Mr Sartaj Aziz is a wily politician rather than an economic wizard. He was skillfully extracted more political mileage than is really his economic due from the privatisation programme, the Indus Waters Accord, the NFC Award and now the Aid to Pakistan Consortium. He is also credited with engaging the Prime Minister’s ear while remaining the President’s confidant.
The forthcoming budget should test his true mettle. Juggling facts and figures to conjure quick and painless remedies will not work. Inflation and unemployment are rising ominously. The fiscal deficit has hit the roof. Foreign aid donors say they will monitor his package carefully before disbursing their pledges. Expectations are high all round.
Mr Aziz was left in no uncertain mind about the emerging mood in Paris and Washington. New layers of political and social condionalities are on the cards. Since Mr Aziz has been reluctant to admit these in public, it may be worthwhile to lay Western terms and conditions on the table.
Consortium delegates took a decidedly dim view of the lack of progress on institutionalising “good government” and better aid utilisation in Pakistan. Significantly, most Consortium members remain acutely apprehensive about the new Shariat laws and wonder how these will effect Prime Minister Nawaz Sharif’s economic policies and social programmes, particularly those relating to education, population and women. One member sought “an early assurance that the new Shariat Bill will enhance the government’s policies and financial commitment to social progress, and will not impede the liberalisation”. Another delegate wanted to know what effects the Shariat legislation would have on the finance and banking sectors and “not least on the role of women in society”. Mr Aziz made apologetic noises which didn’t convince anyone.
The discrepancy between defence spending on the one hand and expenditure on education and health on the other was roundly criticised. The Pakistanis were bluntly told that military budgets of 17 per cent of GNP, equivalent to development expenditure, were unsustainable. “A first step to address this problem in Pakistan” advised one delegate, “would be to set out military expenditure more clearly in the budget, with a view to containing and reducing it in the medium term, so as to be able to use these funds for development purposes instead”. He stressed that his government would “not fail to raise this question with other fora and other relevant Governments”. Others warned Mr Aziz that Pakistan risked losing all Western support if it continued to ignore the mood in the US Congress in particular and the world community in general by stubbornly insisting upon enlarging its nuclear programme. In defence, Mr Aziz referred lamely to the regional constellation which binds Pakistan and shrugged off suspicions of Pakistani interference in Kashmir and East Punjab.
The Pakistanis were also ticked off for not doing enough in the fight against drugs. One delegate noted that “the government of Pakistan is urgently required to step up its efforts to control drug production and trafficking”, adding sarcastically, “One may ask whether the well-equipped and trained armed forces of Pakistan could not be used to good effect in this fight against drugs.”
The World Bank is stressing its proposed Social Action Programme to reduce poverty and improve basic social services by increasing the share of budgetary expenditure going into health, education, family planning and shelter. Particular attention is not being demanded with respect to women’s participation in the Bank’s various projects. Consortium members urged Pakistan to accord women a higher status in society in order to enhance their productive capacities and to pursue greater integration of family planning into health-care systems. (That explains Syeda Abida Hussain’s recent entry into government).
Western donors are also anxious to see a reform of the present system of direct taxation. They are insisting upon a more elastic and equitable system of tax collection, including determined efforts to broaden the tax base. They see no valid reasons why direct taxation should not include the big agricultural incomes and properties as is the practice in developed countries.
Mr Sartaj Aziz represents a government run by feudal landlords. The defence budget and the nuclear programme are jealously guarded by the armed forces. Islamic fundamentalists underpin Mr Sharif’s regime, loathe the West and seek greater control over society and economy. Drugs sustain a vast underground economy and drug barons sit comfortably in parliament despite requests for extradition. Clearly, the new conditionalities constitute a tall order.
All the more reason, therefore, that Mr Aziz should brief his Prime Minister and President quite thoroughly. Western donors are rightly determined to nudge Pakistan into setting a new pace for political and economic reform in the 1990s. And it will take more than a sleight of Mr Aziz’s hands to deliver a budget which corresponds to the political tasks ahead.