Wrong pitch, Mr Finance Minister!

In DC they want to hear about our reforms, while in Islamabad they want to hear about aid promises, not vice versa.

How does one say this without feeling a little embarrassed? After all, our finance minister, Mr Hafeez Sheikh, is a career World Bank bureaucrat and really ought to have known better. Perhaps, they accidentally handed him the wrong script to read, because his remarks in Washington DC for the World Bank and IMF spring meetings sound more like the sorts of things he should be saying upon his return to Pakistan.

Maybe I have it all wrong, but I doubt that. You see, here’s how it normally works: in Washington DC, the attending ministers and finance officials usually craft their remarks around the message they have brought to the meetings. When they get home, their remarks usually revolve around what they brought back from the meetings.

But Mr Sheikh seems to have got it all backwards, or maybe I just don’t get it. While in DC, his remarks revolved around all the aid pledges he has obtained from donors big and small, about the “resilience” of Pakistan’s economy, about the stout character of the Pakistani people who will weather adversity with forbearance and how the magical stream of remittances will foot our import bill well into the future.

This might all be very well indeed but I think he threw that pitch at the wrong audience. That’s the message he should have delivered upon his return to Pakistan, assuring an anxious country that help is on the way, that things are not as bad as doomsayer columnists like me love to make it sound. While in DC, though, he should have taken a page out of the book carried by the African finance ministers and focused more on what reforms his government is implementing, or thinking about implementing, to meet the challenges that rising oil prices and slowing global growth will inevitably bring.

“We are addressing falling foreign investment by improving the business climate through fiscal reforms,” said Manuel Chang, finance minister of Mozambique, going on to add how his government anticipates dwindling inflows and, therefore, seeks to encourage growth in small business start-ups to boost employment.

They also talked about greater regional economic integration as the best way to mitigate the impact of the global crisis, to encourage greater regional flows of trade and investment so that countries that are dependent on the European Union as a destination for their exports can find an alternative market.

Now don’t get me wrong. I’m pretty sure that each one of these gentlemen can be taken to task for their handling of their country’s economy. I’m sure there are plenty of problems in their countries, like unemployment and inflation and fiscal rigidities and an overarching dependence on aid inflows. I’m also willing to bet that they have their own problems with pain-in-the-neck columnists pinpointing their faults in the newspapers all the time.

But while in DC, they chose to focus on the reforms they are working on rather than crow about the aid promises that they have secured. And the reason is simple: in DC you are speaking to your creditors, and they want to hear your story and they’re hoping your story revolves around concrete steps you’re taking in the here and now to help your economy stand on its own feet. In short, in DC they want to hear about the reforms, while in Islamabad they want to hear about the aid promises.

In other forums, Mr Sheikh talked about how democracy is striking roots in Pakistan, helping promote the rule of law and an unfettered public discourse. That may be very well indeed, but with all due respect, it’s not really his story to tell. If he’s celebrating the virtues of democracy today, what was he toasting during his years of service under the rule of General Pervez Musharraf?

He also talked about the unhappy inheritance that befell the infant democracy when it assumed power: plummeting reserves, falling currency, collapsing growth, skyrocketing subsidy expenditures and so on. The difficult path to stabilisation that was adopted as a response was also mentioned, and “just when things were beginning to get better, we were struck by the floods.”

The problem with building your story like this is it makes your creditors more, not less, nervous. His talk at the Brookings institution, to take one example, sounded just like last year’s budget speech, which was fine on the floor of the National Assembly where it was pitched to TV viewers. But coming from a finance minister, this story seems massively misplaced in Washington DC. Rather the story he told should have begun with a blunt and candid assessment of where the economy stands today, how he sees the challenges the country is facing going forward and what exactly he is doing about meeting those challenges. The lengthy political exposition and the almost reflexive invocation of the floods, could have come at the end as a reminder to the audience of the difficult circumstances Mr Sheikh is working within.

In an opinion piece for the Wall Street Journal titled, “Pakistan’s untold economic story” (April 24), he chose to emphasise the positive aspects of Pakistan’s economic story. The piece was studded with pearls like this line: “Business contracts have been consistently honoured.” Try telling that to the poor saps holding their ‘sovereign guarantees’ in the power sector! Elsewhere in the piece, he declares that “Pakistan was not immune to the global financial crisis”. Very true, but tell us Mr Sheikh, will Pakistan be immune to the coming period of global financial instability? What are you doing to prepare for this inevitability? Does he seriously believe he can woo investors from the West at a time when his creditors are shaking their heads at him?

Mr Sheikh has had difficulty with his story for far too long now. Almost from day one he has let politics distract him constantly. Of course, the politics he has to negotiate is powerful stuff, not to be underestimated, but as finance minister, he is a critical interlocutor between the political elites of this country and their creditors, both domestic and international. As such, it is fair to expect that he should know how to speak to these creditors, how to address the sources of their anxiety and back his words up with concrete actions.

Published in The Express Tribune, May 3^rd, 2012.