Economic policy under caretakers’ cabinet

Interim govt for three or six months cannot be taken seriously by investors and diplomats

ISLAMABAD:

It seems that the caretaker cabinet is setting its eyes on the future instead of just steering the country through next general elections.

There are two statements made by caretaker Minister of Commerce and Industries Gohar Ejaz, which make me think this way.

He has recently called for establishing new business parks “to consolidate Pakistan’s global trade connections. These parks or facilitation centres for traders would be designed to serve as hubs for foreign traders, enhancing trade relationships and driving economic growth.” He believes these business parks are good for trade connectivity.

Ejaz has also announced an export target of $80 billion and a “new” strategy of targeting specific countries and by devising a new trade policy framework.

This is wrong on a number of grounds. First of all, the caretaker cabinet should not be allowed to make any pronouncements with long-term consequences for economic policies.

Setting up new business parks or devising new trade policy frameworks are ambitious undertakings.

Similarly, following an export target of $80 billion from the current level of $40 billion is a very ambitious plan. It is unrealistic to achieve it within the period for which the cabinet has sworn in.

The appointment of an industrialist on a public position is also a serious conflict of interest. Public position holders, even if they are financially honest, become privy to critical information much ahead of time that they can easily use to gain private benefits, even if these gains are to materialise in the future.

A caretaker government for three months or six months cannot be taken seriously by investors and diplomats who are looking for a long-term and stable political outlook. In fact, one wonders if this should be taken too seriously by members of the cabinet themselves.

A best caretaker government is no caretaker government. There is hardly any country in the world which practices this arrangement. The sitting government continues till the holding of elections and transfer of power whereas the Election Commission is much more empowered.

If the caretaker government continues for an extended time period, as it is generally believed, till March 2024, then their main mandate is to ensure that Pakistan is not worse off than it is today in terms of economic stability.

That means, primarily, stabilisation of exchange rate, which demands keeping the forex market free from any kind of intervention. This, in turn, is the function of central bank, and not of the federal government, which should continue to exercise its constitutional mandate.

There is another news recently that electricity distribution companies will be handed over to provincial governments. While the caretaker government does not have a mandate to take such a decision, the transfer to provincial governments is hardly going to be a solution.

The solution lies in creating competition in the electricity distribution market and not in “provincialisation” of DISCOs. However, it will help in reducing the federal government’s budget deficit as a significant chunk of subsidies is allocated for the power sector.

Expectations have been built that the caretaker government will take some “tough” economic decisions which elected governments usually hesitate to undertake.

While political governments may be happy to pass on the buck to an interim setup, this does not solve fundamental issues that require consensus on restructuring and reforms.

One of the long-term challenges that Pakistan will have to face is its debt management. As the IMF standby arrangement continues to hold, there should be public discussion on various options for Pakistan’s next government including that of debt restructuring coupled with economic reforms.

The debate can help guide political parties in formulating their manifestos as they prepare for next general elections.

The writer is Executive Director of PRIME, an independent economic policy think tank based in Islamabad

 

Published in The Express Tribune, August 28^th, 2023.

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