There is a strong ideological divide amongst Pakistan’s top economic managers which is hampering the government’s ability to set a clear policy agenda as the country struggles to get out of a recession.
Sources within the finance ministry told The Express Tribune that Planning Commission Deputy Chairman Nadeemul Haq advocates a free market approach to governing Pakistan’s economic policy whereas Finance Secretary Waqar Masood favours a more state-controlled, protectionist approach.
The ideological divide between the two sides have frequently degenerated into heated arguments, leaving Finance Minister Abdul Hafeez Sheikh in the position of having to mediate their differences.
Matters came to a head at a recent meeting of the Economic Coordination Committee of the cabinet, when the issue under discussion was wheat and sugar procurement. Haq advocated that the government should exit the procurement business altogether and let market forces take their course. This led to an argument with the finance secretary, which forced the minister to calm tempers.
“Pakistan is not governed by any ideology,” said the minister.
Haq denied that there were serious ideological differences between him and Masood and echoed the finance minister’s statement that decisions were not based on ideology but on evidence.
Sources inside the finance ministry say that the deputy chairman has been advocating an abandonment of the current economic growth strategy – which he refers to as “aid-driven” – in favour of a more robust strategy based on good governance and free market principles.
Haq has advocated that the government take up the British government’s offer to spend £7 million (Rs974.4 million) on outside consultants to craft a new economic strategy.
However, the finance secretary has not yet cleared the use of the funds, which were offered by the British government’s Department for International Development, saying that the money was “too much.” Masood wants a steering committee formed to monitor the spending of the aid, which would include some of the senior-most economic managers in the country.
In retaliation, the sources said, the deputy chairman has asked the finance ministry to allow him sit on the administration committee of a similar project for the capacity building of the finance ministry. The ministry has recently approved a project – called “Institutional Strengthening of the Finance Ministry” – at a cost of Rs179 million.
The sources said even the finance minister has some issues with other members of the core economic team. He is said to not even have a secretary-level appointments of his own choice but he does not have sufficient backing to make the changes he wants.
The internal strife may take its toll on the national economic agenda, as the government is set to decide the broader parameters of next year’s budget with the International Monetary Fund team next month.
Sources said that the divided approach may result in a weak team that may not forcefully advocate the case. The first major difference might be on carrying forward a subsidy regime, which will have direct bearing on the budget deficit target.
Published in The Express Tribune, April 23rd, 2011.
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