Turning a new leaf

Turning a new leaf

Turning a new leaf

Although Pakistan’s parliament will be completing its full term in a few months’ time, the government is still reluctant to announce a date for general elections.

The avoidable uncertainty is exacting a heavy economic price, by delaying urgent policy decisions that are needed to avoid a full-blown economic crisis. The danger of such a crisis is heightened by official inaction on both internal and external dimensions of the country’s worsening financial position.Government leaders have been sending mixed signals on the timing for the general election. At times they have hinted at elections by March 2013. On other times they have indicated these might be held in April or May.

This political posturing has a two-fold aim: Keep political rivals off balance and use the poll date as a bargaining tactic in on-off talks with the opposition on a caretaker administration.In any parliamentary system, determining the election timing is the prerogative of the party in power, which almost always uses this to its political advantage.

But rarely does a government constantly procrastinate in the way the PPP-led coalition has done, spreading deliberate confusion and uncertainty about the date. At one point it even instigated media speculation that elections could be postponed. This is despite the fact that when Parliament’s constitutional tenure ends in March 2013 general elections have to be held within sixty days of the assemblies’ dissolution.

The government has chosen to obfuscate the poll date at a time of growing disarray in the country – conditions that require a government empowered by a fresh mandate to provide leadership and chart a new direction. The recent surge in sectarian attacks, Karachi’s unchecked descent into lawlessness, collapse authority in Balochistan and the growing fiscal and economic crises are all a consequence of the lack of governance and a rudderless ship of state.

This dire situation underscores the need for a fresh mandate from the electorate, so that the next government can move decisively on a number of pressing issues. In this backdrop, unpredictability about the election timing may serve the ruling party’s purpose, but not the interests of the country. Nowhere is this more evident than on the economic front.  Delay in taking corrective measures to address the worsening budget and balance of payments deficits increasingly risks pushing the economy over the edge.

The government’s patchwork economic management has already left public finances in a precarious state. This is being aggravated by a number of disturbing trends, which show no sign of being reversed: a runaway fiscal deficit that could rise beyond the 2008 level, plummeting domestic and foreign investment, record borrowing from the State bank and commercial banks and high inflation. Additionally, heavy energy subsidies and increasing interagency debt continue to fuel the unresolved energy crisis. On top of this, the government’s fiscal laxity in the run up to elections is sapping public finances.

Meanwhile the country’s external account is close to the tipping point. Exports are stagnating and foreign direct investment has plunged to a record low. Large external debt service payments, including those owed to the IMF, have been steadily depleting the country’s foreign exchange reserves.A moment of heightened vulnerability is approaching. With foreign capital inflows drying up and external liabilities looming, Pakistan is on the brink of a situation where it would be unable to meet its financing requirements despite strong overseas remittances.

Repayments of $605 million are due to the IMF this month and $704 million in January-February. This means that the country’s present $ 9.1 billion of foreign exchange reserves (held by the central bank) could dwindle to a level that barely covers a month of imports by this fiscal year’s end. This could plunge the country into a balance of payments crisis.The only way to avert this is by emergency financing from the IMF. But for this to happen, a broad political buy-in will be needed for reform actions that will have to be swiftly undertaken. This in turn means that a government will have to be in place with a fresh mandate and the political strength to embark on policy reforms.

Prospects of this happening are hindered by the  government’s deliberately conflicting signals on when it plans to hold elections. This may be good politics for the ruling party, but it is bad policy for everyone else. The country needs an end to uncertainty not more displays of political gamesmanship that imperil the economy – and national stability. – Khaleejnews