Election manifestos and the economy

In Pakistan, elections are basically a referendum on the performance of the ruling party. It is time that new traditions are initiated, based as much on the faults, failures and successes of the current government as on a specific future programme of a party to address problems faced by the country. The change of faces alone in the absence of a concrete plan will not change the destiny of the nation.

Pakistan is currently faced with serious economic problems. Accordingly, an essential component of the manifestos of the political parties that aspire to lead the country should be an analysis of the current economic problems and a specific policy programme to address them.

Each political party must come out with a detailed package of economic policies that it intends to implement, including its timing and phasing. The economic manifesto of each party should cover, inter alia, several crucial points. The country is suffering from a high rate of inflation. What specific demand management and supply enhancement measures would a party take to address the problem? Another problem is fiscal mismanagement at the federal, provincial and public sector enterprise level, leading the public sector to depend on internal and external borrowing to finance public sector operations. Domestic borrowing has led to inflation and external borrowing has led to the accumulation of a huge external debt. On the domestic front, what specific expenditure cutting and revenue raising measures would the party take to reduce the dependence of the public sector on domestic borrowing? In the case of external debt, what measures would be put in place to expand exports, curtail imports, take the country out of its existing debt trap and ensure balance of payment viability?

The manifesto should also cover the expenditure side of the budget, debt servicing cannot be curtailed because it is a contractual commitment to service the past debt. In defence matters, any government will find it difficult to reduce expenditure. The only scope for reduction in expenditure lies in civilian non-debt serving current and development expenditures.

If the scope for expenditure cut is limited, each party needs to lay out specific proposals with revenue estimates for the mobilisation of taxes. What specific measures would be taken to tax agricultural income, extend the scope of income tax to the service sector and to professional groups, reduce the underground economy and enhance the tax base, improve tax administration and reduce tax evasion, document the economy and, in general, raise the tax-to-GDP ratio?

The manifesto should also address what plans a party has to improve the financial structure of public sector enterprises so as to reduce their burden on the budget and the economy and to permanently eliminate the losses of these enterprises and the phenomenon of interagency debt. It should also talk about what legislative and other steps a party will propose to reduce dependence of the government and the public sector enterprises on the banking system to cover their budget deficits and how they would make sure that the burden of the fiscal policy is not passed on monetary policy, which should be formulated and implemented by the State Bank of Pakistan independently to mobilise savings to finance productive private sector economic activity at reasonable interest rates.

On the supply side, the country needs a specific plan to accelerate economic growth and ensure equitable sharing of the fruits of development among the people and provinces. Economic growth will require higher investment, which in turn should be based on raising the current low saving rate in Pakistan. The manifesto should show what plan a party has to promote savings, ensure regular flow of water for agriculture, produce enough electricity at cheap rates to meet the country’s energy requirements, explore mineral resources to reduce dependence on imports and attract direct foreign investment.

Another major problem that requires immediate action is that of economic governance. Corruption is eating at the foundations of the economy like termite. It is one thing to condemn corruption, it is another to put a specific action plan in place to control it in the future. Each political party should give a specific action plan to eradicate this menace from the country. More specifically, a concrete plan is needed to enact a strong accountability law and an independent accountability organisation. Accountability needs to start at the top. Each party should explain how it will enforce this within the party and within its government.

The mounting external debt of the government has two dimensions. First, servicing of the existing debt requires a substantial boost in exports and an export-led strategy of growth needs to be evolved. The second aspect is controlling further increase in public debt and making sure that any new debt is put to effective and efficient use. Each party should spell out what revision in foreign debt acquisition and debt management strategy it would make to achieve self-reliance and improve the balance of payment outlook.

The country is suffering from an acute problem of unemployment and economic disparity. An expanding economy with equitable distribution of the fruits of expansion is vitally needed. Each party needs to spell out its package of policies that will accelerate economic growth and ensure merit-based employment.

The suggested action plan to address these major economic problems must be consistent and doable. The manifesto should clearly state what the timing and phasing of the proposed economic reforms should be what results should be expected and with what time lag.

Once all the parties have worked out their economic manifestos, they should be released for public review. Public debate should be held comparing details of economic plans of various parties and testing their internal consistency and viability. A party that gives a clear programme of economic reforms with specificity and shows a commitment to implement it in phases to achieve the desired results should deserve to have a chance to govern. Empty slogans, false promises, unrealistic targets and unspecific statements should be heavily discounted.

Published in The Express Tribune, November 16^th,  2011.