LAHORE: Businessmen are puzzled but dare not to show their shock in public on the recent federal cabinet’s shuffling. They do not know if policies’ agreements reached with ex-finance minister Asad Umar would be implemented in the coming budget.
Businessmen know that any dissent on policies is not taken well by the ruling party. The former finance minister visited all the major chambers, the capital market and important export associations to take their inputs on various economic policies. He publically promised to incorporate most of the suggestions in the next budget.
The businessmen are worried that they do not have the time to engage in similar exercise with the new finance manager as the budget is around the corner.
The newly-appointed Adviser to the Prime Minister on Finance Hafeez Sheikh is more of an academic person and in his past recent stints as privatisation and finance ministers could not mingle with the industrialists and businessmen.
It is also not known whether Sheikh would apply his own economic program or continue with the present one that has not delivered as yet.
The one mistake that previous financial team did make was to slow down the development program that also caused economic slowdown. Another was the farce implementation of austerity measures that in fact resulted in substantial increase in non-development expenditures – apart from security expenses. The new finance ministry’s head would have to tackle the issue of huge debt – particularly the foreign debt and liabilities that ballooned to near $100 billion till December-end last year. Controlling the debt monster would be an uphill task for the new team. The country is expected to add substantial foreign and domestic debts next fiscal year due to widening twin deficits.
The tax collection during the last nine months fell short of the target by more than Rs450 billion. Increased expenses have taken the budget deficit to a historic high. Foreign exchange reserves are depleting. Interest rates are very high. Under these circumstances, the government is not in a position to provide any relief either to the businesses or the masses.
Be that as it may, Sheikh showed extreme courage to accept the position when relatively more competent Shaukat Tareen excused. Omer Ayub also expressed his inability to become federal finance minister.
Sheikh, in his stint as finance minister during the previous Pakistan Peoples Party’s regime, had to leave the post in disgust as he was forced to compromise on several economic issues due to political compulsions. This time around the economic conditions are rather more precarious. He will have to take some difficult decisions that might be politically damaging for the government. Will PM Imran Khan go with the tough decisions or resist?
Asad Umar was too awed by the personality of his party leader that he couldn’t deviate from the limits defined for him. Sheikh is an experienced guy and more independent, which could make things going uneasy for him as well as the government.
Some more touchy questions are popping up. What will happen to the much-touted tax amnesty scheme? Will the government announce it with certain modifications or shelve it. The economy as it is now will take at least two years to come back on track and that would be a herculean task requiring both commitment and prudent decisions on the part of the emergency installation.
Undoubtedly, the new economic head is capable of formulating prudent policies but a question is would the present regime show patience for two years or go for another option in the midway. If the setup is again disturbed it would prove very unfortunate for the economy because Sheikh as a veteran economist would hopefully plan a strategy that would have to be followed without any political compromises.
In the present cabinet shuffling, only the ministers belonging to Pakistan Tehreek-e-Insaf were changed or removed. No changes were made in the ministries where the coalition partners were involved. That either means such untouched ministers delivered according to the regime’s program or were spared as it did not want to confront the opposition.
The new finance adviser is too well-versed with the working of multilateral donor agencies. In fact, he has in the past been closely associated with the International Monetary Fund (IMF). One can expect that he would negotiate a better deal with the IMF and ensure compliance with the Washington-based lender’s conditions.