While Finance Minister Abdul Hafeez Shaikh’s grilling by the federal cabinet on Wednesday made headlines across the country, a background interaction with a federal minister and secretary who attended the meeting highlighted two alarming aspects.
Firstly, most cabinet members are ignorant about even basic economic concepts. Secondly, many were concerned more about how the economic situation affected their re-election chances and deliberately painted the finance minister in a bad light.
The cabinet meeting started with a briefing by Finance Secretary Abdul Wajid Rana on key macroeconomic indicators with a focus on inflation measured by the consumer price index (CPI).
Rana’s presentation was immediately followed by a brief humorous interlude when Interior Minister Rehman Malik, claiming he was a “student of economics and statistics”, informed Prime Minister Raja Pervaiz Ashraf that he had an objection. Before Malik could pose his question, the premier expressed surprise and asked him why he had not disclosed this information earlier. The entire cabinet burst out laughing at the prime minister’s remarks.
Once the laughter died down, Malik asked that if inflation was declining, why were interest rates not declining as well.
Other cabinet members raised several questions as well. According to a senior cabinet member, these were:
What is single digit inflation?
If the pace of increase in prices was slowing down, does it mean the prices of commodities were coming down as well?
What is the CPI and how is it calculated?
What are inflationary trends?
Why are diesel prices higher in Pakistan when they are lower in Bangladesh?
Some cabinet members also proposed government intervention for reducing prices, while another asked how the price of rice could be increased in order to benefit farmers. The finance secretary had mentioned in his briefing that rice prices were declining.
Speaking on condition of anonymity, a federal minister told The Express Tribune that Prime Minister Ashraf then allowed the finance minister to respond to the cabinet members’ questions. Hafeez Shaikh then briefed his colleagues on how inflation is calculated, the definition of CPI and ways that could further slow down the pace of increase in prices of essential commodities.
According to the federal minister, Shaikh admitted that while inflation came down to 8.8% in September, it was still high and continued to hurt people. The finance minister told the cabinet that austerity was the only way to control prices since even administrative measures could not last long.
The federal minister said at least eight cabinet members along with the prime minister appreciated the finance minister for explaining things in a friendly manner. Shaikh also suggested a full cabinet session to further educate other ministers on economic indicators.
However, the federal minister said the meeting had been inaccurately depicted by the media and the event was hijacked by those who consider Shaikh a hurdle. He added that premier Ashraf expressed concern over the media’s depiction of the meeting and the way it was painted by some cabinet members when the latter met Shaikh on the sidelines of a briefing on external financing held at the PM House on Thursday.
Published in The Express Tribune, November 2nd, 2012.
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