Analysis: Politically confident, PPP manages to resist the ‘awami’ itch

Budget appears to be targeted towards satisfying not the average Pakistani voter but the executive board of the IMF.

Call it the wages of being a frontrunner: the ruling Pakistan Peoples Party is so confident of winning the next elections that it appears unwilling to go on a populist pre-election spending spree.

In the build-up to the last budget before the 2013 general elections, it had been widely expected that the government would be bending over backwards to announce ‘relief’ measures. But that never happened. There were no grandiose announcements of half-baked projects whose sole purpose was to provide punchlines for the election trail in coming months.

Indeed, some reports suggest that legislators from the ruling Pakistan Peoples Party and its allies were not happy at all when they saw the numbers on Friday – crying foul about not having anything to take back to their voters. President Asif Ali Zardari, it seems, is playing for the long haul. The decision-makers in the ruling party do not want to go on a spending binge and then have to clean up the mess after they (presumably) win the next election.

This is why the budget appears to be targeted towards satisfying not the average Pakistani voter but rather the executive board of the International Monetary Fund to whom the government will likely have to turn to this coming year in order to finance its foreign debt repayments (including, somewhat comically, a $1.2 billion loan repayment to the IMF itself.)

Note, for instance, that the government announced (once again) that it would be eliminating all electricity subsidies, except those on the very poorest of consumers. This was a key demand of the IMF and one that Finance Minister Abdul Hafeez Shaikh will no doubt be sure to highlight in bold, block letters at his next presentation to the Washington-based lender.

The IMF is not the evil monster it is often portrayed to be. It is brought in by governments to tell a truth they are often too afraid to tell their people: that their government either spends too much or taxes too little and needs to mend its ways or else it will go down in flames to bankruptcy, taking the rest of the economy with it. In Pakistan’s case, we very clearly tax too little. But we also spend in the wrong places, subsidising current power consumption rather than investing in future generation capacity for cheap electricity.

The relation between sound economics and strong politics has long been debated, but for possibly the first time it has manifested itself positively in a democratic government.

Let there be no doubt: the relatively realistic and even-handed approach by the government reflects just how comfortable it is politically. A strong ruling party has bobbed and weaved its way out of a number of crises, kept political continuity going with its survival, and has dexterously driven home even the smallest political advantage that appeared during this time. It did not get caught up in any one crisis.

At the end of the day, the incumbents have consolidated their position, and are well placed to take the next elections, too – even the notion of which would have been considered ludicrous in democracies past.

The PPP may yet lose the next elections – but the fact is this: this budget was kept within limits because of the political confidence of the incumbents, who did not need the sort of cheap economic jugglery to impress the masses in a desperate last ditch effort to win votes that the past weak government did. The economy is better for it. This is long-term and poised politics – the only bridge leading to rational, long-term economics. Let’s hope that bridge is taken.

Looking ahead, the ruling party must continue to translate its political advantage into economic prudence – particularly when it comes to dealing with problems such as the energy sector, which could yet prove to be their political downfall.

There are rumours that Water and Power Minister Naveed Qamar may be replaced by Ahmed Mukhtar, currently the defence minister. Given the reports that he enjoys the confidence of the president, one hopes that this means the big man is lining up a solution to the energy crisis. The finance minister did say the government was willing to spend whatever it takes to get the nation’s power grid humming again.

Published in The Express Tribune, June 2^nd, 2012.