While there was never an expectation from the coalition government led by Prime Minister Shehbaz Sharif that it would solve the most pressing issues facing the country in a matter of weeks, at minimum, a direction or strategy was expected to become apparent by now. Unfortunately, that has not happened so far and there are worrying indicators of politics taking precedence over the undeniable need to address the dangerously precarious condition of the economy.
There is no denying that the PTI has left behind an economic quagmire for the PML(N) to deal with. The massive fuel subsidy, necessitated by PM Imran Khan and his party’s popularity taking a nosedive, was like taking a sledgehammer to the IMF package. Apart from that damage, there is the cost to the exchequer, standing at Rs 194 billion cumulatively since it was announced at the end of February. According to Finance Minister Miftah Ismail, May will be the most expensive month if the subsidy continues as is, close to Rs118 billion.
Additionally, the Finance Minister complains that not only did the previous government lose taxpayer money in such a spectacular fashion, it did not fund the subsidy either as claimed by his predecessor, Senator Shaukat Tarin. This begs the question, why has the government not completely rolled back the subsidy by now? One straightforward answer is that the political cost for the party with such a move was far greater than the economic one.
The longer this set-up governs; it will continue to rack up not only the political liabilities it itself will create going forward, but also a significant chunk of the PTI’s. However one looks at it, the PML(N) stands to lose the most out of this political-economic predicament
There is a lot of pressure from the ousted PTI government to hold elections immediately. Imran Khan is currently leading a campaign that is fueled by a reinvigorated support base that would rather see another coup take place than tolerate Shehbaz Sharif, Asif Ali Zardari and Maulana Fazlur Rehman in cahoots and in power. Khan believes that this tailwind should see him through to another crack at governing the country. His march to Islamabad at the end of the month is a culmination of all the public engagement he is doing with jalsas every other day in key constituencies.
He perhaps feels that once his regained popularity is noticed by the powers-that-be, those ‘electables’ and allies that recently abandoned him would bet on the winning horse, sensing the wind had changed direction yet again. This is of course a longshot considering how Khan has practically burned all his bridges, berating the armed forces with increasingly less subtlety in public spaces while openly blaming them for his premature departure from the PM House and this current disorder the country finds itself in.
One wonders what sort of reconciliation strategy he is playing at when practically every one of his ill-conceived childish outbursts reveals more about how little ‘the Americans’ had to do with his ouster, how close he was to the military establishment and how big a role they played in bringing him to power, keeping him in power despite the odds and eventually calling off ‘project Imran’ altogether.
It has become necessary now that a concrete decision is taken or at least some direction is provided by the government over what it plans to do about the fuel price hike and whether or not it is considering heading into early elections. The former has bearing on the latter. Going in to elections too soon after dropping a ‘petrol bomb’ would be disastrous. The dash to London is specifically to seek counsel from PML(N) supremo Nawaz Sharif.
That these consultations could have easily taken place over video conference but weren’t, displays that a point had to be proven about who is really running things. Pictures to this effect were also released. The optics of the dash to London are as terrible as they are intentional, much to the detriment of the effective and efficient running of the country. In a country where people are struggling to run a single kitchen owing to back-breaking inflation, those in charge of solving this problem plan to do this by running two parallel kitchen cabinets, in different time zones, within the same party.
Talks with the IMF are scheduled to resume on Wednesday, which means that a decision on the fuel subsidy will have to be made before then, otherwise it would practically be a nonstarter for the fund that has not shown any restraint in expressing its displeasure over how the PTI violated some of their key agreements..
While a date for PM Shehbaz Sharif’s return from London has not been confirmed yet, he is scheduled to stop in the UAE to condole the death of the country’s president on his way back. He is expected to reveal whatever will be decided in London then. He would presumably need to consult with all member parties of the coalition, take them into confidence and then announce any major decisions. The diversity in this coalition government makes for a very difficult, and therefore time consuming, decision-making process.
A worrying web of issues from the standpoint of the external account also continues to get worse. No matter what spin the SBP gives to the foreign exchange reserves figure, it is not reflective of the actual situation. The total figure may be $16.3 billion, but only $10.3 billion of this is available and semi-liquid to service debt or buy oil.
Confidence of ‘all-season friends’ also seems to be shaky as China has already decided not to roll over the $2.1 billion support it had provided to prop up reserves (these dollars are inaccessible to SBP, just there to make the numbers look good). This was a major outflow that happened in March. There is reportedly a demand that Pakistan pass its ongoing 7th IMF review to be eligible for these funds again.
Regularising relations with the IMF by addressing some of their key grievances opens up a lot of doors for raising additional financing from international lenders. This might address many of the government’s financial woes, allowing the country to function normally and avoid a potential Sri Lanka-like situation. However, the longer this set-up governs; it will continue to rack up not only the political liabilities it itself will create going forward, but also a significant chunk of the PTI’s. However one looks at it, the PML(N) stands to lose the most out of this political-economic predicament.