Economic cost of political shenanigans

Abdul Rauf Shakoori & Dr. Ikramul Haq

Governments around the world take responsibility of providing enabling environment where individuals, institutions, and businesses can flourish and explore various avenues to prosper. Among many other things, this includes providing food and shelter, access to health, education, infrastructure facilities, and above all a peaceful and secure atmosphere that can ensure growth and stability for all the stakeholders.?Pakistan has a long history of disruptions both on the internal and external fronts. Internally, urban and rural divide existed since its inception, and then the ethnic divide emerged. With the passage of time, extensive fragmentation took place in the name of religion and politics that further interspersed the society.

Polarisation in society has already assumed alarming proportions. People are becoming more intolerant and rigid in their social, religious, and political beliefs. Political parties are generally confined to specific ethnic and geographical domains. The diversified, vivacious, and forbearing characteristics of a society are fast fading out. On political front, parties are focusing more on agitations rather than solving the issues faced by ordinary citizens through available means.

Especially in the last decade, Pakistan witnessed increased and horrifying trend of long marches and sit-ins. From small groups to mainstream political parties, everyone has tried to dictate terms by manipulating the strength of people with them. Recently, the coalition government of Pakistan Tehreek-i-Insaf (PTI ) was ousted through a constitutionally valid mechanism—through a vote of no-confidence under Article 95 of the Constitution of the Islamic Republic of Pakistan [“the Constitution”]. The opposition parties redefined political partnerships and gained confidence from most of the members of National Assembly. Accordingly, Imran Khan lost legal mandate to govern the country as prime minister.

The former star cricketer, however, failed to demonstrate sportsmanship, not ready to accept that he was bowled out. Back in 2013, he did the same after losing the general elections badly. In 2014, Imran Khan and his party disrupted the visit of the Chinese President that was aimed at consolidating the landmark China Pakistan Economic Corridor (CPEC) initiative. Due to political chaos created by PTI, this important initiative received a setback, earning a bad name for Pakistan in the eyes of foreigners willing to explore investment opportunities. Even after this, PTI continued its politics of agitation, rather than playing its role in parliament. PTI was on the roads creating more problems for the government in general and the economy in specific. Imran Khan boycotted the joint session called in the honour of Turkish President and later a session on the Kashmir issue.

These practices of PTI continued even after assuming power in the aftermath of the shady elections of 2018. The focus of its head remained on victimising political opponents in the name of corruption, rather than achieving political and economic stability, being his primary responsibilities as executive head of the country. Contrary to party’s manifesto of transforming governance and promoting economic growth, he miserably failed to contribute anything positive towards these goals—though enjoyed full institutional support during his four years in power. He ended up pushing the country towards its highest ranking in history on the corruption perception index. During his reign, abuse of state institutions was worse, as evident from the statement of former head of Federal Investigation Authority and many judgments of Supreme Court in cases filed by National Accountability Bureau.

On the economic front, PTI government could not surpass the record of GDP growth of 6.1% set in 2018 by Pakistan Muslim League (Nawaz)—PMLN—though it faced continuous agitations by PTI and Tehreek-e-Labbaik Pakistan as well as negative perception of governance created by frequent interferences by then Chief Justice of apex court. The PTI government failed to sustain GDP growth, rather registered negative growth of (0.94%) in 2020. Despite revising the base, projected GDP for the current fiscal year (FY) is about 5.97%, still lower than 6.1% in 2018 by PMLN.

During four years of the PTI government, debt increase was abnormal, domestic by Rs. 28 trillion as compared to Rs 17 trillion till June 2018—registering increase of 65% in just four years. The external debt also rose to US$128.92 billion from US$95.24 billion in June 2018. Such ill-directed policies of PTI government, despite adding unprecedented debt burden, failed to either add enough to national exchequer or restrict the current account deficit, projected to be around US$20 billion by the end of June 2022.

Because of reckless PTI government’s reckless borrowing, the grip of foreign lenders on our economic decision-making has become stronger with each passing day. They are now dictating the new government on both transactional as well as strategic matters such as determining oil and electricity prices to the imposition of erratic taxes.?The unwise economic decisions during PTI’s rule pushed the country to double-digit inflation, hike in POL and electricity prices, and a downward trend in the growth due to heavy indirect taxes.

Due to PTI’s overall failures, the present coalition government is facing uphill task of meeting fiscal deficit, expected to be over Rs. 5500 billion for the current FY. It is desperately looking toward financial support from International Monetary Funds (IMF) and some friendly countries. Fresh deal with the IMF is not possible without removing subsidies etc, agreed by Shaukat Tarin and Raza Baqir with the IMF in February 2022.

Another factor, which has contributed to the deteriorating economic situation, is the devaluation of the Pak rupees. In the last four years, Pak Rupee has devalued by more than 60%. This devaluation has increased the cost of doing business. If the IMF does not lend financial support immediately, green pack will face further pressure.

It is clear that due to erratic policies of PTI government, our economy is facing multi-dimensional challenges both on local and foreign fronts. Power sector’s circular debt alone has increased from Rs. 1.1 trillion in June 2018 to Rs. 2.5 trillion in April 2022.

The incumbent government has no choice but to go for fiscal tightening, tax harmonization, and removing subsidies that will directly affect an overwhelming majority of Pakistanis. In these adverse conditions, in budget for FY 2023, we are going to witness historic high deficits—fiscal, current, trade etc—coupled with horrifying debt burdens. All these making it imperative for Pakistan to resume the IMF’s programme willy-nilly.

After creating deadly mess, instead of extending helping hand for revival of economy, PTI is once again on the roads adding further to worsening political and fiscal destabilisation. The political shenanigans of PTI’s head are transmitting negative signals to local and foreign investors. Threat to close main cities will halt economic activity, incurring heavy cost for the businesses, the poor, and those having fixed incomes. The previous call for Azadi March cost around Rs.149 million to the government, for maintaining law and order in the capital city alone. This does not include the innumerable sufferings borne by businesses and citizens. PTI and its leadership must be accountable for their actions after exit from power as well as alleged charges of corruption from August 2018 to April 2022 by those holding governmental positions, subject to fulfilment of their fundamental right under Article 10A of the Constitution . However, it appears the united government, led by Shehbaz Sharif, lack power/commitment/mandate to do so. It must be realised by those who matter in the land that political stability is a prerequisite for economic wellbeing. Agitations, processions, gatherings, sit-ins and marches without any just cause and/or agenda for public welfare, but just to capture power, no matter by whom, are doing no good but further tarnishing the image of democracy and undermining the security of state.

Originally published by The News on Sunday [Political Economy] without retaining the references (hyperlinked) and some lines were omitted (this is slightly amended and edited version vis-a-vis original text) :

https://www.thenews.com.pk/tns/detail/963408-economic-cost-of-political-shenanigans

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Abdul Rauf Shakoori , Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).

Over his career he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and have also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E–Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study driven scenarios and exams to insure knowledge transfer.

His notable publications are; Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan and Rauf’s Research on Labour Laws and Income Tax and others.

His articles include: Revenue collection: Contemporary targets vs. orthodox approach, It is time to say goodbye to our past, US double standards, Was Due Process Flouted While Convicting Nawaz Sharif? , FATF and unjustly grey listed Pakistan , Corruption is no excuse for Incompetence , Next step for Pakistan , Pakistan’s compliance with FATF mandates, a work in progress , Pakistan’s strategy to address FATF Mandates was Inadequate , Pakistan’s Evolving FATF Compliance , Transparency Curtails Corruption , Pakistan’s Long Road towards FATF Compliance , Pakistan’s Archaic Approach to Addressing FATF Mandates , FATF: Challenges for June deadline , Pakistan: Combating the illicit flow of money, Regulating Crypto: An uphill task for Pakistan. Pakistan’s economy – Chicanery of numbers. Pakistan: Reclaiming its space on FATF whitelist. Sacred Games: Kulbhushan Jadhav Case. National FATF secretariat and Financial Monitoring Unit . The FATF challenge. Pakistan: Crucial FATF hearing. Pakistan: Dissecting FATF Failure , Environmental crimes: An emerging challenge , Countering corrupt practices .

The recent book, coauthored with Huzaima Bukhari & Dr. Ikramul Haq is Pakistan Tackling FATF: Challenges & Solutions , available at:?https://www.amazon.com/dp/B08RXH8W46 ?and https://aacp.com.pk/

Twitter: Adbul Rauf Shakoori

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Dr. Ikramul Haq , Advocate Supreme Court, specialises in constitutional, corporate, media and cyber laws, ML/CFT related laws, IT, intellectual property, arbitration and international tax laws. He established Huzaima & Ikram in 1996 and is presently its chief partner as well as partner in Huzaima Ikram & Ijaz . He studied journalism, English literature and law. He is Chief Editor of Taxation .?He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD ) and member of International Fiscal Association (IFA ). He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE ).

He has coauthored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review , Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition ,?Pakistan: Enigma of Taxation , Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax , Law and Practice of Corporate Law , Law & Practice of Federal Excise , Law & Practice of Sales Tax on Services , Federal Tax Laws of Pakistan , Provincial Tax Laws , Practical Handbook of Income Tax, Tax Laws of Pakistan , Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis) .

The recent publication, coauthored with Abdul Rauf Shakoori and Huzaima Bukhari is Pakistan Tackling FATF: Challenges & Solutions

available at:?https://www.amazon.com/dp/B08RXH8W46 ?and https://accp.com.pk/

He is author of Commentary on Avoidance of Double Taxation Agreements signed by Pakistan , Pakistan: From Hash to Heroin , its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax .

?He regularly writes columns/article/papers for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.

Twitter: DrIkramulHaq