Dr Kaiser Bengali is a senior economist with over 40 years of experience in teaching, research and policy. Dr Bengali has a master’s in economics from Boston University, and a PhD in economics from the University of Karachi.

His areas of research include issues in planning and development, macro-economic and fiscal policies, poverty, unemployment, and social justice, urban and regional planning, decentralisation and local government and finance, education, and ethnic, sectarian and religious militancy and violence. He has served as head of the Chief Minister’s Policy Reform Unit, Government of Balochistan. Earlier, he was an advisor for planning and development to Sindh chief minister. He was also the first head of the Benazir Income Support Programme, having also had designed the programme.

Dr Asad Sayeed is director and senior researcher at the Collective for Social Science Research (CSSR), Karachi. He obtained his BA in economics and social thought from Lawrence University, Wisconsin, US; his MPhil in economics and his doctorate from the University of Cambridge.

Previously, he has worked as senior economist at the Social Policy Development Centre and as director of research at the Pakistan Institute of Labour Education and Research. Dr Sayeed has conducted extensive research in the fields of social protection, macroeconomic policy, labour market dynamics in developing countries, poverty assessment and the political economy of corruption. He is currently the member from Sindh in the 10th National Finance Commission.

Excerpts from the interviews follow:

The News on Sunday (TNS): Is the Shahbaz Sharif-led government ready to tackle the challenges facing the country?

Dr Kaiser Bengali (KB): It is not just this government. No government in the last 10 years has developed a strategic roadmap for tackling the economic crisis, which has been brewing particularly over the last 20 years.

Dr Asad Sayeed (AS): The present federal government is unprecedented in terms of its diversity. It consists of seven different parties (if I can count correctly) and an array of independents. Usually coalitions in Pakistan consist of two or three parties and there is a dominant party that holds sway over the others. Working this coalition will be a challenge for Prime Minister Shahbaz Sharif. This is not only because of the varied nature of the cabinet but also because of Shahbaz Sharif’s own style of working where he is known to micro manage and work with a close group of bureaucrats rather than through the cabinet and, that too, of members belonging to a broad range of ideological and regional interests. Having said that, this diversity has its positives too; it is more inclusive of regions and opinions in the country and many ministers bring with them expertise and experience that was lacking in the previous government.

For instance, most of the economic ministries are with the PML-N and most of them have vast experience in managing the economy and some with the right credentials also. Similarly, the PPP has a good track record in handling foreign affairs, poverty alleviation, social protection and working federalism across provinces. Another positive is that this coalition will work more harmoniously with the bureaucracy, something which was lacking in the previous government and one of the reasons for it not being able to provide adequate governance on a routine basis and in executing policy decisions made by the cabinet. Thus, on balance, the Shahbaz Sharif government is better placed to meet challenges that confront it than the whimsical and seemingly non-serious cabinet that Imran Khan presided over. The only proviso is that Shahbaz Sharif will have to maintain cohesion across diverse interests that he has to work with.

TNS: What are the challenges affecting the economy at the domestic front?

KB: The principal economic challenge is to narrow the budget deficit by reducing non-development expenditure, including non-combat defence expenditure. Cuts totalling Rs 1 trillion are needed; anything less will be window dressing.

On the socio-political front, Imran Khan has polarised and fragmented our polity and society and created rifts, even within families. The challenge here is to lower the political temperature and unite the country to be able to face the common economic challenges.

AS: The biggest challenge in the short run is inflation. All other failings at the macro-economic level translate primarily into inflation for the people at large. This is true for the exchange rate, the trade deficit, the budget deficit, circular debt in the energy sector, etc. Because so many different elements are feeding into the headline as well as food price inflation, the government will have to tackle most, if not all, of these indices to bring about the ‘feel good’ on inflation. This is perhaps the most formidable challenge.

TNS: Will the new government revise the terms of international agreements with the IMF, CPEC etc.?

KB: Terms of agreement with the IMF, other international creditor organisations and with official and commercial entities of other countries, including all the Free Trade Agreements (FTAs) need to be revised. But first we have to improve our bargaining power. A country whose economy is hanging by a thread has no bargaining power.

AS: On the IMF, let’s see. Given Pakistan’s desperation for IMF validation, the bargaining chips are with the IMF. However, if Pakistan displays a more accommodative position on geo-politics, in other words, if foreign policy pronouncements are more nuanced, then IMF may be more accommodating, at least, so far as prior actions required of the previous government are concerned.

The PML-N has a good record of working well with the Chinese on the CPEC, and I expect a much smoother relationship on that front. In fact, Prime Minister Shahbaz Sharif has already indicated enhancing the scope of the CPEC to Karachi’s mass transit system. And more of that can be expected.

TNS: What will be the fate of the various poverty alleviation programmes launched by the Imran Khan government?

KB: The Pakistan Tehreek-i-Insaf government launched no welfare programmes; they renamed the Benazir Income Support Programme (launched by the PPP government) calling it their Ehsaas programme. Their health insurance schemes were like old wine in new bottles. Their housing scheme never went beyond 17,000 units out of a promised 5 million; and the promise of ten million jobs never materialised.

The PPP is a coalition partner in the new government. It has a strong welfare agenda. I expect the government to continue and expand viable programmes.

AS: The fact of the matter is that other than expanding the Sehat Card, the PTI government did not bring about any new poverty alleviation programmes. The flagship social protection programme in Pakistan remains the BISP. The PTI government did enhance the budget for BISP and provided emergency grants during Covid-19. However, even on that front it did not enhance the number of beneficiaries. In 2019, they struck off 850,000 beneficiaries on allegations of corruption. Regardless of the veracity of that claim, they did not include new, more deserving, beneficiaries to replace those that they had excluded.

The other initiatives, such as langar khanas, panah gahs, etc are funded by private philanthropies and will likely continue. The Sehat Card will likely continue in the short run also as it was originally launched by the PML-N. The Kamyab Jawan programme is not for the poor but is seen as a welfare programme for middle and lower middle class youth. This may continue also, perhaps at a smaller scale as again these are schemes that fit well with the way the PML-N approaches welfare.

TNS: What will be the fate of the NAB?

KB: The NAB, like all malignant organisations of the Gen Zia and Gen Musharraf eras, must be abolished and consigned to the dustbin of history.

TNS: Can the new government handle issues like low exports, pressure on rupee, circular debt, petroleum prices and food inflation etc.?

KB: Not unless they manage to take surgical measures to curtail the budget and external trade deficits.

AS: As I said earlier, the new government is expected to govern better because of its experience and ability to work well with the bureaucracy. That will have a positive impact on containing food inflation, to the extent that food inflation is caused by market speculation and hoarding. The component of food inflation which is imported, especially for edible oil and pulses, cannot be controlled unless global commodity prices decline or the exchange rate appreciates. Not even nominally increasing petrol prices for the last month is falling in the trap that the previous government has laid and it is, to say the least, unwise. It will create more pressure on the exchange rate as well as the budget deficit. This government should steer clear of ‘Daronomics’ and not fiddle with an open market exchange rate policy because if it does, it will suppress exports, enhance the trade and current account deficits and that will come back to bite them if they are re-elected, whenever elections are held.

I do not think they have the time to delve into the deep structural reforms in the energy sector that are needed to reduce circular debt.

TNS: Will this be an election year? Should the remainder of the National Assembly’s term be seen as a test for the Shahbaz Sharif-led government?

KB: I believe elections will be announced after the appointment/ reappointment of the army chief in November. Polling may come around February/ March 2023.

AS: This does not appear to be the election year. Elections will likely be held in 2023 as the short term economic stabilisation required will take time to sink in. Necessary legislation to undo the anti-democratic legislations of the past will take time also. Obviously, the proviso is that if this ‘unity government’ fails spectacularly, its hand will be forced.

The interviewer is a staff reporter. He can be reached at shahzada.irfan@gmail.com