Down the beaten path

By Dr Pervez Tahir

Published: October 26, 2018

On the financial side of the economy, governments in Pakistan

invariably inherit a mess and also leave a mess. There are no exceptions
here — civil, military, left or right of centre. All go down the beaten path
to get going. The first port of call is the brotherly Saudi Arabia. Deferred
oil payments during 1998-2004 converted eventually into grant and an
outright grant in 2014 are well-known. Then comes China, with a long
history of a friend in need. Last comes the IMF, literally the lender of
the last resort.

This rather sour honeymoon is followed by two to three years of hide

and seek with the IMF, the scapegoat for studied inaction. Exit the IMF,
and the action starts to recreate a financial hot house. And the cycle
moves on. There was a “change” this time. Not exactly from the old
guard, the incumbent had claimed a lot more than it should have. Nay,
it was a classic case of good intentions paving the way to hell. $200
billion to be recovered from the corrupt and the money launderers. A
similarly fantastic sum was to come from overseas Pakistanis — in
investment, remittances and donations — if only they had the right to
vote, a congenial climate and, most important, an honest leader. In the
last by-elections, the votes cast were less than the most pessimistic
estimates. Financial inflows are not likely to follow a different path.
Things are looking up — for now. Saudi Arabia has agreed to deposit $3
billion for one year, defer oil payments of a similar amount for three
years, set up an oil refinery in Gwadar and prospect minerals in
Balochistan. The Prime Minister’s forthcoming visit to China is likely to
deliver similar dividends. The Chinese stood by Pakistan when the
economic relationship was not very strong. Now that relationship has
undergone a sea-change in the form of CPEC. Pakistan has not done a
good job of analysing and informing the world and its own people about
the costs and benefits of the project. China has taken the lead and asked
the World Bank to carry out a detailed study. The Chinese know that
Pakistan would still have to go to the IMF. A study by the Bretton
Woods sister would provide comfort in the negotiations. Needless to
say, inflows from Saudi Arabia, China and the UAE will also improve
the negotiating position. Going by the past experience, accounting for
the oil facility may be a sticking point. However, what is important now
is the programme, not its size, as a certification to access other
multilaterals and the market. The Americans are already back to the “do
more” mantra from the Trumpnology of “no dollars to repay the
Chinese debt.”

Will it be just one last time, as the PTI’s top leadership keeps asserting?
Failures in the past are attributable to a lukewarm approach to
reforming the structure of the economy. Tax reform, regulatory
competence, energy rationalisation, restructuring of public enterprise,
State Bank autonomy, and good economic governance through civil
service reform — the list goes on and on. Once the immediate crisis
shows signs of subsiding, as it has in the rupee’s gain and rising share
prices, and will in the form of lower fiscal and current deficits and
higher reserves, the zeal to pursue reform weakens. Seeking waivers,
exceptions and sheer intransigence becomes the order of the day. The
PTI government claims that it is serious about reform. By the time of
the next budget, we will know whether a great leap forward has
happened and the country is finally off the beaten path.

Published in The Express Tribune, October 26 th, 2018.