Uncertainty and confusion can ruin an economy | By Dr Farrukh Saleem


UNCERTAINTY simply means the “lack of certainty or sureness of an event”. And, confusion is the “state of being bewildered or unclear in one’s mind about something.”

In an uncertain environment two things happen: businesses postpone investment decisions into fixed assets and consumers hold back spending on durable goods.

When businesses postpone investment decisions GDP falls. A contraction in GDP has two consequences: job losses and disruption of businesses. Uncertainty is an economy’s biggest enemy. Confusion just kills it.

On February 16, the Ministry of Finance and the IMF staff reached an agreement under which the Ministry of Finance agreed to do three things: impose additional taxation of Rs1,200 billion; raise the electricity tariff by Rs6 a unit for an additional Rs900 billion; and the “strengthening of the State Bank of Pakistan’s autonomy and governance.”

On March 24, the IMF Executive Board completed the second, the third, the fourth and the fifth reviews. On March 30, the State Bank of Pakistan received the IMF’s tranche of $498.7 million.

On May 5, Shaukat Tarin, the newly inducted Minister of Finance in a press conference, categorically ruled out two things and hinted at the third: he ruled out “new taxes”; ruled out a hike in electricity tariffs; and hinted that the State Bank of Pakistan cannot be given full autonomy.

Will the IMF allow a wholesale renegotiation? Will the IMF and our new Minister of Finance be able to work out a compromise? Where will we get $30 billion from? Can beggars be choosers? Can we live with the IMF? Can we live without the IMF? Will the State Bank of Pakistan be autonomous or not? Is the agreement signed by a Minister of Finance (Dr Hafiz Shaikh in this case) worth the paper it is written on? Can the PTI government get the new Minister of Finance elected to the parliament within the next six months (the government failed the last time it tried)? That’s way too much uncertainty.

On November 17, Pir Noor ul Haq Qadri, our minister for religious affairs, confirmed that an agreement between the government and the Tehreek-e-Labbaik Pakistan (TLP) had been reached.

On February 11, the government reached another agreement with the Tehreek-e-Labbaik Pakistan. On April 15, the government formally proscribed the Tehreek-e-Labbaik Pakistan.

On April 20, a resolution was presented in the National Assembly on the expulsion of the French ambassador to Islamabad.

On May 1, the EU Parliament adopted a resolution “calling for a review of trade relations with Pakistan and ending its eligibility for the Generalised Scheme of Preferences (GSP) status.”

Is TLP a proscribed organisation or not (it has been taking part in by-elections)? Is the agreement signed by the minister of religious affairs worth the paper it is written on? Is the EU going to end Pakistan’s eligibility for GSP or not? What will happen to Pakistan’s exports? What will happen to the value of the rupee in the international market? That’s way too much uncertainty.

Then there’s so much confusion. On December 5, Prime Minister Imran Khan “categorically stated that he will give up his office but will not give any NRO to the opposition.” On May 5, our new Minister of Finance used the term “stop digging” and move forward.

On January 16, Tabish Gohar, Special Assistant to the Prime Minister on Power, confirmed that the power tariff “increase is inevitable”.

On May 3, our new Minister of Finance said: “IMF did injustice to Pakistan, the demand to increase the electricity tariff is unjustified.”

Will the government continue its so-called ‘war on corruption’ or ‘stop digging’ and ‘move forward’? Is there going to be an increase in the power tariff or not? Are the prime minister and the minister of finance on the same page or not? Are the Minister of Finance and the Special Assistant to the Prime Minister on Power on the same page or not?
There’s even more confusion and more uncertainty.

Imagine, 4 ministers of finance in 32 months, 6 FBR chairmen, 4 BOI chairmen, 6 Punjab IGs, 6 commissioners in Lahore, 7 commissioners in Gujranwala, 4 chief secretaries in Punjab, 4 commerce secretaries, 3 SECP chairmen and 14 ACs in Bhakhar.

On April 23, General Qamar Jawed Bajwa, in an interaction with media persons, said that the cabinet’s rejection of ECC’s summary to import cotton from India was a step backward.

On April 29, Prime Minister Imran Khan, in a similar interaction with media persons, said that India is badly stuck in Kashmir and that we should not trade with India.

On April 30, Asad Umer, the Minister for Planning, Development and Special Initiatives, claimed that Prime Minister Imran Khan could dissolve assemblies at any time. Is anyone really even interested in the economy of the 220 million?

To be certain, “uncertainty has a cross cutting impact across all sectors of the economy as it affects households, businesses and financial markets”.

Businesses cut back on “production, investment and employee compensation”. Financial markets become “volatile with higher risk premia”.

For Pakistan’s sake, uncertainty must end-or at least brought down. For the sake of 220 million, confusion must end-or at least brought down.

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