Friday May 24, 2024

The change at the finance ministry

By Mohammad Zubair
April 06, 2021

Finally, the admission – an acceptance that the economy is in a mess. This acceptance is coming from no ordinary person. And surely not from any opposition leader.

Shaukat Tareen, who had been picked by the PM to head the finance ministry, is making the serious allegation. In several interviews on electronic media, Shaukat Tareen confirmed that he had been offered the finance portfolio by the PM. The only hindrance to that, according to Shaukat Tareen, is a NAB appeal in a rental power project case in which Shaukat has already been cleared.

Shaukat Tareen’s statements are an indictment against the former finance ministers in the Imran Khan cabinet – Asad Umar and Hafeez Shaikh. One, it clearly reflects the thinking of the PM. If the PM did not share Tareen’s views, why would he offer him the job? Second, it also reflects how worried the PM is with the state of the economy and recognises the failure to fix it in the first half of his tenure.

However, a few days before Tareen’s accusations, Shibli Faraz fired the first bullet. He accused former finance minister Hafeez Shaikh of failing to control inflation – something that affects the masses more than any other economic indicator. When Asad Umar was asked to step down, the PM had bluntly stated that the criterion to remain part of his cabinet would be performance only, indicating that Asad did not perform according to the benchmark expected of the finance minister.

The change from Asad to Hafeez Shaikh was not normal. It reflected a major change in economic policy under the PTI government. Asad was considered the brain of the party; he not only prepared the economic plan before the elections but also reflected the hopes and aspirations of the party’s urban educated middle class and professionals. The concept of Naya Pakistan, whatever it meant, was to be implemented by Asad.

With the change from Asad to Hafeez Shaikh, the dream of Naya Pakistan was thrown in the dustbin of history. Hafeez Shaikh never owned the PTI plan and therefore carried no responsibility for its implementation. PTI diehards lost all hope of the dream that took years to build up – even though they kept justifying every action or decision of the new FM.

Gone was the concept of Sarmaya Pakistan, an organisation that was to fix all state enterprises. Gone was the commitment not to privatise state institutions. Gone also was the commitment not to fire any employee of state enterprises. Hafeez Shaikh was only brought in to stabilise the economy and calm the nerves of the markets and to restore some level of confidence among the major stakeholders.

Negotiations with the IMF had gone on for too long since the current government came in power. But it seemed Asad as finance minister was reluctant to conclude an agreement with the IMF which obviously contained harsh conditions on the Pakistani government. Hafeez Shaikh had no issue in concluding the agreement with the IMF within weeks of his assuming the finance portfolio.

The stringent conditions imposed by the IMF destroyed any hope of economic recovery. Instead, the economy nosedived with growth rate going down from 5.8 percent to 1.9 percent within the first year of this government coming to power, and then down to negative 0.4 percent (part of it affected by the Covid-19 pandemic as well).

Pakistan’s economy never recovered from the disastrous decisions taken in the first year of the current government – something reconfirmed by Shaukat Tareen. The discount rate was more than doubled within the first 9 months, an unprecedented act in recent history. Then the massive devaluation of around 35 percent within the first year. More misery was to come through unprecedented hikes in gas and electricity tariffs. Finally, there were the additional taxes imposed on businesses.

These four decisions within the first year killed whatever hope there was of any economic recovery. The implications were far-reaching, affecting every single Pakistani. Consider some of the consequences: one, the economy came to a grinding halt; two, unemployment on a mass scale; three, more people going below the poverty line than any other time in our history; four, the decline in imports not only contributed towards negative economic activity but also seriously affected our tax collection; five, growth nose-diving; six, phenomenal increase in inflation with major impact on food items; seven, record increase in fiscal deficit due to poor tax collection; and eight, massive decline in total GDP

After almost three years in power, the economic situation remains precarious. The PM seems to have finally accepted this reality and is now looking towards Shaukat Tareen to rescue the sinking ship.

The announcement by Tareen came as a shock. After Hafeez Shaikh’s departure, the PM announced Hammad Azhar as the new finance minister. Hammad’s first two days in office could not have been worse. First, he presided over the ECC meeting which approved the import of sugar and cotton from India. This was a major decision with significant political and foreign policy implications. No one seems to have paid much attention to this fact in the ECC. The federal ministers, secretaries and others were probably more than willing to approve the summary initiated by the PM himself in his capacity as commerce minister.

Hammad thought he had achieved a major milestone and must take credit for that. Accordingly, he did a press conference, sharing the ECC’s decision to import sugar and cotton. This was widely covered in the media, including international media. The very next day, Hammad faced serious embarrassment when the cabinet meeting under the PM rejected the ECC proposal. More embarrassment was to come when the ministers tried to justify both the decisions – the one approved by the ECC and the cabinet’s decision to reject it. Obviously, the PM had to be defended come what may.

Hammad was still recovering when breaking news started coming in about Shaukat Tareen being offered to head the finance ministry. And surely enough, it was not just rumours – with Shaukat himself appearing on TV channels and confirming the offer.

All of this reflects poor decision-making at the highest level. The economy is bad enough but what about the decision-making process? A significant change could have been handled in a much better way, but this unfortunately is the story of this government. For now, we await to see who will finally head the finance portfolio.

The writer is the spokesperson for Nawaz Sharif and Maryam Nawaz, and former governor Sindh.

Twitter: @Real_MZubair