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Consensus on an economic agenda

Consensus on an economic agenda – DAWN OpEd

AFTER Finance Minister Ishaq Dar’s musing on a so-called charter of the economy, the IMF has added its voice for the creation of a national consensus on a ‘core economic agenda’.

In the IMF’s reckoning, the core agenda should cover four areas: tax revenues, with an emphasis on a wider and fairer system; revamping public-sector enterprises; energy reforms; and improving the national business climate.

Unsurprisingly, the IMF’s formulation hews closely to the agenda it tried to implement via the three-year fund programme that will come to an end this year — a programme that has achieved very little beyond the macro stabilisation that has been embraced by the PML-N government.

Yet, simply because it is IMF advocacy does not make the prescription wrong. Mr Dar, too, was right when he suggested a charter of the economy — though drafting a meaningful charter would be extremely complicated given that economic policies cannot and should not be static.

Perhaps what the federal government could do, however, is begin to create the conditions that make taking up an economic charter easier in the years ahead.

At the moment, economic policy is too closely controlled by Mr Dar himself — even inside the PML-N. As de facto prime minister, Mr Dar has a veto over virtually all major economic decisions.

If that changes — if policies advocated by other ministries are allowed to be debated and their implementation not made conditional on Mr Dar’s approval — it would contribute to the creation of a climate where the contours of overall policy can be shaped by policy experts and not be subject to the whims of one individual.That inclusive process could be extended to other major economic exercises, particularly the federal budget and longer-term frameworks within which the budgets are set.

Once again, the process is so tightly controlled by the finance ministry that parliament is often asked to sign off on numbers it has little understanding of. If parliament — meaning not just the elected government of the day, but opposition parties too — is made part of the decision-making process, trust can be built.

The tax system illustrates the problem well. In principle, the tax system is unfair and it needs to be restructured in favour of having a greater proportion of direct taxes. But while most political parties would agree that tax revenues need to be boosted, none have felt the need to embrace specific policy positions backed up reliable numbers. That leaves the details of tax reforms, the few that are attempted, to be worked out between the government of the day and (usually) the IMF. Drawing parliament into the budget process could help change that. What are the numbers and what are the options?

Ministerial transparency and openness with parliament could help encourage parliamentarians to think about economic policy as more than mere politics and put forward more responsible suggestions. The road will be a long one, but political trust is built slowly.

An economic charter will only be as useful as the political willingness to abide by it. As the charter of democracy has shown, repeated mistakes can lead to a willingness to change.

Published in Dawn, April 11th, 2016

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