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How Pakistan Fared in 2015

How Pakistan Fared in 2015

The support for the Operation Zarb-e-Azb, spanning all political parties as well as the general public, with the objective of militarily dealing with terrorists continued successfully in 2015 with a visible decline in the number of terror attacks in the country. The heinous attack on Army Public School on 16th December 2014 continued to galvanize the nation in support of the operation. Significantly this was the first time that an anniversary of a terror attack was held on an unprecedented scale amidst somber events with senior political leaders of all major parties paying their tribute to the APS martyrs. However, besides the operation other components of the National Action Plan (NAP), including registering seminaries, some of which are believed to be recruitment centres for the terrorists, have not yet been put in place. The threat of Daesh, first dismissed by the Interior Minister, was revisited in November after wall chalking in support of the outfit as well as the arrest of 8 of its members in Punjab. A political solution which does not destabilise Sindh in particular and the country in general is needed. Courts cannot do the job. Only parliamentarians can.

The Karachi operation, however, became controversial and Sindh emerged as a political trouble-spot for the Sharif administration by the end of 2015. The two key players in Sindh – Pakistan People’s Party Parliamentarians (PPPP) and the Muttahida Qaumi Movement (MQM) – expressed their extreme reservations on the Rangers raids on their party offices that led to their senior leadership being implicated yet neither party opposed the raids/remand of party leaders/loyalists when the focus was on them. The visible target of the two beleaguered parties was the Minister of Interior Chaudhry Nisar who was credited with spearheading the NAP as well as the Karachi operation; however, few analysts are convinced that the decisions were taken without consultations with the establishment with some maintaining that these consultations were binding while others contend that they were not.

Public support for the establishment was significant during the year with a decline in not only the number of terror attacks but also other crimes, including kidnapping for ransom, extortion, and land grabbing particularly in Karachi. Constitutional clause 147 was cited by the Sindh government as a justification for the passage of the resolution in the assembly limiting the powers of Rangers – a clause that grants the right to a province to limit the powers of Rangers. The federal government cited Articles 148 and 149 that allow the centre to over-ride 147 allowing it to use authority “for the purpose of preventing any grave menace to the peace or tranquillity or economic life of Pakistan or any part thereof.” These clauses allowed the federal government not to adopt extreme measures as in the past, including imposing Governor’s Rule or invoking Article 245 by calling in army.

Law and order improvement, long regarded as a major impediment to not only the domestic economy but also to improved relations with neighbouring countries, led to a feel good factor inside and outside the country and with our international partners. Prime Minister Nawaz Sharif held onto the foreign affairs portfolio and undertook several foreign visits. In spite of proclaimed Modi opposition to any overtures of friendship with Pakistan over the years and the suspension of the Strategic Dialogue by his administration Prime Minister Nawaz Sharif exhibited maturity in dealing with his more volatile Indian counterpart by neither giving in to the demand to limit the agenda to one point or indeed to refuse to engage with him.

Be that as it may, the PML-N leadership did not use parliament as a forum to develop a consensus on critical policies (in spite of the role parliament played last year in containing the threat of the protracted Pakistan Tehreek-e-Insaf dharna) due to lacklustre attendance particularly by the members of the cabinet, including the Prime Minister; the administration also violated clause 154 of the constitution that stipulates the calling of a Council of Common Interests once every three months. This accounts for a widening of the trust deficit between provinces and the Centre more particularly on issues/decisions relating to the economy.

The economic policy put in place in 2013, soon after the Sharif administration was established, continued for the third year running. This accounts for the continuation of the 6.64 billion dollar International Monetary Fund (IMF) programme in Pakistan and its associated reform agenda. Disturbingly, however, several components of the reform agenda that were part of the party manifesto have been compromised notably those relating to improved governance through selection of senior management on merit as well as restructuring of badly-run state-owned entities (SOEs) prior to privatisation. Selection process remains in the hands of senior members of the executive and like during the tenure of the PPP-led coalition government, nepotism and favouritism continue to account for serious lapses in governance. The selection panel consisting of three men of integrity, as directed by the Supreme Court and set up by Prime Minister Sharif shortly after he took oath, remains abandoned after the panel’s recommendations were at odds with those of the Prime Minister or his inner cabinet colleagues. The result has been legal challenges to some appointments as well decisions by heads of SOEs and/or members of board of directors.

Restructuring of the two SOEs notably the Pakistan International Airlines and the Pakistan Steel Mills that account for the heaviest annual bailout packages was visibly not up to the mark. PIA did attain an operational profit in the year past, however, analysts maintained that it was due to a dramatic fall in the international price of fuel, constituting a major input for the airline industry. The management also referred to improved performance through leasing more planes and in terms of on time take-offs and landings; however media reports highlighted outstanding dues of 1.6 billion dollars to Pakistan State Oil and frequent late take-offs that led to inconvenience to domestic passengers as well as reports of the levy of heavy penalties in foreign countries. PSM on the other hand remained largely non-operational and the federal government continues to extend packages encompassing the staff wages and has offered to sell the Mills to the Sindh, however, so far it has not received any response. It appears a strategic investor will have to be found as PSM requires a lot of funds for its revamping. As a last resort, the government must not hesitate in liquidating PSM regardless of the financial cost. Such a drastic action, however controversial, will surely lessen a significant burden on the national exchequer.

The biggest criticism hurled at the federal economic team, however, was on data manipulation by its detractors; and an increase in reliance on external loans. Debt-to-GDP ratio is imperative – whether or not on the rise – is of little consequence as GDP has nominal inflation as a component and the size of grey or undocumented economy is never properly captured. It is on the rise as indicated by a significant increase in cash-in-circulation. Our policymakers must not lose sight of the fact that labour productivity in service sector does not grow as fast as it does in agriculture and industry. Raising GP through service sector is therefore no answer to growing joblessness in a country of 200 million people.

However, the 46 billion dollar China-Pakistan Economic Corridor has been initiated and, there is a widespread consensus that if fully implemented, growth rate will rise significantly as it could create new employment opportunities. However, there is a need to look at other poorly performing macroeconomic indicators, particularly the decline in exports, though the Prime Minister recently reduced the electricity tariff for the industrial sector yet the rupee remains overvalued and refunds inordinately delayed, the decline in rating on ease of doing business, and the heavy reliance on domestic borrowing for budgetary support is crowding out private sector borrowing. The situation, therefore, is disabling the private sector from playing its due role towards growth efforts. Pretty soon, we could be in a straitjacket, i.e., debt servicing cost as a percentage of the budget. A closer look at investment-to-GDP ratio is needed as without private sector investment – jobs will not be created. Improvement in law and order situation and infrastructure would indeed be helpful.

Last but not least, Pakistan’s stock market was flat in 2015 (a rise of only 2.1 percent). It was largely due to foreign selling; oil and bank earnings were down (having approximately 40 percent of the weight in the KSE-100 Index) and right issues and record number of public offering increased share supply. As a consequence, price of KSE-100 was down by 3.5 percent in rupee terms and 2.2 percent in dollar terms.

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