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VIEW: Economic threat to democratic transition —Akbar Noman

The economic situation is reminiscent in many ways of what the civilian government faced during the decade or so after 1988. During much of this decade they were confronted with onerous macroeconomic measures and conditionalities under a series of IMF programmes initiated by the last remnants of the Zia era

The people of what is often called the most dangerous place on earth have spoken in a voice so loud and clear that they can be easily heard over the din of pre-election rigging. It is not they who are the source of any danger. They have provided an opportunity to end the menace of terrorism and extremism and to make Pakistan a progressive, democratic state. But it will not be difficult to snatch defeat from the jaws of this victory.

An important danger is the risk of destabilisation of the new democratic dispensation by the measure needed to deal with the looming economic crises. What those risks are and how to minimise them is the main concern of this article.

It goes without saying that to seize the opportunity presented to Pakistan’s politicians and military by its people, they need to act with sagacity and a democratic spirit of constructive compromise and consensus that have been so elusive in the past.

Fortunately the dialogue that Mohtarma Benazir Bhutto and Mian Nawaz Sharif initiated during their exile has laid the foundations for a maturing of the democratic tradition, notably by recognising the distinction between loyal opposition and enmity, as well as the need to strengthen democratic institutions as reflected in the charter for democracy.

But there are other dangers than the obvious one of the politicians and the military establishment being unable to play the political game of democracy and legitimacy.

These stem from the economic crises that a new government has to face. The urgent measures needed to deal with these could easily destabilise the government and democracy. Populist economic policies of the past couple of years have undone much of the good of the early economic reforms of the Musharraf government.

Politically, the most difficult decision is to raise prices for oil and electricity, which have been left unchanged for a couple of years or so while world prices have soared. This has created a huge fiscal hole and growing indebtedness of the government to the oil companies. Energy prices may have to be raised by as much as 30 percent or more to stop this haemorrhage. Also the precise extent and the terms of the government’s resulting indebtedness to oil companies are not clear.

It is imperative that the price hikes are undertaken by the current government before the elected administration comes into office. Also, lax macroeconomic management in the past couple of years has led to rising inflation and a shrinking of the fiscal and balance-of-payments space.

At the same time, serious infrastructural constraints, especially of power, have emerged. This implies that the need for and the details of a stabilisation programme need to be agreed between the incoming and the outgoing governments and announced before a new government assumes office.

The economic situation is reminiscent in many ways of what the civilian government faced during the decade or so after 1988. During much of this decade they were confronted with onerous macroeconomic measures and conditionalities under a series of IMF programmes initiated by the last remnants of the Zia era. At any rate, avoiding politically destabilising economic stabilisation is vital for the success of this democratic transition in Pakistan.

The options for how that might be done include setting up a committee of independent technocrats to draw up such a programme in consultation with representatives of the government and the political parties that agree to form a government at the federal level.

The committee of technocrats could include those who were heavily involved in dealing with the macroeconomic crises of the late 1980s and 1990s. Names such as Saeed Qureshi, Rafiq Akhund, Mueen Afzal, Qazi Alimullah come to mind immediately in this category. Others on this committee should be academics and economists such as Rashid Amjad, Akmal Husain, Naved Hamid and Hafiz Pasha. This committee would consult with the government, the State Bank and with technocratic politicians, especially former finance ministers of the leading parties who have also had to deal with earlier stabilisation programmes such as Sartaj Aziz, Naveed Qamar, and V A Jafarey. Assorted details of its terms-of-reference and modus operandi will need to be worked out.

This task must be done immediately and as a matter of great urgency. Time is of the essence. By taking responsibility for these difficult measures and facilitating the task of a democratic transition, President Pervez Musharraf could play a valuable role and alter his legacy.

Akbar Noman is Senior Fellow, Initiative for Policy Dialogue, Columbia University. He was at the World Bank and served as an economic adviser during the earlier governments of both Benazir Bhutto and Nawaz Sharif

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