At the receiving end of one challenge after the other since at least 2018, Pakistan’s economy is in near-total shambles by now, with the common citizen grunting under the burden of...
At the receiving end of one challenge after the other since at least 2018, Pakistan’s economy is in near-total shambles by now, with the common citizen grunting under the burden of unprecedented economic hardship. Seen against this backdrop, Prime Minister Shehbaz Sharif’s initiative to bring relief to the lower income strata of society through a cross-subsidy on petroleum fuels looks very much like an idea whose time has come. Its takers can claim the initiative smartly sidesteps the IMF's objection to unfunded and untargeted subsidies by introducing a self-funding scheme and targeting it at small cars, rickshaws, and motorcycles. In practice, however, the scheme does not adequately address either of the two objections. The scheme envisages subsidizing every litre of petrol used by small cars and motorcycles by Rs50 and Rs100 respectively. However, the government has no reliable data on how many motorcycles and small cars there are, and what proportion of the pump sales they are responsible for. In other words, the government does not know how much the scheme is going to cost, and whether or not the respective price increase for those driving larger cars will generate enough revenue to finance the spend. Nor is it plain to see how the officialdom can make sure the fuel sold to smaller vehicles does not end up in the fuel tanks of V8s and land cruisers. Seen in this light, the scheme leaves lots of room for suspecting the government’s motives, especially as a general election is just round the corner.
More importantly, there is a second and more immediate context to this development: It comes in the wake of the indecorous grumbling about the IMF arm-twisting us over the range of nuclear-capable missiles. Although the government has since denied levelling any such allegations, the corrigendum was exceedingly slow to come, arriving only after the IMF had issued a rebuttal. This was a wholly unnecessary and unseemly gambit, and points us to a third layer of context to the subsidy scheme: the inevitable general elections that are due in a matter of months. Was the bogeyman of economic blackmail conjured only to invoke the government's unquestionable patriotism, and by extension to insinuate questionable policy on the matter by the previous government? The big question is whether officialdom can work out a practicable targeting mechanism, as well as safeguards against pump-level malpractice. Iffy as these questions are, finding their solutions remains primary to the implementation of this scheme – and those solutions are nowhere in sight. This is a dead giveaway that the government is using the scheme as a veneer to sweeten the ballot box.
In the context of the IMF situation, plotting a path from here is up to the government, and it is ideally placed to tackle these issues. PM Sharif and his cabinet, however, seem to be distracted with electoral considerations at this crucial juncture, and it bears repeating that they should think better of it. A democratic government will by definition be sensitive to the ballot box, but canvassing for votes based on dubious conspiracy theories or ill-conceived schemes masquerading as pro-poor subsidies is a no-no. Not only can such a course of action go wrong, it can backfire spectacularly.