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Petro-politics: Making sense of PM Imran’s ‘gift’ to the people

Petro-politics: Making sense of PM Imran’s ‘gift’ to the people

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Petro-politics: Making sense of PM Imran's 'gift' to the people

The relief package marks a clear shift from the fiscal reforms agenda, which may not only irk the IMF but also hurt the economy.

Prime Minister Imran Khan caught almost everyone by surprise on Monday. Amid a global crisis in the form of the Russian invasion of Ukraine that sent global markets tumbling and a political storm brewing at home, the premier announced a major cut of Rs10 in the prices of petroleum products — the single largest contributor to the country’s import bill.

The move, which left citizens stunned and economists scratching their heads, was not just limited to subsidising petroleum products.

No, the prime minister went ahead and slashed energy prices, announced tax exemptions for IT companies and freelancers associated with the sector, exemptions from capital gains tax for IT startups, skills-based internships for graduates and an increase in the stipend disbursed under the Ehsaas programme from Rs12,000 to Rs14,000. Moreover, the cut in energy and fuel prices would be sustained for the next three to four months till the next budget, he promised.

Needless to say, the move raised many an eyebrow — and for good measure too.

Where would the government get the fiscal space to cover the expenditures, pundits questioned. Had it not increased petrol prices by Rs12 just a couple of weeks ago, saying it could not afford to offer subsidies? Are these measures sustainable? What about Pakistan’s commitments to the IMF? More importantly, how would the move impact Pakistan’s economy in the long term?

Let’s try to address these questions one at a time.

A Populist move. Period.

The move, though unexpected, is not a new trick in Pakistan’s political landscape, where almost every government has attempted to check petrol prices as a shortcut to wooing the electorate every time it found itself in trouble.

In this case, however, it is all the more difficult to see economic sense in the move as the government had raised petrol prices by Rs12 just a couple of weeks ago, when the benchmark crude oil was trading at around $95 per barrel. Nothing has changed since, except that the same commodity is being traded today at $110 per barrel.

The only logical explanation one can hence arrive at is this: that the announcement is a purely populist move, designed to buy the government some political mileage as opposition parties up the ante of an impending no-confidence vote and embark on long marches.

Perhaps the biggest giveaway in this case is the timing of the move — the pressure being built up by the opposition — and perhaps the government’s own allies — combined with an increasingly restless electorate seem to have forced the government to take this route.

The saddest part is that the very people, in whose name these actions are being taken, will see little to no benefit of the reduced prices, except that they may pay slightly lower amounts for getting their vehicles’ tanks filled. The cut will not inflict any substantial dent to inflation in the medium to long term.

Petroleum and energy prices, though important, are just one contributor to inflation in Pakistan. There are many other factors, such as governance or lack thereof, supply chain issues and hoarding, which have broken the backs of the most vulnerable for the past several years.

Moreover, once the prices of commodities go up, they are hardly ever seen to drop with a cut in petrol prices — at least not by any significant measure. For example, how many times have you seen a major cut in bus fares or product prices, even when the prices of petroleum products have been decreased? In fact, rarely is the benefit of a decrease in commodity prices passed on to the end consumer.

What the public will undoubtedly feel, however, is the pinch of inflationary pressures on commodity prices as a result of the fiscal deficit created by these populist measures. The government’s own estimates to finance this cut seem to ignore the rising trend of crude oil prices and their impact over the next three to four months. Freezing the prices at the current level till the next budget at a time when global oil prices are on an exceptional surge will leave an unbearable dent on the fiscal deficit.

The IMF conundrum

While the cut in petrol and energy prices were immediately implemented, the other measures announced by the prime minister in his address may take more time or may not even see the light of day until after the next budget. The process of designing and implementing these reforms — other than Ehsaas transfers — may take another two to three months, when it is time for the next budget. The announcement, however, will be enough to create some goodwill on its face value and buy the government some time.

And while it may yet be able to finance the cut in petrol prices — estimated at approximately Rs60 billion for the next four months — it would be hard put to both find the resources to implement the other measures and also explain its position to the International Monetary Fund (IMF), which finally released the sixth $1 billion tranche under its Extended Fund Facility after months of deliberations and only after Pakistan agreed to some very tough conditions, including the mini-budget.

While there are reports that the government is hoping to finance this Rs250-300 billion package from cuts in expenditure, and not by borrowing, one is hard-pressed to understand why these possible avenues were not utilised when the mini-budget was presented. What has changed that these avenues are suddenly now available?

If indeed the government does push on for the implementation of all the measures announced by the premier, it would not only be reneging on its commitments to the IMF, specifically in relation to fiscal reforms and pricing in the energy sector, but also jeopardising the seventh review by the Fund.

Not only will this hurt the government’s credibility, any form of derailment from the IMF programme will have an adverse effect on the exchange rate as well as the foreign exchange reserves, further elevating the inflationary pressure. This in turn can have wide ranging medium to long term consequences for the economy. The market is already exhibiting fears around this scenario.

Moreover, if the government does go ahead with the measures, it will also hurt its standing with other development partners such as the Asian Development Bank and the World Bank, who may stop their support in light of the country’s reversal on its reforms agenda. We had, in fact, seen a glimpse of this last year as the IMF was conducting the sixth review, when all other development partners were waiting for it to finish before extending support.

What is most unfortunate in this whole scenario is that despite the months of pain and suffering, taking tough decisions that caused the economy to contract even before Covid-19 struck and introducing a tough mini-budget, Pakistan would not be able to complete its reforms agenda simply because politics trumped basic economic sense.

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Ex-Punjab CM Usman Buzdar becomes latest PTI leader to quit politics

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  • Buzdar cites current circumstances reason behind quitting politics.
  • Former CM calls on all stakeholders to reach a consensus.
  • He condemns May 9 incidents, says “we should avoid such incidents”.

Former Punjab chief minister Usman Buzdar Friday became the latest Pakistan Tehreek-e-Insaf (PTI) leader to quit politics in the aftermath of the May 9 violent riots.

“First of all, I condemn the May 9 incidents. The military installations which were targeted were properties of the state of Pakistan and I believe we should avoid such incidents,” Buzdar told journalists during a press conference in Lahore.

Buzdar, whose term as Punjab’s chief minister was cut short in March 2022, said he had always stood with the armed forces of Pakistan and will continue to do so.

“I have always committed to politics of nobility […] but due to the current circumstances, I have decided to quit politics,” the former chief minister, once considered to be close to PTI Chairman Imran Khan, said.

The former chief minister called on all stakeholders to reach a consensus and asked the authorities to release all those who were innocent from jail.

The heat

Khan’s party has been feeling the heat of the state’s might after his party workers burnt and smashed military installations, including the General Headquarters in Rawalpindi, after his arrest on May 9 — a day the army dubbed as “Black Day”.

Several party leaders and thousands of workers have been rounded up in connection with the violent protests and the army has insisted that the people involved in attacks on military installations be tried under the Pakistan Army Act and the Official Secrets Act.

A close aide of Khan, Asad Umar, has relinquished his posts of secretary general and core committee member, citing the ongoing situation.

Several party leaders and lawmakers — including Fawad Chaudhry, Shireen Mazari, Aamir Mehmood Kiani, Malik Amin Aslam, Mahmood Moulvi, Aftab Siddiqui, Fayyazul Hassan Chohan among others — have publicly denounced the attacks on the state installations and announced leaving the former ruling party since the May 9 vandalism.

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Imran Khan’s ‘rights abuses allegations’ ploy to distract from May 9 riots: PM Shehbaz

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  • PM says PTI chief “capable of going to any extreme”.
  • Says he is “not surprised” by Imran Khan’s “antics”.
  • “Everything about Imran Khan is hate, division and lie.”

Prime Minister Shehbaz Sharif slammed his predecessor Imran Khan for “misleading and baseless allegations” of “rights abuses”, saying that it was a ploy to distract attention from his involvement in May 9 events.

“Make no mistake about the evil intent behind Imran Niazi’s latest ploy to defame our law enforcement agencies and police. Yet again he is making misleading and baseless allegations of the “rights abuses” just to distract attention for his culpability in the tragic events of May 9,” the premier wrote on his official Twitter handle.

PM Shehbaz, who is also the president of the Pakistan Muslim League-Nawaz (PML-N), also said that he was “not surprised” by the former prime minister’s “antics”.

Imran Khans rights abuses allegations ploy to distract from May 9 riots: PM Shehbaz

He added that the PTI chief was “capable of going to any extreme” as he “persistently” uses “foul language against the state institutions, incite[s] people to violence and attack[s] the state symbols and military installations & bring[s] down martyrs’ monuments”.

The prime minister went on to write on the tweet: “He [Khan] presides over a disinformation apparatus that deploys fake news methodically to fool the people. Everything about him is hate, division and lie.”

A crackdown has been launched against PTI following the arrest of former prime minister Imran Khan from the Islamabad High Court’s premises.

Khan’s arrest last month sparked days of street protests after which the PTI leaders’ exodus started, as security forces launched a crackdown against the party following the attacks on civil and military institutions, including the General Headquarters in Rawalpindi and the Lahore Corps Commander’s House (Jinnah House). At least eight people were killed in the violent protests almost across the country.

Amid these arrests, an exchange of accusations began between the Imran Khan-led PTI and the federal government involving alleged “ill-treatment” of the party’s women workers and supporters during the custody.

The government has maintained that the PTI’s claims are unfounded.

Last week, in a late-night press conference, Interior Minister Rana Sanaullah said that the PTI planned to highlight human rights violations in Pakistan on a global scale after orchestrating a simulated raid at a certain known party worker, involving a rape and casualties caused by gunfire.

The security czar said that intelligence agencies intercepted an audio clip that sheds light on a conspiracy hatched by the PTI to malign the country’s law-enforcement agencies.

Reacting to his presser, Imran Khan on Sunday said Sanaullah is “so obviously trying to cover up and preempt the horror stories about to break in the media.”

“If there were any doubts about women being mistreated in jails, this press conference from this certified criminal should remove all such doubts,” he wrote on Twitter.

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PTI President Parvez Elahi arrested in Lahore

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  • Former Punjab CM was arrested by anti-corruption personnel.
  • He was wanted in Rs70m corruption case related to uplift funds.
  • Elahi’s son says his father was taken into custody in a fake case.

Pakistan Tehreek-e-Insaf (PTI) President Parvez Elahi was arrested by anti-corruption officials from Lahore outside his home, Geo News reportedon Thursday. 

The former Punjab chief minister was taken into custody by the anti-corruption personnel after pulling over his car near Zahoor Elahi’s residence in Lahore’s Gulberg area.

Elahi’s spokesperson has confirmed the development.

The development came after an anti-corruption court last week discarded his interim bail over his failure to appear before the court citing health issues.

His arrest was required in the Rs70 million corruption case related to the embezzlement of development funds allocated for the Gujrat district.

The anti-corruption court judge also declared Elahi’s medical certificate bogus which claimed that he had been experiencing chest pain.

The anti-corruption spokesperson in a statement said Elahi was taken into custody while trying to flee and added that he was wanted in various corruption cases.

The spokesperson also said that Elahi was arrested as his bail was discarded by the court for submitting a fake medical certificate.

In a statement to the police, Elahi’s driver said the PTI leader was fleeing to Gilgit Baltistan along with a convoy of four vehicles.

He said Elahi was not travelling in a bulletproof vehicle and added that police tried to break the car’s window after the PTI president refused to open the gate.

Speaking to Geo News, Punjab caretaker Information Minister Amir Mir said Elahi was wanted by the anti-corruption police in a graft case.

He said the PTI president was fleeing from his residence when the police intercepted his vehicle and took him into custody.

The minister added that resistance was put up during the arrest but the police managed to arrest him.

The PTI leader’s spokesperson said Elahi’s son Rasikh and Pakistan Muslim League-Quaid (PML-Q) President Chaudhry Shujaat Hussain’s sister were also present with him during the arrest.

Elahi’s arrest came as hundreds of PTI leaders and workers have been arrested since May 9 violent protests erupted almost across the country.

The crackdown on PTI leadership in the wake of the May 9 riots triggered a wave of desertion in the former ruling party with many bigwigs including Shireen Mazari, Fawad Chaudhry, Aami Mehmood Kiani, Ali Zaidi and others have parted ways with the party in protest against the violent protests.

Elahi was appointed as the PTI president in March this year only a month after he along with 10 former MPAs left the PML-Q to join the PTI.

Moonis Elahi, the PTI president’s son — who is active in politics and played a key role in convincing his father to join the PTI ranks — said his father was arrested in a fake case.

Moonis said his father and mother had already asked them to support the PTI even if they were arrested.

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