month programme expires. This time frame is too short to move the economic needle but a platform can be set. There seems a clearest resolve by civil-military leaders to accelerate foreign investments from friendly Arab countries under SIFC. The to-do list there must be fulfilled to attract investments, which create jobs, add dollars to the economy, are transparent and add a domestic skills set.
Glacial debt levels can only be sporadically melted through a constant supply of foreign capital in the country this decade.
Meticulous calculations are needed to fix the fiscal side. Though empowered with a limited mandate, a push to the FBR to widen the tax net, go after the untaxed and digitalise the process is vital to spur growth.
With a whopping debt level and interest rate, almost all of tax revenues are paid to service interest on loans. This is preposterous toying with 240 million lives. A team must sit down to see merits of any further tightening or start relieving pressure of debt service.
Observers, analysts, foreign investors and real stakeholders would want to see action from day one. Country needs a break from the heated political atmosphere for the last few years.
A smaller cabinet with prompt decision-making can leave an example for next one on a better form of governance.
Every effort must be made to hold elections at the earliest but the cabinet will be judged on how good care the caretakers took of the economy or the lives of 240 million. The boat needs to be steadied so we regain the confidence shattered by our own misadventures.
Investments, IMF, inflation, fiscal prudence and circular debt are KPIs. Let’s hand over a stable Pakistan.
The writer is an independent
economic analyst
Published in The Express Tribune, August 21st, 2023.
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