Prime minister Zafarullah Jamali’s unthinking utterance about restoring Friday as the weekly holiday at the behest of the mullahs is most unfortunate. It shows how clueless he is about the ways in which our domestic economy and national well-being are critically integrated with and linked to the global market via trade and aid and why it is necessary to stay in tune with international financial practices.
Mr Jamali’s misplaced zeal for the MMA can create problems in the economic reform programme so painstakingly initiated three years ago by General Pervez Musharraf. The new prime minister, it seems, is all too willing to make untoward concessions to the MMA, including a commitment to implement various impractical recommendations of the Islamic Ideology Council, in exchange for its political support in Islamabad. Does he know, for example, how necessary and hard it was for the Musharraf government to manipulate a reversal of an earlier decision by the Shariat Bench of the Supreme Court that equated “interest” with riba and outlawed it at the behest of the IIC and Federal Shariat Court?
Let’s face it. The MMA is not good for business and the economy. Its leaders thunder about keeping women out of the work force in many sectors, discourage tourism, seek to institutionalise smuggling and gun-running, outlaw interest, encourage default on foreign debt, threaten to kick the IMF and World Bank out of Pakistan, and disrupt and censor the entertainment industry. These are all negative measures that don’t inspire confidence. And it’s not as if the mullahs are all work and no play – it’s more like all preachers and no workers. In fact, not one MMA-MNA or MPA has formulated a single positive policy proposal to spur trade and investment in the provinces under MMA control now. Nor, for all its moralistic sermonising, is “corruption” a real issue for the MMA. The stunning speed with which two MMA leaders convicted for corruption were sprung from NAB prisons in Balochistan even before the ink on the MMA’s accord with Mr Jamali was dry is noteworthy. Indeed, the MMA’s demand that the Frontier Corps should be subservient to the provincial government should not be construed as some principled requirement of provincial autonomy. It is solely aimed at ensuring that institutionalised smuggling of petroleum and other items from Iran should not be disrupted.
We live in interesting times. The stock market jumped at the conclusion of the elections peacefully but plunged when the MMA swept two provinces and grid locked government formation in Islamabad. Since then, the market has been nervously watching for signs of unease in international credit rating agencies, financial donors and Pakistan’s strategic partners like the USA and EU which have quietly expressed misgivings about the manner in which election results have been contrived. This is hardly a conducive environment for investing in the future. But there is much more at stake than meets the eye.
The “grand economic achievements” of the Musharraf regime flow from a political change in the strategic environment in which Pakistan is situated. Despite two years of Musharrafic economics, the fact is that until 9/11 forex reserves were barely US$1 billion, foreign debt was a whopping US$38 billion, debt payments amounted to a crippling US$4 billion a year, IMF assistance was barely US$500 per year, the fiscal deficit was as high as 7.5% of GDP, exports were hardly US$9 billion a year, remittances were under US$1 billion a year, the currency had fallen to Rs 68=US$1, privatisation had stalled, foreign direct investment was a trickle at less than US$250 million a year, large scale manufacturing growth was rock bottom at 1.5%, and domestic investment had shrunk to below 12% of GDP. Then came 9/11. When General Musharraf swiftly about-turned politically, the international community rewarded Pakistan by re-profiling US$12 billion in debt and nudged donor institutions to increase economic assistance by over 200%. The American anti-terrorist crackdown on money laundering and havala transfers led to a shift of remittances from unofficial to legal channels, burgeoning the forex balances of the State Bank of Pakistan, and the inflow of dollars from foreign bank accounts of Pakistanis liable to scrutiny by American agencies flooded the forex market and upped the value of the rupee. With a surge in economic confidence, foreign buyers now stepped into the market to buy United Bank Ltd and got ready to pick up PSO, HBL, etc.
The necessary conditions for economic revival are finally at hand only because the domestic political environment has been suitably aligned with the international community after 9/11. But the sufficient conditions for take off into self-sustained economic growth (rising domestic and foreign investment, employment and poverty alleviation) await appropriate confidence-building measures and consolidation of this political relationship. That is why it would be tragic not just from General Musharraf’s personal point of view but also from the point of view of Pakistan’s national interests if the budding relationship between the PMLQ and the MMA, or indeed the political and economic antics of the MMA on its own, were to cast a shadow on the hard-won prospects of the economy by alienating the international community or driving a wedge between Pakistan and the US that would lead to a reversal of Pakistan’s fortunes. Forewarned is forearmed.