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May 8, 2019

Brimming with tabdeeli


May 8, 2019

The PTI has made U-turns galore on almost every subject, and has now elevated making U-turns to the art of leadership. But one place where it has not made a U-turn, and where it has fulfilled its promise, is in bringing tabdeeli. And the last few weeks have been especially rich in tabdeeli – in personnel.

Let’s first talk about why the health minister was fired. During the PML-N's tenure, the health minister, Saira Tarrar, and the pharmaceutical industry reached an agreement that allowed pharmaceutical companies to raise prices by half the rate of inflation. In addition, some drugs that the companies were selling at a loss were allowed up to an eight percent price increase. The companies were not allowed to raise prices due to devaluation because they were getting a raise due to inflation and giving a raise due to rupee depreciation would mean double benefits to the industry. Mrs Tarrar, a hafiz-e-Quran, may come across as demure but was ferocious in her defence of the consumer against the pharmaceutical lobby. I was present in some of her meetings with the industry and I have since become a fan of her sense of right and wrong, and the role a minister should play to safeguard the public interest.

The PTI government allowed the industry to raise prices by 15 percent due to devaluation but in reality we have seen medicine prices increasing by up to 200 percent. Had this happened under any other government, Imran Khan would have raised hell and accused the government of corruption. But this time he is quiet. I am not suggesting that any corruption took place. But I am happy that the minister was removed, unfortunately not before causing a lot of loss to the consumer. I wish the new incumbent – about whom people have positive views – well and hope he emulates the fine example of Mrs Tarrar, the PML-N minister.

Also demoted was petroleum minister Ghulam Sarwer. Last December, his ministry turned back LNG vessels and instead imported expensive furnace oil. This resulted in higher cost of power generation, as well as substantial loadshedding of gas and electricity. Hopefully, now the government has learnt its lesson and will be importing LNG as per the plans laid out by the PML-N government.

The PTI government also raised gas prices, in some cases up to 140 percent, for industry and domestic consumers. We were told the price increases were necessary because both the Sui gas companies were losing money. Except that the companies are not losing money and in the last audited accounts both companies made profit.

Ogra is directed by law to recommend gas prices so that our gas companies make a huge 17 percent return on assets. But there is no compulsion for the government to accept that high recommendation. The government can always decide to keep profits and prices lower, like the PML-N did. As it is, the PTI government is forcing some domestic and industrial consumers to subsidise – for eg, the fertiliser industry. That’s not fair. And I think it was a huge mistake on the part of the government to raise prices so much and I hope they reverse the increase. I am glad that the minister was removed but not before doing a lot of damage to the consumers. The new incumbent Nadeem Babar – who is universally praised for being very smart – has a lot of work to do.

Finally, we come to the removal of the finance minister. The PTI had marketed him as an economic genius who – working under Imran Khan – was going to double tax collection while reducing the tax burden, make petrol and diesel cheaper, make gas and electricity cheaper while eliminating circular debt, reduce budget deficits, decrease national debt, reduce inflation, provide public or private financing for five million new homes and increase economic growth to create ten million new jobs, so that even overseas Pakistanis would come back home for employment. Unfortunately for the PTI and for Pakistanis, not even a single promise has been kept. (The only exception is that two very educated overseas Pakistanis have returned home to take employment: one as adviser on finance and the other as governor of the State Bank. I wish both these gentlemen well).

Coming to the PTI’s economic performance, instead of increasing tax collection, the PTI government has raised less in real terms compared to last year. In fact, this year our tax-to-GDP ratio will actually decrease, after increasing during the PML-N tenure. And in spite of drastically cutting development expenditures, including on higher education, current expenditures are growing at such a high pace and tax collection is so sluggish that this year we will have the highest ever budget deficit in our history: over Rs2700 billion. At 7.2 percent of GDP, it will be a higher deficit even as a proportion of GDP than any deficit ever made by the PML-N, not just in the last five years but from 1991 to 1993 and 1997 to 1999.

Given the record deficit and unprecedented devaluation, our national debt has also increased at the fastest pace ever. In fact, the PTI will have raised our national debt more in its first year than all the governments combined during our first 40 years. What this means is that the debt taken by all governments, from Quaid-e-Azam to Gen Zia, added together is less than the debt that will be taken by Prime Minister Khan’s government in just its first year. Incompetence is costly.

And while the government is borrowing at record pace, both domestically and internationally, it has destroyed business sentiment and consumer confidence in the economy, thus slowing our growth to half, doubling our inflation and multiplying our economic problems. After this performance it’s not a surprise that the finance minister was changed – some say scapegoated – especially one who could have been a rival to PM Khan one day. But Asad Umar is a proud and ambitious man and he will be back. Maybe not in Imran Khan’s cabinet, but he will be back.

It is not just in the above areas that the PTI’s performance has been disappointing. In area after area, the PTI’s inexperience and incompetence has proven to be costly. Whether it’s railways (record losses), power (fastest increase in circular debt), planning and development (siphoning CPEC funds to PTI legislators for their constituencies) – everywhere there is mismanagement. Even something as non-political as polio eradication has had a reversal. From 306 cases in 2014, the PML-N team ably led by Sen Ayesha Raza Farooq, the polio focal person, reduced the cases to eight in 2017. This year, they have again gone up to 17 cases. It seems that when it comes to governance, PM Khan has the reverse of the midas touch.

It is now painfully obvious that PM Khan is not suitable for governance. So, having borrowed half of Mr Zardari’s cabinet, Khan may now want to borrow another idea from him. PM Khan should elevate himself to the presidency and limit himself to giving inspiring speeches to the youth, and give the prime-ministership to Shah Mehmood Qureshi. That way the PTI may – finally – deliver good governance.

The writer has served as federal minister for finance, revenue and economic affairs.

Twitter: @MiftahIsmail

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