ECONOMIC stabilization through harsh and unpopular measures such as the withdrawal of the fuel subsidy or a reduction in development spending, in the context of public mobilization by the PTI led by Imran Khan, seems a daunting challenge for a new government coalition with a very slim majority.
The latest fuel subsidy was granted early last month in a desperate gamble to stay in the saddle by a government facing united opposition, desertion from allies and divisiveness within the ranks of its own parliamentarians as a motion of censure was approaching.
Although when it announced the subsidy, instead of an increase recommended by the regulator, the government said it would manage the cost of the nearly Rs 400 billion subsidy until the summer through higher than expected revenues and savings in other areas.
But the growing deficit in less than two months since the grant was awarded is ringing alarm bells in the halls of power, as it is abundantly clear that the gamble was aimed at thwarting a likely defiance movement at the time, and would have been withdrawn as soon as the danger was averted.
Two things have happened since. First, the vote was successfully carried and the Prime Minister, despite trying every trick in the bag, including some constitutionally questionable ones, was unable to stay in office, and one of his main rivals was been elected and sworn in.
Miftah Ismail’s credentials are beyond doubt; what leeway it has.
Second, the former Prime Minister resented his constitutional removal from office and embarked on an aggressive mass mobilization campaign, using inflammatory and populist slogans and threatening to take to the streets to impose immediate elections.
This week the government stated emphatically that parliament would complete its term and elections would not be held until next year, but Imran Khan’s aggressive campaign, apparently backed by renegade elements in a key institution, continues to casting doubts on the longevity of the incumbents.
And this element makes any attempt possible to balance the books full of pitfalls. Removing the fuel subsidy will further spur grueling inflation, especially for the poor and middle classes, and the electoral public will likely punish those it sees as responsible.
When your life is an uphill struggle to put food on the table, it’s no surprise that short-term memory, rather than long-term memory, informs your reactions. Who will remember the mismanagement of the PTI and the decisions that brought the economy into this pass?
The most likely target of people’s anger would be the hand that signed the takedown notice. This is why Prime Minister Shehbaz Sharif rejected the first summary of a fuel price hike. But that cannot be sustained for too long, as the growing deficit and Islamabad’s commitment to the IMF dictate a change of course.
Perhaps aware of the consequences of bringing this poisonous gift to its lips, the government could also consider other options to reduce the deficit. And those include a reduction in development spending.
Proponents of this course argue that roads and bridges and other infrastructure can wait and that any savings made in these areas will be used to provide targeted aid to those most in need. However, this path is not easy either.
Even if Parliament is able to complete its term, it has about 16 months left. Can the ruling coalition afford to sustain development spending in the country, including in rotating constituencies, where such projects are likely to bring a political dividend and may determine who forms the next government?
Some independent economists are pinning high hopes on Finance Minister Miftah Ismail. Even then, given how few options he has, one wonders if he can pull a rabbit out of his hat. His credentials are beyond doubt; what leeway it has.
If addressing these challenges were not enough, the government may need to address another issue that could be just as important, if not more important. Let me explain what I mean. In the January 31, 2021 issue, Dawn magazine’s ‘Eos’ hub ran Carmen Gonzalez, my partner who was BBC and Instagram editor, and I covered the topic of ‘fake news’. Here are some paras of this piece:
“In January 2017, the 45th President of the United States of America was sworn in before a crowd that – shall we say – was not as large as expected. The live television images spoke for themselves. of the new president was quick to say that it was the “largest audience to ever attend an inauguration (…) on the globe”. Asked about her blatant lie, her response was truly Orwellian. She said her opinions were “alternative facts”.
“Going into truly dystopian territory, Trump’s attorney, Rudy Giuliani, told an amazed NBC’s Chuck Todd, ‘The truth isn’t the truth!’ And to complete the Orwellian scenario, Trump gave a speech in July 2018, where he said, “What you see and what you read is not what happens. As Orwell warned in 1984, a Once you are told to “dismiss the evidence with your eyes and ears”, you can expect utter alienation.
The ‘insane’ attacked the United States Capitol on January 6, 2021, prompted by Trump’s ‘alternative facts’ in a callback to our own ‘D’ Chowk dharna from 2014. Trump claimed to have won the presidential election November 2020. Official data shows that Joe Biden won seven million more votes than Trump, giving him 51% of the vote and 306 seats in the US Electoral College.
“But these ‘alternative facts’ resulted in five deaths, dozens of arrests; the children of legislators and their aides terrorized in the manger inside the Capitol and the US Legislature besieged by a fiery mob. A recent Reuters/Ipsos poll showed that 68% of Republican voters still believe the election was rigged, meaning 50 million Americans no longer have faith in their democracy.
Need I say more about what we need to tackle head-on?
The writer is a former Dawn editor.
Posted in Dawn, April 24, 2022