Talking Business

Adnan Mazarei’s tough talk may not be enough to wipe that grin off Hafeez Shaikh’s face, but it might be an idea to pay some heed to his words.

According to those who were there, Saturday’s meeting between the IMF’s executive directors and the boys from Q block did not go down very well.  For starters, our finance minister insisted on playing his game of who’s got the bigger ego.  Jaffar Mojarrad was kept waiting for 30 minutes and the subsequent meeting with Adnan Mazarei also had to be delayed.  Mojarrad was decent enough to let it go, but Mazarei let it be known that waiting is something he is not used to.

What was Hafeez Shaikh trying to prove with this little stunt?  That his time is more important than that of his guests?  From those who know him, we know that petty honorifics and point scoring of this sort is something our finance minister excels at, more than anything else perhaps.

But it did not end there.  The visiting delegation wanted to know more about how exactly the whiz kids of Q-block intend to finance their Alice in Wonderland budget.  Reports tell us the International Monetary Fund (IMF) was not convinced that a Eurobond floatation of $500 million would materialise; given global investors’ extreme wariness of sovereign risk these days, that provincial surpluses of Rs167 billion were wishful thinking; considering the provincial governments are not famous for their fiscal discipline and that that external financing of Rs165 billion is a very optimistic assumption.

In fact, the problems they saw in the economic management of the country went far beyond just the budgetary targets.  We are told they were not convinced that the inflation target would be met, considering the government’s limited financing options, and that the real scale of the power sector losses had not been properly factored in.  By the IMF’s estimates, the power sector is losing almost 50 per cent of its electricity through ghost billing, recovery problems, transmission and distribution losses.

Add to this the Q-block whiz kids’ failure to move on the circular debt by July 1; as promised to the IMF in April’s Letter of Intent and you have a very embarrassing laundry list of failures in economic management.  So what did our exalted finance minister have to say to all this?  First, show up late to prove who’s got the bigger ego here, and then dare Mazarei and company to go tell it to the PM.

The whiz kids handed over a copy of the presentation they had given to the PM two weeks ago in an effort to jolt him into awareness of the country’s dire fiscal straits.  But to their dismay, they discovered the PM’s skin is a little thicker than they had bargained for.  Having failed in his efforts to persuade his colleagues in the cabinet to exercise restraint in their expenditures, Hafeez Shaikh conveniently passed the ball to Mazarei and told him to take his message directly to the political elite.

Now let’s pause a moment here and think about what this tells us.  I mean, what is the finance minister if not an interlocutor between the political elites of this country and their creditors?  If Hafeez Shaikh cannot talk to the country’s creditors and credibly reassure them, if he cannot push through tax reform or bring about fiscal discipline, if he cannot pull back government borrowing and reduce monetization of the deficit, if he cannot address the liquidity problems of the power sector, if he cannot control the bleeding of the public sector enterprises, if he cannot so much as get through the day as finance minister of this country, then what exactly is he good for?  What exactly is he grinning about?

It’s high time the whiz kids at Q-block figured out that this is for real.  Pakistan is not going to get through its economic difficulties on Hafeez Shaikh’s airs alone.  It’ll take more than rhetoric to get growth going again, to get the power sector chugging, to keep the trains running, the PSEs floating, to get tax reform through and keep prices in check.

It’s true that the IMF is unlikely to cut Pakistan off altogether; after all everybody knows that there are unwritten “performance criteria” in this facility.  But the finance minister should be the last person to find grounds for complacency as a result.

Published in The Express Tribune, July 19^th, 2010.