Resistance to change in Pakistan is an old problem, but it takes on a new face every few years. These days, resistance to change has an accounting problem. In other words, everything from managing our debt to energy sector reforms and tax apparatuses appears to be little more than an accounting problem.
Resistance to change has been a theme that has defined the country for decades. Ghulam Ishaq Khan placed it as the main strategy by which the country would deal with the massive changes sweeping the world, starting in the 1980s and accelerating during the 1990s. GIK and a small group of bureaucrats around him, including but not limited to people like AGN Kazi, HU Beg, VA Jafarey, Saeed Qureshi and IA Hanfi among others, practically ran the economic administration of Pakistan in those years.
They were serious men, rightly renowned for their professionalism and intelligence, and functioned as an exclusive club for powerful civil servants, where admission was by invitation only. Mahbub ul Haq was hovering on the outer fringes of this group, a one-man army trying to champion change at a time when this group was guarding the walls to keep out all change and protect the status quo.
What change were they trying to keep away? In short, the decline in the state’s ability to bear all the responsibilities it carried began during the era of the revolution. Years of rapid growth in the 1960sAnd then again after the catastrophe Nationalization in the 1970s.
From financing the country’s infrastructure development to maintaining the agriculture and energy pricing system, to determining who gets how much credit and on what terms, who can invest how much and where, and fetching returns on that investment, the state played a dominant role in the country’s economy in those days. This coterie of bureaucrats chose all the winners and losers in the economy.
Daronium science rarely succeeds, and when it does, it comes with a hefty bill.
Pakistan was not alone in facing this pressure for change in those days. It was close to universal. Across the world, governments have been facing challenges in their ability to occupy a prominent position in all national economic decision-making processes. Some responded by digging, others by looking for a way out, and others by trying to discount the costs of staying the course. Only in the late 1980s and early 1990s did appropriate reform strategies begin to emerge in the global conversation about breaking out of this confinement and finding new ways to sustain economic growth.
Importantly, these strategies included a model for tax and electricity sector reforms. But it also involved a more general withdrawal of the state from the areas of pricing management, credit allocation, ownership of business enterprises, and so on. Together, these strategies have been called the “Washington Consensus.”
In those days, GIK laid the foundations for how Pakistan would address the growing crisis of the country and the economy. His approach was to first agree to broad reforms, then find ways to mitigate their impact, impede their implementation, and, when necessary, simply back away from commitments once the funds promised under the agreements were released.
Benazir Bhutto’s first government was overwhelmed by the scale of the challenges it had to face – the effects of the Afghan jihad were smoldering in the west, while in the east, the Indian arms build-up had drained Pakistan’s coffers. The bankrupt economy at home and the stringent IMF program the interim government signed before taking power necessitated structural reforms so deep that even governments since its era have struggled to implement them.
Nawaz Sharif’s first government introduced some envisaged changes. They changed the debt management strategy, brought in the first non-DMG State Bank governor in the person of Muhammad Yaqub, carried out the first privatization, liberalized trade, and passed the sales tax law (with a trick of hiding it under a veil of money). Invoice), and opening a capital account to free up the flow of capital to and from the country. They also succeeded in wresting control of economic policy from the GIK and its clique, bringing in their own people to key positions, such as Sartaj Aziz and Ishaq Dar.
This is the essence of the great battle between President Ghulam Ishaq Khan and Nawaz Sharif, which ultimately ended with the downfall of both. But what started as a struggle over changing the direction of the economy eventually turned into simply a changing of the guard. The reforms of Nawaz Sharif’s first government were not intended to achieve much, other than to stimulate growth in the short term and encourage the flow of dollars through the foreign currency deposit system that had become an albatross around the government’s neck by the end of the decade.
What resulted from all this was a type of economic management that today goes under the name “Daronomics,” and whose main goal is not very different from that of the GIK. Daronomics aims to find ways to maintain the prominent role of the state in the economy, while allowing sufficient scope for the energies of the private sector to continue the process of investment and growth. This strategy rarely works, and when it does, it racks up a huge bill that eventually amounts to the fiscal and public debt portion of the national accounts.
The challenge of our time is to find a way to remove the state from this role and, instead, empower regulatory bodies to protect the public interest. But the nature of the political struggle for power in our country makes it necessary for all powers to flow upward and be subject to the requirements of this struggle. The ongoing power struggle paralyzed the state at the top and frustrated its attempt to develop a sound reform strategy.
The writer is a journalist in the field of business and economics.
khurram.husain@gmail.com
The tenth: @Khurram Hussein
Published in Al-Fajr, June 20, 2024