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November 5, 2019

The art of spin

Opinion

November 5, 2019

The job of spin masters is to give a feeling of ‘All is well’ – even when the reality is the exact opposite. The present government has mastered this art to perfection, better than any previous government.

Why is spin needed more now than ever before? Because the failures have been massive – both against the expectations built up prior to the elections and also when compared to the previous government’s performance. The most significant failure has been on the economic front – high levels of inflation, mass unemployment, extremely low growth rate, high fiscal deficit, plummeting foreign direct investment, poor tax collection, declining tax-to-GDP ratio, declining trends in savings and investment, high interest rates, massive devaluation, no improvement in exports etc.

The other area of serious concern is poor governance by the federal and provincial governments. Governance issues have been more prominent at the federal level and in Punjab and Khyber Pakhtunkhwa – areas where the PTI has been the ruling party. Lack of experience, immaturity, lack of understanding of basic issues and above all poor quality of team selection have led to consistent failures on the governance front. This extends to the foreign policy front as well, especially the inability to garner enough support on the Kashmir issue.

Hafeez Shaikh and Firdous Ashiq Awan seem to be leading the art of the spin in the current government. This is for obvious reasons; the failure on the economic and governance front is the most significant. Having committed itself to a 'Naya Pakistan', the government realized soon that the commitments were unrealistic and the challenges beyond the capacity of the team selected by the Kaptaan, who also realized that leading the cricket team was far easier than leading the country. He also realized that, unlike cricket where he had the benefit of world-class players, the team on the political front included a long list of incompetent and unprofessional people at the helm of affairs. Key positions are all held by technocrats – be it finance, revenue, commerce, industries, production, textile and others. That’s an acknowledgment that the original team was wrongly selected. Also, an acknowledgement that the PTI did not have enough quality people who could hold key ministerial positions.

During the first 9-10 months, the government was defensive about its economic failures. It accepted them but justified by putting the blame squarely on the previous governments rather than its own incompetence. Around that time, the government realized that people were running out of patience and were no more willing to accept that. People wanted results as promised by the PM and his team. Around the same time, most members of the economic team were changed. The new team led by Hafeez Shaikh decided to give an entirely new perspective to the state of the economy. Out went the old narrative of accepting failure and in came the idea of declaring that the economy has been turned around. Good news was manufactured when none existed.

Tax revenue collection of 90 percent against its own set target was widely celebrated for the first quarter of this fiscal year. In the first four months, revenue shortfall is around Rs160 billio – and yet the celebrations. The spin masters held a press conference declaring that this year's GDP growth would be better than initially projected. The original projected GDP growth was 2.4 percent – one of the lowest in our history. How much better it would be the adviser did not explain. It could actually be 2.7 or 2.8 percent at best which will still be one of the worst. The adviser was extremely positive that inflation had been contained around 12 percent. The PM of course misses no such occasion to celebrate by tweeting the great achievements of his economic team. Little does he know, the numbers he tweets as successes are a result of extremely poor performance.

The most talked about economic success is the reduction in the current account deficit. It indeed has come down significantly but one needs to look in detail how the reduction has been brought about and at what cost. Increase in exports is the ideal way to reduce the current account deficit. Unfortunately, that has not been the case. This despite massive devaluation has had its own economic negatives (price increases, increase in discount rate etc).

Almost the entire reduction in the current account deficit has come through a significant reduction in imports. Textile imports are significantly down which will have an impact on future exports as also expressed by the commerce minister. Imports of industrial raw materials are also down. The reduction has helped improve the current account deficit for sure but has also contributed to slowing down the economy in a significant way. Economic activity has slowed down considerably contributing to unemployment, lower tax collection etc. The reduction in the current account deficit should also have helped improve the foreign exchange reserves, which has not been the case.

The significant decline in growth rate is projected as a consequence of the deliberate attempt to slow down the economy; that is far from the truth. A nose dive in growth rate is a direct consequence of poor economic decisions – massive devaluation in a short period and doubling the policy rate again in a short period has led the growth rate to decline in an unprecedented manner.

The economy is in a state of recession and no one knows that better than the people. As their incomes decline and prices hit the roof, no amount of spin can reduce their pain. As more and more people go below the poverty line and more people lose their jobs, no amount of spin can work. The only way forward for our economic team is to manage the economy in a manner that improves the economic lives of the people and leave the spin management to others.

The writer is former governor Sindh and former minister for privatisation.