Dar Sahib’s budget

Finance Minister Ishaq Dar will be making the budget speech in the National Assembly today (Tuesday, June 3). Last year, any limitations in the budget could be excused because of the very short time he and his government had been in office. This year, he has enjoyed a full year of preparation.
The 2014-2015 budget should, therefore, be fully and richly representative of the hopes and aspirations of Pakistanis. Hard-nosed realists would scoff at this and say that budgets are political statements of priorities, not whimsical statements of the people’s aspirations. I’d suggest that there should be very little distance between those two things. We know that we’re not a Jeffersonian, or even a Sir Syedian democracy. So perhaps that is too ambitious. At a very minimum, however, the budget should at least represent the finance minister’s own aspirations. To understand what these are, and how likely this budget speech is to meet them, let’s examine something he said almost exactly a year ago.
In his budget speech last year on June 12, Dar Sahib said, “We want to build an economy that is not dependent on others except through trade and investment, based on competitive advantage and market considerations. We are a strong nation of nearly 185 million people and a nuclear power. As much as we need to defend our frontiers, we need to protect our economic sovereignty also, which would only be possible when we refuse to live on handouts and foreign goodwill. Self-reliance has to be our real goal, for only then we will earn the needed respect in the ranks of the nations.”
Dar Sahib then proceeded to relentlessly pursue the following, in no particular order: ‘free’ money from Saudi Arabia, ‘free’ money from the United States, ‘free’ money from the United Kingdom, cheap credit from the IMF, cheap credit from the World Bank, cheap credit from the Asian Development Bank, in-kind & kind-of investments from China, and at least one reasonably expensive bond issue from the global markets. In addition, Dar Sahib has tried to collect money by selling Pakistani assets and property, with little success, except the 3G and 4G spectrum.
It would surprise no one if he was able to secure roughly the same quantum of ‘free’ or cheap money from the same actors, and perhaps additionally, Iran, in fiscal year 2014-2015.
It doesn’t take a forensic scientist to see that Dar Sahib has basically done the opposite of what he said he would do. He has cashed in on the global warmth generated by the promise of Prime Minister Nawaz Sharif’s new and improved rhetoric for a global audience, his party’s performance in Punjab and a solid parliamentary majority. Dar Sahib has consistently sought external financing, which is far beyond the realm of trade and investment. He has sought various kinds of quick fixes to his perpetual challenge of producing enough cash to keep the macroeconomic fundamentals just a pale above the embarrassing level. He has done so with exceptional effectiveness. To that extent, he’s been an incredible finance minister.
However, Dar Sahib’s model of economic management, notwithstanding the state of emergency he believes the economy was in when he took over, is not one of self-reliance, but of extreme economic dependence. Pakistani economic sovereignty, which he cites as a motivation in last year’s budget speech, is in tatters. The roughly decade and a half that the Sharifs spent outside the Prime Minister’s House in Islamabad has taught the party how to say the right things. Now if only we could all collectively help the prime minister and his close aides and confidantes also do the right things.
One of the problems Dar Sahib has is that he is driven by the need to always be able to say to the prime minister, “Yes, Mr Prime Minister”. This is not such a bad thing. All democracies, even the best of them, are driven by top-down decision-making, by the need and desire to distribute patronage and by the desire to spend money without taxing constituents to pay for that spending. This particular contradiction is not unique to Pakistan, but I’m afraid the context of our contradictions often is, very unique.
When we look around at the national discourse, and the anger and heat in it, a lot of it is explained by these unique national contradictions.
The army high command, let’s call them the corps commanders, they all want to have the best equipment possible, and they want their finest young officers to have a chance to attend Fort Leavenworth and Sandhurst. This is absolutely the correct set of things to want. It also means having to make nice with the Pentagon and the MoD.
But our corps commanders, like the rest of us, also want to be proud Pakistanis. Perfectly understandable. So when Uncle Sam offers conditional aid, as it tried to under the Kerry-Lugar Bill, our corps commanders’ wires get crossed.
Short circuits are bad for any system. They’re terrible for a young, ambitious nation like Pakistan. How do we get the best military equipment and training in the world, while also rightfully retaining our pride? This is hard stuff to figure out and get right.
Our civilians are in as sticky a situation, if not stickier. Dar Sahib says he wants sovereignty. So he makes a budget speech in which the very starting point of his economic model is to get Pakistan away from being a begger-rentier state. We’re a nuclear power, for crying out loud. Let’s act like one, he rightly adjures us.
Then he goes to collect freebies from various countries. He follows this up by enduring the inane chatter and self-righteousness of joint secretary-level bureaucrats from the World Bank and the IMF, pretending to be knowledgeable economists. He must endure these people because the World Bank is Mr Moneybags Junior, and the IMF is Abu Moneybags.
It takes a peculiar kind of absurdity to have a mid-level bureaucrat talk about a nuclear power like IMF official Jeffery Franks publicly speaks about Pakistan, but this is the world of Ishaq Dar.
The net impact is devastating. Pakistan spends less money, as a percentage of its GDP on education, than all but four countries in the world. The devastation is visible too. We are a nation of illiterates, intoxicated by a false pride in strength that does not exist. Decision-makers know how weak we are. They choose to say the right new things, but keep doing the same old things. This is the story of Dar Sahib from last year to this year. This will be the story from this year to next.
The writer is an analyst and commentator.