Wrong pitch, Mr Finance Minister!

Published: May 2, 2012

The writer is a business journalist based in Karachi. He worked as editor of business and economic policy for Express News from 2009 to 2012. He can be found on Twitter @khurramhusain [email protected]

How does one say this without feeling a little embarrassed? After all, our finance minister, Mr Hafeez Sheikh, is a career World Bank bureaucrat and really ought to have known better. Perhaps, they accidentally handed him the wrong script to read, because his remarks in Washington DC for the World Bank and IMF spring meetings sound more like the sorts of things he should be saying upon his return to Pakistan.

Maybe I have it all wrong, but I doubt that. You see, here’s how it normally works: in Washington DC, the attending ministers and finance officials usually craft their remarks around the message they have brought to the meetings. When they get home, their remarks usually revolve around what they brought back from the meetings.

But Mr Sheikh seems to have got it all backwards, or maybe I just don’t get it. While in DC, his remarks revolved around all the aid pledges he has obtained from donors big and small, about the “resilience” of Pakistan’s economy, about the stout character of the Pakistani people who will weather adversity with forbearance and how the magical stream of remittances will foot our import bill well into the future.

This might all be very well indeed but I think he threw that pitch at the wrong audience. That’s the message he should have delivered upon his return to Pakistan, assuring an anxious country that help is on the way, that things are not as bad as doomsayer columnists like me love to make it sound. While in DC, though, he should have taken a page out of the book carried by the African finance ministers and focused more on what reforms his government is implementing, or thinking about implementing, to meet the challenges that rising oil prices and slowing global growth will inevitably bring.

“We are addressing falling foreign investment by improving the business climate through fiscal reforms,” said Manuel Chang, finance minister of Mozambique, going on to add how his government anticipates dwindling inflows and, therefore, seeks to encourage growth in small business start-ups to boost employment.

They also talked about greater regional economic integration as the best way to mitigate the impact of the global crisis, to encourage greater regional flows of trade and investment so that countries that are dependent on the European Union as a destination for their exports can find an alternative market.

Now don’t get me wrong. I’m pretty sure that each one of these gentlemen can be taken to task for their handling of their country’s economy. I’m sure there are plenty of problems in their countries, like unemployment and inflation and fiscal rigidities and an overarching dependence on aid inflows. I’m also willing to bet that they have their own problems with pain-in-the-neck columnists pinpointing their faults in the newspapers all the time.

But while in DC, they chose to focus on the reforms they are working on rather than crow about the aid promises that they have secured. And the reason is simple: in DC you are speaking to your creditors, and they want to hear your story and they’re hoping your story revolves around concrete steps you’re taking in the here and now to help your economy stand on its own feet. In short, in DC they want to hear about the reforms, while in Islamabad they want to hear about the aid promises.

In other forums, Mr Sheikh talked about how democracy is striking roots in Pakistan, helping promote the rule of law and an unfettered public discourse. That may be very well indeed, but with all due respect, it’s not really his story to tell. If he’s celebrating the virtues of democracy today, what was he toasting during his years of service under the rule of General Pervez Musharraf?

He also talked about the unhappy inheritance that befell the infant democracy when it assumed power: plummeting reserves, falling currency, collapsing growth, skyrocketing subsidy expenditures and so on. The difficult path to stabilisation that was adopted as a response was also mentioned, and “just when things were beginning to get better, we were struck by the floods.”

The problem with building your story like this is it makes your creditors more, not less, nervous. His talk at the Brookings institution, to take one example, sounded just like last year’s budget speech, which was fine on the floor of the National Assembly where it was pitched to TV viewers. But coming from a finance minister, this story seems massively misplaced in Washington DC. Rather the story he told should have begun with a blunt and candid assessment of where the economy stands today, how he sees the challenges the country is facing going forward and what exactly he is doing about meeting those challenges. The lengthy political exposition and the almost reflexive invocation of the floods, could have come at the end as a reminder to the audience of the difficult circumstances Mr Sheikh is working within.

In an opinion piece for the Wall Street Journal titled, “Pakistan’s untold economic story” (April 24), he chose to emphasise the positive aspects of Pakistan’s economic story. The piece was studded with pearls like this line: “Business contracts have been consistently honoured.” Try telling that to the poor saps holding their ‘sovereign guarantees’ in the power sector! Elsewhere in the piece, he declares that “Pakistan was not immune to the global financial crisis”. Very true, but tell us Mr Sheikh, will Pakistan be immune to the coming period of global financial instability? What are you doing to prepare for this inevitability? Does he seriously believe he can woo investors from the West at a time when his creditors are shaking their heads at him?

Mr Sheikh has had difficulty with his story for far too long now. Almost from day one he has let politics distract him constantly. Of course, the politics he has to negotiate is powerful stuff, not to be underestimated, but as finance minister, he is a critical interlocutor between the political elites of this country and their creditors, both domestic and international. As such, it is fair to expect that he should know how to speak to these creditors, how to address the sources of their anxiety and back his words up with concrete actions.

Published in The Express Tribune, May 3rd, 2012.

Reader Comments (18)

  • Jalib
    May 2, 2012 - 11:30PM

    Masterfully put Mr. Husain.

    Recommend

  • academic_economist
    May 3, 2012 - 12:43AM

    If Mr. Sheikh was a knowledgeable/respectable economist, dont you think he would have quit his job as a Finance Minister a long time ago like other respectable economists did before him under the PPP rule?
    Also, he is the perfect example of the MO of the PPP throughout their rule, which is living off of the sympathy of the lenders. Rather than rising above the challenge and bettering the economy despite the challenges, they make things worse and try to find reasons to blame their bad performance. Exogenous shocks are not only responsible for our bad situation, the endogenous factors are much more responsible.
    Let me inform the honorable finance minister, most WB and IMF officials (that I personally know) look at Pakistan’s economic team as a joke, one that is so professionally inept that if it were a pure economic decision, the WB and IMF would not lend a single dime to Pakistan. But given the politics, they keep lending to Pakistan and these ‘leaders’ keep flushing the money into their bank account, putting our children and their children’ children (add infinitum) into a hole that only has default written all over it!
    I have no clue how Pakistan will ever do well economically since any respectable economist who can make the country better has sworn off being finance minister.

    Recommend

  • Meekal Ahmed
    May 3, 2012 - 1:17AM

    Excellent, Khurram. Keep them coming.

    Recommend

  • gt
    May 3, 2012 - 1:27AM

    In 1991 Mr. Manmohan Singh flew to Washington carrying with him a huge fraction of the gold reserves of India. The situation at home was dire, back to the wall; he was frank about that and explained his plans to turn the situation around. He did not bluster, bully, nor insult his audience with a presumptuous sense of entitlement. The results are there for all to see.

    What I find deeply disturbing are those who have inculcated this sense of truculent and infantile entitlement within the majority of the Pakistani public so that now it become identified with their religious consciousness and sense of manifest destiny. To be denied “aid” is to to be denied their role in some Islamic paradigm. There is no appreciation of how poorly these attitudes and beliefs play out with those “outside” this paradigm.

    At the same time, this belief system constrains policy makers and officials as to what they may utter in public, and the range of policies they might choose to invest their lives in. It is not that the public cannot be weaned away from this terribly dangerous path, but people like the present author need to bring these issue forcefully to the general consciousness. I hope his keen intellect and persuasive pen will explore some of these ideas in the future. Thank you.

    Recommend

  • gp65
    May 3, 2012 - 1:48AM

    Well argued.

    Recommend

  • Ashvinn
    May 3, 2012 - 5:09AM

    Don’t mr khurram Pakistan is too dangerous and important a country to fail, if America fails someone else will pick up the tab,their is always a super power around

    Recommend

  • Balma
    May 3, 2012 - 8:14AM

    People in Pakistan should pay taxes.
    There is enough money to go around within Pakistan, currently a tax chore nation.

    Recommend

  • ayesha_khan
    May 3, 2012 - 8:40AM

    @gt: “In 1991 Mr. Manmohan Singh flew to Washington carrying with him a huge fraction of the gold reserves of India.”

    It wasn’t Manmohan Singh. ChandraShekar was the PM and Yashwant Sinha was the finance minister. It was Yashwant SInha’s decision to mortgage the gold so that India’s reputation of never failing to honor a contract would remain intact. Soon after Chandra Shekhar’s government had the rug pulled under them by Congress and in the ensuing elections COngress came to power.

    Recommend

  • Hameed
    May 3, 2012 - 9:35AM

    Good one Khurram sahib, very valid points.

    Recommend

  • Umair
    May 3, 2012 - 10:51AM

    Aptly said.
    Under his leadership FBR cooked the tax numbers. Stat Department cooked the growth stats.
    His strategy has been to duck out the storms while the ‘real’ politicians around him have been fighting it out. PPP’s economic policies have always been a joke, but they have had better FM’s than this guy. He seems to be waiting out his time to get back to his networking job at the WB. When was the last time you heard him put his foot down on a subject. On any subject, for that matter.

    Recommend

  • chacha
    May 3, 2012 - 11:40AM

    Complete naivete from the Author. The finance minister is trying to set the agenda – to do that you have to beat a different drum than the audience is used to. Paksiatn wants tohear about aid but has no will to do reforms – will then constantly remind Paksiatn that no reforms, no aid. Do not tell them lies that aid is coming and therefore no need for reforms. Similarly world bank wants to hear about reforms not aid. So tell them that aid will come in, that thier credit conditions have to be tempered in the reality of the society and its resilience etc. Creditors need to be assured that money is not going down the drain. if you do not have reforms to show, then you talk about other things.

    for all his faults, I think your finance minister is doing the right thing on this

    Recommend

  • Meekal Ahmed
    May 3, 2012 - 1:49PM

    @gt:

    You are completely wrong. Those gold reserves were flown on an Air India fight to London. Banks were not prepared to lend to India at that time.

    Recommend

  • ashvinn
    May 3, 2012 - 4:45PM

    @Meekal Ahmed:
    correct, that was most shamefull period for India and Indians.But i belive we have not learnt from the incident, i forsee 98 situtation in the near future for India.

    Recommend

  • May 3, 2012 - 6:03PM

    So was it Manmohan Singh or Chandrasekhar? London or Washington DC? And pray tell what relevance it has to this article about PAKISTAN?

    On topic, it seems that our FM had nothing good to say on the reform front so he decided to talk about something else entirely. I agree with Umair that this FM is the most useless FM ever.

    Recommend

  • mohammed ali jawaid
    May 3, 2012 - 7:02PM

    while i fully agree with the author, i would be surprised if the donors told him to get lost and forget about our help, show us some positive sings in your economy then come back to us. but this does not happen. they dole a few dollars again but, on even strictest conditions, even they (donors) have to survive, as this is the business they are in!

    Recommend

  • rj17112
    May 3, 2012 - 9:02PM

    It is always a pleasure reading your articles. Very unique and realistic perspective on economic issues.

    Recommend

  • Rationalist
    May 3, 2012 - 11:58PM

    @academic_economist:

    “have no clue how Pakistan will ever do well economically since any respectable economist who can make the country better has sworn off being finance minister”

    You are oversimplifying Pakistan’s economic problems by suggesting all Pakistan needs is a respectable economist in charge. You are totally ignoring the wrong national priority as a security state that is in constant confrontation with its neighbors. As a result of this policy, a giant portion of the national income is directed to the military. Further, these policies have led to the creation of terror groups as national assets.

    Recommend

  • Righteous
    May 4, 2012 - 5:49PM

    @gt: Brilliant comment. You sir, have great writing talent. You ought to be a writer. Then again, maybe you are one already. I enjoyed your post.

    Recommend

More in Opinion