Passion and policy

THERE is a place for screaming and shouting in parliamentary politics, but economic policy is not it. The last couple of weeks we’ve seen members of the opposition in the Senate scream and shout about an alleged change in the route of the Pak-China corridor, followed by two walkouts and further shouting followed by a walkout over tax measures passed by the government in the wake of the IMF review.

The scale of the emotion and tears displayed in the legislature on both occasions was embarrassing to see. It was bad enough that these were adults behaving this way, but to consider that they are also elected representatives made the whole spectacle that much more painful to observe.

Let’s get one thing clear first: any chance in the route of the corridor, particularly if it is based on parochial grounds, is unacceptable. And let’s also agree that midcourse changes in revenue targets and reliance on ad hoc taxation measures to shore up what was an unrealistic fiscal framework from the get go is evidence of bad economic management.

But is such a display of angst and emotion really called for? In the matter of the change in the corridor route, Senator Farhatullah Babar eventually struck the right note, by calmly and dispassionately pointing out that even a temporary change in the route can be problematic because it will create its own vested interests in time which will mobilise opposition to the original route, making it difficult to implement.

A few days later, Sirajul Haq of the Jamaat-i-Islami also struck the right tone, by again calmly and dispassionately calling on the government to refrain from any unilateral changes in the route of the corridor, as well as bringing more transparency into the project’s execution.

For its part, the government is strenuously denying that there have been any route changes. The minister for planning, who is overseeing the project, says two roads are envisioned in the project. One will go north from Gwadar towards Quetta, then veer east to D.I. Khan from Zhob. The other road will head directly east from Gwadar, towards Khuzdar then connect with Ratodero in Sindh.

But who will strike the right note regarding the taxation measures and the myriad other economic failings of the government? Who is there to call them out on the currency being overvalued? Who is calling the finance minister out for compromising State Bank autonomy by announcing the interest rate cut before the State Bank governor?

The hue and cry raised in the National Assembly around the new revenue measures sounds disingenuous at best for an opposition that has otherwise sat with its arms folded regarding so many other failings of the government. Besides, did the PPP not resort to mid-year revenue measures, as well as bypassing parliament in raising taxes and granting exemptions when they were in power?

The government’s own explanation for why the extraordinary revenue measures became necessary also sounds disingenuous. They tell us that the measures became necessary given a decline in revenue collection due to a fall in oil prices. But the revenue loss from a declining oil price has been estimated by them to be Rs68 billion, whereas the revenue measures announced are reportedly estimated to be around Rs150bn. The cut in the revenue target agreed with the IMF is also Rs119bn. It’s not adding up.

If the decline in oil prices is all that this is about, then why does the amount being collected under the new measures exceed the revenue shortfall from declining oil by such a large margin?

Compounding the problem is the matter of additional security-related expenditures. The finance minister said in a recent TV interview that the incremental, non-budgeted expenditure arising from NAP implementation, the military operation and the IDPs is around Rs140bn. This is unbudgeted, additional expenditure that is estimated to be incurred in the remaining months of this fiscal year. Given the unchanged deficit target, and the downwardly revised revenue target, where is the money going to come from to pay for this? The finance minister has yet to clarify.

The State Bank pointed towards this in its last monetary policy announcement. “Going forward, overall expenditures could increase due to higher security-related expenditures,” said the bank, about as close as any central bank can come to flagging an issue as sensitive as this. “This along with expected shortfall in FBR revenues may make meeting the fiscal deficit target more challenging.”

Complicating things, the revenues are expected to decline by more than what they’ve already estimated. The State Bank doesn’t give figures about how large the shortfall is likely to be, preferring only to say repeatedly that meeting the fiscal deficit target will be “challenging”. But in reported comments, higher authorities in Q block have put the figure as high as Rs200bn. The comments are anonymous at this point, so the figure is unofficial, but that’s still a sizable hole in the fiscal framework.

Faced with a problem like this, any party in power would have resorted to ad hoc revenue measures to raise more funds. And any party in opposition would have raised a hue and cry. The problem of the moment is structural, and would have played out in an identical manner, regardless of who is running the show.

Emotional outbursts and walkouts create a sense of crisis for sure, but they do nothing to help steer the situation. Economic policy is one area where emotion and passion needs to be muted, and calm, dispassionate critique can go a long way to produce beneficial results. The opposition can play a far more helpful role if they remain vigilant over economic developments as they occur, rather than simply picking up arms at one moment and creating a ruckus, only to return to business as usual the next day.

The writer is a member of staff.

khurram.husain@gmail.com

Twitter: @khurramhusain

Published in Dawn, February 12th, 2015