Life After Musharraf

By Omar R. Quraishi

Now that General Musharraf is no longer president, one of the main hurdles often cited by the coalition government as an impediment to its smooth functioning has been removed. And this means that the government had better get its act together and get on with the till-now-shoddy job of governing the country. Readers will already know that the country is beset with major crises -- economic, social and of deteriorating law and order. And perhaps, the most important in terms of warranting the full attention of the government: the militant insurgency in FATA and parts of NWFP's settled districts.

Let's take the issue of the economy. In a nutshell, it seems to be on a downslide -- inflation is at its highest in almost 30 years, the budget deficit is unsustainably high as is the trade deficit, food prices seem to be rising all the time, and the rupee has hit around 75 to the dollar. The problem with a lot of what is written and said in the media and press itself on this issue is that it is usually not substantiated with fact and/or logic, especially that related to simple economics.

Take the issue of inflation for instance. In the short-term, and while the government may not want to publicly say so (though it should), there seems to be no solution to checking inflation. One remedy has been employed -- that of tight monetary policy, where interest rates are raised to a level where there is a fall in investment and total demand in the economy (assuming that some demand by consumers and firms comes from funds taken as loans -- such as a lease). However, as was ably pointed out in the editorial pages of this newspaper some time ago by former IMF and planning commission economist, Dr Meekal Aziz Ahmed, such a policy will work only if accompanying fiscal measures are taken as well -- meaning basically that the government needs to cut down its own expenditures. Unfortunately, that does not seem to be the case at all and if anything government borrowing has reached record levels, signifying that the government (both this one and the one before it) has been resorting to borrowing from the banking system to finance its expenditures. What this does is that it further balloons the budget deficit, increases the level of public debt, which is already very high for an economy the size and strength of ours, and ends up causing inflation. Such fiscal measures have no bearing with whether Musharraf is or is not in power.

Similarly, inflation in large part is being caused by the worldwide rise in food and oil prices -- both factors over which the government has little control. While the former may fall, there is no real possibility that the oil prices will come back to where they were a year or two ago. And the reason for that is simple -- oil is an exhaustible or non-renewable resource and the rise in its price reflects this fact, and it also means that its price may well rise even further in future years as stocks begin to deplete. What is needed to combat the effect of oil prices -- not only in terms of inflation, but also its effect on the trade balance, which in turn is the main reason for the recent hemorrhaging of Pakistan's foreign exchange reserves which have fallen by over five billion dollars in recent months -- is for people in the country to come to grips with this reality and accordingly bring some changes into their lifestyles vis-a-vis petrol and oil consumption. Measures like car-pooling or switching off the engine while waiting at a red light are commonplace in most civilised countries and make sense because they reduce the proportion of one's household budget that is spent on fuel and transport but in Pakistan, so far, they seem alien. And to make matters worse, the government takes the lead in this life of fantasy because a cursory look at the way its senior functionaries travel would make one think that this isn't the government of heavily-oil-dependent Pakistan but some oil-rich Gulf state.

As for bringing down inflation, somebody needs to tell the people of Pakistan that this is easier said than done. For starters, measures such as increasing interest rates only lower the demand-pull component of inflation -- meaning that this move can only influence that kind of inflation which is being caused by demand being very high, as in a booming economy. Our problem is that much of the inflation now is what economists call the 'cost-push' variety, and caused by rising costs of production (oil being a key input) and hence its remedy lies in bringing down production costs.

However, while it may not be in the government's power to import oil at a lower price, it can adopt certain measures which can bring down the cost of producing goods and services in the country. Unfortunately, most of these work -- and there is no guarantee that they will always, the reason being that economic theories sometimes are not as effective in real life as they look in a textbook -- in the long run.

Moving on from economics, the coalition partners will have to quickly forge a united front against militancy and terrorism. What has been happening in Kurram Agency over the past few weeks, with all-out battles between Sunni and Shia tribes suggests that the government is powerless to intervene and bring out even an end to hostilities -- other than issuing an inane ultimatum to both sides to stop the fighting within THREE day (and this came at a time when dozens were dying every day!).

People think that the government felt nothing wrong in a few more dozen lives being lost as long as the fighting ended in three days. One can only wonder what kind of message this sent to the Shias of Kurram, since by all accounts they seem to be at the receiving end in this war (which has its genesis in General Zia's days).

And then look at what is going on in Bajaur. One aspect may be heartening in that the military is giving a solid fight to the Taliban there and has used its air-power to put them on the defensive. However, the hapless residents of the agency are caught in the crossfire, and there are numerous reports of the Taliban preventing them from fleeing their homes -- so that they can be used as human shields.

Clearly, the government has its work cut out for it -- and it better get on with the job of running the country. Only the next few weeks will show whether this is, at best, very optimistic wishful thinking.

Courtesy: The News Pakistan