On the eve of Asad Umar’s removal from the cabinet, I posted a poll on Facebook and Twitter, asking how the Pakistani stock market would react the following day. Majority expected the market to behave negatively. Instead, the market rebounded the next morning.
Right after a massive cabinet reshuffle, this was unprecedented, yet understandable. Businessmen love a thriving economy. And they dislike slowdowns. But what they absolutely hate is uncertainty and confusion. They need to know what the future holds for them, no matter how worse, so that they can cut their losses and move on.
But uncertainty and confusion is what reigned supreme during the eight month-tenure of Asad Umar as finance minister. And his untimely exit seems to expose an inexperienced government crumbling under the load of its own tall promises. While Asad is not to be solely blamed for this, he didn’t help it either.
A few weeks ago, I wrote a piece about Pakistan’s puzzling politiconomics, in which I sympathised with Asad for being in an impossible situation. He had to juggle between the conflicting priorities of stabilising the plunging Pak rupee, stimulating economic growth and giving relief to citizens versus containing twin deficits, bringing in economic discipline and protecting the depleting forex reserves. The challenges entrusted to him were inherently contradictory.
But everyone knew that tough decisions had to be taken and no sane person expected him to deliver on the PTI’s ambitious economic reforms agenda right away. People with some objectivity also knew the rationale for putting breaks to Dar’s strategy of accumulating piles of debt, fuelling a consumption-driven economy and spending forex to earn popular votes.
But Asad cannot also be absolved from some of his own fundamental mistakes. After all it was a fair expectation from him to appoint his own team, assess the economic situation, come up with a clear plan and then stick to it. Instead he decided to run with the team he inherited. He went back and forth like a pendulum on IMF programme and unnecessarily delayed it on the made-up pretext of softening of IMF conditions. At the end, despite the bitter pill that he made the nation swallow, the cure was nowhere in sight.
Even some of the good steps that he took were half-baked. He appointed a high-profile economic advisory council but failed to engage it effectively in economic decision-making. He established Sarmaya Pakistan — a holding company for state- owned enterprises — but without a clear plan. And while he was able to cut current account deficit on the back of massive erosion in the value of rupee he seemed rather clueless on handling the much more challenging fiscal deficit. The tax amnesty proposal was probably the last nail in the coffin, which was not only in stark contrast to what the PTI had been advocating but was also a poorly conceived scheme. He brought in even more contradiction to an already paradoxical situation.
Asad is undoubtedly a man of integrity, a thorough gentleman and someone with loads of common sense. But what he does not understand is the politiconomics of this country. And his refusal to take a cabinet position further validates this notion. Not only does he not have a solid political constituency of his own, but he is also a man with a short and questionable career as finance minister with an unceremonious exit. Without a seat on the cabinet, he now runs the risk of becoming irrelevant and getting lost in the pages of oblivion.
Going forward, Hafeez Shaikh is not likely to repeat Asad’s mistakes. Yet he does not hold a magic wand. There are going to be many more bitter pills in the days to come, but hopefully this time with less confusion and more certainty in sight.
Published in The Express Tribune, April 23rd, 2019.