The elusive economic consensus

Poor GDP growth of 2.4 per cent and a high inflation rate of 14.1 per cent in the first 10 months of the current year, which translates into even more poverty than already exists, reminds us, yet again, of the need for adopting a broader economic consensus. Reaching this consensus is, however, turning out to be far more difficult than the 7^th NFC Award or the 18^th Amendment. Unfortunately, the key points of the agenda for the consensus are perceived to be based on IMF conditionalities and therefore dismissed as unneeded imports. Also, the economists who make the case for this consensus are seen as representing the IMF rather than their own country. In this backdrop, it was refreshing to see the Pakistan Business Council (PBC) enter the foray. This is perhaps the first time that the private business sector is engaging with political parties. Asad Umar, the PBC chair, said that macroeconomic stability is the starting point, but the PBC agenda goes beyond this to include energy, education, regional trade and social protection. This is fine, but the issue in Pakistan is to show to political parties that economic reform is in their own long-term self-interest.

In seminars where major political parties are invited, none of the parties wants to be seen as opposing what is good for the country. This is what seems to have happened at the PBC seminar held in Islamabad. The output of the seminar was presented to the president, who readily agreed to forward the recommendations to the government. Had the PBC met with the prime minister, he would have happily sent the recommendation to concerned ministries. And there, they would have been deposited as indigestible lumps. The PBC has also been trapped by the notion that somehow the productivity of the Federal Board of Revenue (FBR)can be improved to yield another Rs300-400 billion. Millions of dollars spent by the World Bank in the past several years to reform the FBR have not brought it any closer to achieve this objective. The proposal to set up an integrated ministry of energy has been debated and discarded long time ago. The way the smallest of ministries have been divided up further to accommodate the Q-League is enough to demonstrate that the political action is in the other direction. Incidentally, economy was a major point in the agreement between the PPP and Q-League, raising hope for some kind of consensus. With the portfolios allotted to them, the weight of the Q-League in economic decision-making would be next to nothing.

Panels should be set up to pursue this agenda further. May I suggest that one panel should be allotted to do a case study of how a consensus was reached by all parties in a Senate committee to enhance the autonomy of the State Bank.

Published in The Express Tribune, May 7^th, 2011.