The free market liberal economist inside Finance Minister Abdul Hafeez Shaikh seems to have been set free: after more than a year of paying lip service to the government’s historical left-wing stance, Shaikh outlined a long-term vision for the economy that is unabashedly capitalist.
For anyone who has followed the minister’s career, it has been obvious where his ideological sympathies lie: just as there are no atheists in foxholes, so too there are no socialists on Wall Street. If the opposition expected left-wing populism from a man whose last job was running a merchant bank in Dubai, they were sadly mistaken.
Yet for the first year, Shaikh had seemed to humour them, promising a “people’s budget” for fiscal year 2011 and giving in on several occasions to provide “relief” to the masses (lowering petrol taxes, keeping power subsidies), even at the expense of running up an already unsustainable fiscal deficit.
This year, it seems, the minister feels more liberated to pursue laissez-faire economic policies, removing tax exemptions for several sectors, slashing subsidy allocations and then deregulating energy pricing to make sure he keeps his word to the International Monetary Fund (IMF) this time around. He has insisted that the government move ahead with privatisation in 2012 and has even taken the first cautious steps towards civil service reforms.
So what accounts for this change in a man who disappointed many of his supporters early on by not being bold enough? Two factors, it seems.
The first is President Asif Ali Zardari’s political manoeuvring over the last several months that has built up a larger coalition, giving the ruling Pakistan Peoples Party more room to pursue policies that it feels are necessary. The second, and perhaps more important factor, is the suspension of the IMF’s bailout programme, which has forced the government to give up its populist pretensions and get a little more serious about fiscal reform.
The finance minister is not alone in his adherence to free market principles. Planning Commission deputy chairman Nadeemul Haq is an avowed follower of the Chicago School of Economics and, from his monetary policy statements every two months, State Bank Governor Shahid Kardar seems to have a similar ideological persuasion.
While the finance ministry is still the primary economic management institution in the country, these two men, from their relatively more independent perches, have been able to provide Shaikh with policy advice that he is likely to find appealing.
It seems that this new openness about a free market vision has not gone unnoticed in the budget. Those legislators who still seem to be labouring under the illusion that
the budget is an instrument of providing giveaways to their constituents have spoken out against the bill and are likely to make their voices heard during the next two weeks that the finance bill will be debated in parliament.
It is unclear whether or not Shaikh’s gambit will succeed. There is still much resistance to free market capitalism across the political spectrum. But, in being true to his own convictions, the minister has at least freed himself to articulate a more clear vision for what the Pakistani economy should look like than he has ever done before.
Published in The Express Tribune, June 4th, 2011.
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