On November 5, 1996, Nawaz Sharif realised that he would be PM on February 3rd, 1997. Four months ago, he also knew that the government’s kitty was empty and the economy needed urgent surgery. Mr Sharif was suitably briefed by President Farooq Leghari, Mr Shahid Javed Burki and the IMF’s representative, Mr Abbas Mirakhor. Yet, six weeks after assuming office, Mr Sharif is still whistling in the dark. What, in God’s name, is he up to?
Let us face facts. The PM’s Debt-Relief Fund has failed to excite the patriotism of the richie-rich. His finance minister admits that a mere US$ 100 million has found its way into the Fund against a target of US$ 2 billion. Worse, only US$ 10 million is in the form of donations, the rest being an expensive addition to our medium-term debt. Now four PML do-gooders have flown off to foreign lands to exhort expatriate Pakistanis to do their bit for the motherland and we are left with a depressing sense of deja vu, a throwback to the billions of dollars of MOUs brought into Pakistan by Benazir Bhutto.
Mr Sharif is toing and froing all over the place, suspending, transferring, hiring and firing all types of officials. This is all very well, except that, perhaps, it might have been better left to some minion or the other. It certainly won’t take Mr Sharif too far. Private companies in trouble are not revamped by chief executives in this manner, let alone a prime minister administering thus to a huge and bankrupt country of 137 million people. Come on, Mr Sharif, stop clucking about like a runaway, headless chicken and get on with the job.
The stock market is a good barometer of the confusion and nervousness in business circles about the new government’s modus operandi. It went up when Mr Sharif became PM. Now, unable to fathom the import of his daily blustering, it is down again. One bad word from the IMF tomorrow and all hell could break loose. Is this any way for a businessman-prime minister with a huge mandate to kick-start an ailing economy?
Mr Sharif’s avowed plan to revive growth is based on “Laffer curve” economics. This theory postulates that tax cuts can lead to higher government revenues (and, therefore, higher public expenditures) by inducing faster economic growth, without adversely affecting the fiscal deficit. The number of tax payers — and therefore the amount of revenue — is supposed to go up, partly because tax rates become less punitive, making tax evasion less attractive. Whatever the IMF thinks of this strategy, we have no problems with it in principle, provided, of course, that Mr Sharif gets cracking and lays down the new signposts to economic recovery quickly. But consider what he has done so far.
Mr Sharif has upped government servants’ salaries by Rs 300 per month, adding about Rs 7 billion to government expenditures. He has also sanctioned Rs 800 million for the Lahore-Islamabad Motorway and another Rs 800 million has been usurped by his talented younger brother to build a new Motorway from Lahore to Faisalabad. But nothing at all has been done to raise revenues which are abysmally short of targets as usual. In fact, Mr Sharif is adamant that there will be no enhancement in the rates of electricity, oil or gas, despite the knowledge that WAPDA, KESC, Sui Northern, Sui Southern and OGDC are bankrupt and about to default on their international covenants. With privatisation being a medium-term prospect, how on earth does Mr Sharif hope to manage in the here and now?
There is only one way out. Mr Nawaz Sharif should stop playing at gimmicks and knuckle down to an early 15-month budget at the end of this month. He should slash all tax rates by about 15-20 per cent so that businessmen and the salaried classes have solid incentives to work hard, increase productivity and reinvest savings. He must widen the tax net to make income taxes commensurate with tax evaders’ electricity and telephone bills. He should increase utility rates so that the exchequer is not bled to death by hidden subsidies. And, if he is serious about accountability, he should amend the laws to curtail the writ jurisdictions of the courts so that patently corrupt people are not bailed out in a jiffy.
Mr Nawaz Sharif means well. That much is clear. But he is wont to behaving these days like a benevolent Mughul Emperor who wants to be everywhere at the same time so that people are impressed by the energy he expends in trying to “solve” their everyday problems. If this attitude had manifested itself in a run-up to a general election, we might have excused its obvious self-serving objective. But newly elected prime ministers with reformist mandates are not expected to behave in this fashion. They are expected to confront hard-boiled issues and take difficult institutional decisions for the collective good of the country. The sooner Mr Sharif understands this and sits down to do some overdue homework, the better.