Beyond the IMF, what’s PDM’s economic plan?

Congratulations Miftah Ismail, you’ve cleared the first right of passage for any Pakistani Finance Minister, securing an IMF deal. And you’ve done it not just with the opposition opposing it but also the head of your own political party, his daughter and several loudly critical voices in your own party. That’s quite a feat. You’ve stuck to what you believed was right and held onto your seat too. Take a break and have some cocomo biscuits; you’ve earned them.

The big question now though is: what do you want to do with Pakistan’s economy, given that money from the IMF and friendly countries is rolling in? Do you invest in a consumption driven boom so PML-N can win next year’s election or do you actually try to reform the economy? And with the one two punch of an angry electorate and aftermath of the devastating floods, do you even have a choice?

They say past behaviour is the best predictor of future behaviour. If PML-N’s last tenure is a signal for what’s to come, it’s clear that an economic sugar rush — aka consumption boom — at the expense of long term structural reform is what the PML-N government will try to trigger towards the end of this year. And there are already clear signals that structural reforms aren’t on the cards; for example, PML-N’s key constituencies of real estate and retail sectors continue to get rollbacks on any reform measures while already taxed industries get super taxes and salaried individuals have their tax credits withdrawn.

There’s already anger within PML-N ranks over the harsh IMF conditions so much so that their own party’s leader walks out of economic deliberation meetings (virtually, from London of course). This will add to the pressure on Miftah to ease conditions versus make them harder, particularly after the electoral shellacking experienced by PML-N in the Punjab by-elections. The devastation of the floods will rightly justify incremental spending and even relax IMF position slightly to enable some of this spending to occur. But there’s a twist coming.

Miftah’s term as Finance Minister ends on October 27, as he can only serve as six months as an outsider. After that, he needs to be a member of the National Assembly or the Senate. Miftah talks a big and inspiring game about putting the state over politics. Let’s believe him on face value. This means he will continue to take hard decisions but unlikely to get his own party to invest their political capital in retaining him as Finance Minister, especially with Ishaq Dar waiting in the wings. This is where PML-N’s economic policymaking will pivot from serving the state (read, the boys) to trying to win over the electorate through an economic sugar rush, consequences be damned.

This classic good cop, bad cop schtick on the IMF by Miftah and Dar reminds me of another iconic good cop, bad cop schtick deployed by PML-N when it comes to negotiating with the state: Nawaz Sharif and Shehbaz Sharif. No one should really fall for this kind of spin. Miftah and Dar are two faces for two phases of the same political strategy: stabilise and spend. Miftah does the hard work and Dar undoes the hard work because there’s no political incentive to reform. As a result, the Pakistani public watches the same bad Lollywood movie on repeat.

To take a more politer viewpoint on PML-N’s conundrum, one could argue that PDM has neither the time nor mandate to engage in long term structural reform. This is fair but the question then is: why would you pursue a vote of no-confidence against Imran Khan, knowing this, while arguing that PDM’s competence is needed to rescue the economy from Imran Khan’s governance? The instability imposed on the politics and economy of the country thanks to the VONC is far more damaging than any signs of competence by this government. Forget competence, the government isn’t even signaling an intent to reform the economy.

This brings us to the original sin of this PDM government. There’s no economic plan beyond rushing back into the arms of the IMF. Both Pakistan and the PDM will pay a heavy political price for this misadventure.

Published in The Express Tribune, September 4^th, 2022.

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