His first ‘fudget’
OUR new finance minister, Muhammad Aurangzeb, is preceded by a strong lineage.
Our first finance minister, Ghulam Muhammad, began as an assiduous accountant with Mahindra & Mahindra. He turned trusted courtier in Bhopal and Hyderabad states. Before independence, Ghulam Muhammad had helped the then finance minister Liaquat Ali Khan prepare India’s first home-grown union budget.
Post 1947, Liaquat, now prime minister, appointed him as our country’s first finance minister. In 1948, GM presented our first budget and submitted the draft of our First Five-Year Plan. Later, as governor general, he birthed Ayub Khan’s martial law.
Since then, we have had finance ministers from varied crèches, including the World Bank, Citibank, the State Bank, and now Habib Bank. The most frequent occupant of this post has been a chartered accountant, Ishaq Dar. He would have happily volunteered to serve a fifth term, had Prime Minister Shehbaz Sharif not decided otherwise.
The latest — Muhammad Aurangzeb — is also an ex-Citibanker. He made his name with ABN-AMRO in Holland, where he acquired a Dutch nationality. He had to surrender that on becoming finance minister, though he retains his fluency in Dutch. That will prove useful to him when interpreting the double-Dutch of Pakistan’s financial double-speak.
Our new finance minister needs all the help he can get, even if it originates across the border. It is a pity that he cannot consult former Indian finance minister Dr Manmohan Singh in Chandigarh. He could, however, benefit from reading Strictly Personal, the book compiled by Dr Singh’s daughter, Daman, from her father’s recollections about his experience in helping to engineer India’s miraculous economic revival.
We have had finance ministers from varied crèches.
He told her that in the mid-1970s, India’s situation was dire. Inflation had ballooned within two years from 4.9 per cent in December 1971 to 23.8pc in December 1973. A distraught Indira Gandhi sought help from inside and outside the government. In February 1974, 140 economists prepared a memorandum on measures necessary to control inflation. Launched a few months later, and more importantly, implemented by the finance ministry, by end 1974 inflation fell to 25.4pc. By end 1975, it had reached zero.
Personally honest, Manmohan Singh-ji learned, as FM Aurangzeb will, that politics needs lubrication to function: “Every political system needs money. This money cannot be raised in a legal manner [.] Parties have to mobilise resources, and they do all sorts of things to do so.”
India’s economic coherence was achieved by Dr Singh using the Planning Commission and the National Development Council, in which all chief ministers were active members. He promoted coordination between New Delhi and the states, convincing them that successful planning was not “a matter of ideological preferences, but a practical necessity”.
His acolyte, Montek Singh Ahluwalia, carried the flag even though successive prime ministers shortened the pole. (Rajiv Gandhi, for example, described the Planning Commission as “a bunch of jokers”.) Narendra Modi delivered the coup de grâce immediately on taking over in 2014.
How much of a free hand will FM Aurangzeb be allowed? Foreign Minister Dar is already poaching on his preserve. One sympathises with Dar. Foreign affairs is not his forte. It lacks the machismo of finance. As his successor Shaukat Aziz observed on being asked to relinquish the finance ministership upon being elevated to the prime ministership: “How can I give up the only real job I have?” Mr Aurangzeb has been clamped with more manacles than he has wrists. His immediate task is to negotiate a new loan programme with the IMF, to replace the present Stand-by Arrangement of $3 billion that expires this month.
Pakistan already owes more than $130bn in external debts. It was required to repay $24bn by June 2024, but has winkled some relief from friendly creditors through debt rollovers. Even then, it has to repay nearly $5bn before June. It has paltry reserves of about $8bn. When will we kick the habit; cure ourselves of this addiction to borrow to cover our chronic insolvency?
FM Aurangzeb and Sharif’s government have sworn to introduce economic reforms — however unpalatable and unpopular they may (and predictably will) be. But then, which government has not made such gossamer promises? They are believed by no one except the IMF and other myopic lenders. Why do such mature creditors remain convinced (to adapt Ralph Emerson’s aphorism) that Pakistan’s performance will outrun the promises of its governments?
Soon, our finance minister will have to present his first budget. He has had more time to prepare than Dar did in 2013. (Dar had a week.) Will he be daring, innovative? Or will he rehash stale, sour ideas?
Critics suspected Dr Manmohan Singh’s 1991 budget was a rehash. They renamed it a ‘fudget’.
The writer is an author.
Published in Dawn, April 13th, 2024