Caretakers and the budget
Caretakers can provide temporary relief by gaining IFI support in return for some upfront actions.
pervez.tahir@tribune.com.pk
Who will make the next budget? The question was posed to senators Raza Rabbani from the PPP and Ishaq Dar from the PML-N in a TV talk show. Having worked closely together on the Eighteenth Amendment, both are eminently qualified to address the question. Senator Rabbani left no doubt that the caretakers had no business making the next budget. It is the prerogative of the elected government. The budget has to be approved by a cabinet and passed by parliament. The caretakers are only authorised to incur expenditures for a period of four months, which also requires to be regularised later by parliament. Doubtless, this is the constitutional position. Surprisingly, the response of Senator Dar was pragmatic, even bureaucratic. Parliament or no parliament, a budget has to be made. The bureaucracy starts the process of budget-making in November and by March, most expenditure proposals are finalised. All that is left, then, are the revenue proposals. By the time the caretakers are installed, a blueprint will be ready. Senator Dar did say, though, that the budget is the instrument through which an elected government implements its manifesto. The description he put forward for a possible change in future policy was ‘austerity’.
It is known to all and sundry that this single word sums up a whole regime of policies that hurts the victims of bad policies more than the makers of those policies. Ordinary citizens are asked to pay off the debts accumulated by the inept managers of the economy. Greece, Spain and Portugal, suffering from some of the highest rates of unemployment known to history, are examples of austerity regimes. Only the socialist French President, François Hollande, had the courage to protect his people from the pains of austerity. International financial institutions (IFIs) want Pakistan to impose a strict austerity regime. They have given up on political regimes introducing economic reform that they think is in the best interest of Pakistan. The fears and feelers about a three-year caretaker regime are not unrelated to the vibes coming from international lenders of the last resort. Over the long Christmas and New Year break, one saw many serving or consulting practitioners of the dismal science, from the IFIs, visit their homeland to let the potential Pinochets know of their availability to clear up the economic mess created by the corrupt and inept politicians. One has seen this before as well. All past caretaker regimes borrowed their finance ministers from the IFIs. In July-October 1993, Mr Babar Ali was not much of an exception as his boss, the prime minister, was from the World Bank. The austerity regimes initiated by the caretakers, however, were rolled back by the succeeding political regimes. The refrain that caretakers should mind the economy for three years, not three months, seems like a lesson learnt from this experience.
Our change zealots fail to understand that the question of economic reform is a political one. It can be sustained only through a process of political negotiation with winners and losers. Unless a party or a coalition of parties wins an election on the platform of reform, there is no hope. The example of Turkey comes to mind here. The caretakers can provide temporary relief by gaining IFI support in return for some upfront actions, but this stop-go approach will return the moment the non-political pause ends. If the Pervez Musharraf era is any guide, a longer non-political period itself tends to degenerate into the politics of business as usual. More than economics, politics is the natural order of things.
Published in The Express Tribune, February 8th, 2013.
It is known to all and sundry that this single word sums up a whole regime of policies that hurts the victims of bad policies more than the makers of those policies. Ordinary citizens are asked to pay off the debts accumulated by the inept managers of the economy. Greece, Spain and Portugal, suffering from some of the highest rates of unemployment known to history, are examples of austerity regimes. Only the socialist French President, François Hollande, had the courage to protect his people from the pains of austerity. International financial institutions (IFIs) want Pakistan to impose a strict austerity regime. They have given up on political regimes introducing economic reform that they think is in the best interest of Pakistan. The fears and feelers about a three-year caretaker regime are not unrelated to the vibes coming from international lenders of the last resort. Over the long Christmas and New Year break, one saw many serving or consulting practitioners of the dismal science, from the IFIs, visit their homeland to let the potential Pinochets know of their availability to clear up the economic mess created by the corrupt and inept politicians. One has seen this before as well. All past caretaker regimes borrowed their finance ministers from the IFIs. In July-October 1993, Mr Babar Ali was not much of an exception as his boss, the prime minister, was from the World Bank. The austerity regimes initiated by the caretakers, however, were rolled back by the succeeding political regimes. The refrain that caretakers should mind the economy for three years, not three months, seems like a lesson learnt from this experience.
Our change zealots fail to understand that the question of economic reform is a political one. It can be sustained only through a process of political negotiation with winners and losers. Unless a party or a coalition of parties wins an election on the platform of reform, there is no hope. The example of Turkey comes to mind here. The caretakers can provide temporary relief by gaining IFI support in return for some upfront actions, but this stop-go approach will return the moment the non-political pause ends. If the Pervez Musharraf era is any guide, a longer non-political period itself tends to degenerate into the politics of business as usual. More than economics, politics is the natural order of things.
Published in The Express Tribune, February 8th, 2013.