Illicit wealth amassed by individuals involved in black market activities can resurface and be legitimised during the election cycle in Pakistan.

This is likely to obscure the political landscape and cast doubt on the credibility and fairness of the fragile democratic process.

The Election Commission’s political finance cell may find limited legal avenues to block this influx, posing challenges to maintaining the integrity of the electoral system.

What is even more disconcerting is the lack of attention given to a subject that essentially shapes the integrity of the democratic project in Pakistan. There seems to be a notable absence of systematic research or studies on the economics of elections in the country. Journalistic endeavours on the matter only skim the surface, relying on hearsay and guesswork due to the absence of pertinent data.

Certain fragmented pieces of evidence support the notion of wealth entering the system from undisclosed origins. With the lack of oversight on funds transfers for financing election campaigns by the State Bank, Election Commission (ECP), or any other official body or civil society platform, those keen on understanding the economics of elections have had to resort to informal surveys and brief interviews with relevant stakeholders to glean some insight into the reality.

‘It is extremely challenging to precisely identify the various and diverse sources of election funding unless someone on the inside reports it’

The investigative groundwork for this report has revealed that repositories of savings in the country, including banks, saving schemes, private fund management companies, real estate, etc, maintained a relative calm all through election phases that recur at five-year intervals since 2008.

While election campaigns involve requisitioning services from printers, painters, advertisers, caterers, decorators, transporters, private jet operators, social media warriors, channel operators, commodity dealers, paid workers, etc, a substantial amount of money changes hands, contributing to an upswing in economic activity.

Attempts to solicit input from the hierarchy of the State Bank proved unsuccessful. Privately, some bankers, speaking anonymously, confirmed that after the election date announcement and the finalisation of nomination papers by the ECP, no significant fluctuations in the withdrawal levels have been observed now or in previous elections.

Hamid Raza Khalid, Director General of the Central Directorate of National Savings, echoed sentiments similar to those of bankers. Speaking over the phone from Islamabad, he stated: “We have not observed increased withdrawals linked to elections.”

Realtors and fund operators contacted were somewhat evasive, but feedback from several individuals active in those sectors indicated sluggish business and a lack of urgency among sellers looking to liquidate their investments.

In response to an inquiry on this matter, Ahmed Bilal Mehboob, CEO of the Pakistan Institute of Legislative Development and Transparency (Pildat), expressed keen interest in the subject and recognised its relevance. He lamented the scarcity of research on the topic and underscored the imperative for enhancement in the laws governing the financial aspects of elections.

Rashid Chaudhry, National Coordinator, Free and Fair Election Network (Fafen), remarked, “Given the absence of a mechanism to trace and track the money trail of private election expenditures, estimated to be in billions of rupees, the likelihood of funds flowing from unknown sources remain strong.”

It is the electorate’s right to know who is funding whom and for what purpose

While the Election Act establishes spending limits for candidates aspiring to secure seats in the federal or provincial tiers of the legislature, it inadvertently creates loopholes in the legal framework, allowing them to surpass these limits without any adverse consequences.

According to the election law, all participants are mandated to open a dedicated election account for routing campaign financing at the time of filing nomination papers. There is, however, no requirement to disclose the sources of funds deposited into this dedicated account.

A candidate running for a seat in the National Assembly can legally expend up to Rs10 million, while candidates for provincial assemblies have a limit of Rs4m. However, the law absolves contestants from the obligation to account for all expenditures made on their behalf by others.

Even in the optimistic scenario where all 336 National Assembly seat contestants adhere to the spending limits, considering just three candidates per constituency, a straightforward calculation, multiplying Rs10m by 1,008 candidates (three times 336), yields a staggering figure exceeding Rs10bn. Presently, there are a total of 22,751 candidates vying for positions in national or provincial assemblies.

With the looming deadlines before the polls, it seems the Election Commission has been preoccupied, perhaps not finding time to address the need for closing regulatory loopholes to enhance financial transparency. Despite reaching out to the political finance wing of the ECP for their insights, their response was not received at the time of filing this report.

Zubair Faisal Abbasi, a development policy expert based in Islamabad, was candid in sharing his perspective, drawing from his recent involvement in the interaction of the ECP with civic bodies.

In response to a query on this matter, he stated, “Under the current legal arrangements, it is extremely challenging to precisely identify the various and diverse sources of funding unless someone on the inside starts reporting on it. This became evident in the case of a particular political party in Pakistan, where irregularities were reportedly committed.

“The political finance cell of the ECP collects financial records from all contestants. The challenge lies in the fact that not everyone complies with reporting, and perhaps not every response undergoes thorough scrutiny by the ECP. The legal mechanisms to enforce the rules and follow-up actions have, so far, been largely ineffective.

“It appears there is a need for ‘sunshine rules’ to ensure transparency in the transfer of funds for electioneering. The declared amount of spending by candidates often falls short of the extravagance witnessed in society during the election period. It is the electorate’s right to know who is funding whom and for what purpose.”

Published in Dawn, The Business and Finance Weekly, January 8th, 2024