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30 June - 06 July , 2012

Challenges Facing The New Prime Minister

Challenges Facing The New Prime Minister

There are different messages for different stakeholders in the election of Raja Pervez Ashraf as Prime Minister of Pakistan. While PPP will have to be more careful to avoid his disqualification, PML-N has to accept its inadequacy. PML-N still has the right to approach the apex court and get election of Raja declared null and void. However, the better approach will be to save the country from further crisis. The ongoing confrontation has to be stopped to facilitate key decision making.
Those who believe in the supremacy and sanctity of parliament must accept the harsh reality. The total number of seats of the National Assembly is 342 but the present strength is 338 as four seats are vacant. A total of 300 members cast their votes while others chose to abstain.ÊThe fact remains that PPP candidate Raja Pervez Ashraf got 211 votes as against 89 votes secured by PML-N backed candidate Sardar Mehtab Abbasi. This clearly proves that PML-N just can't bring any in-house change and it will have to wait till new elections are held and also stop mudslinging.
PML-N seems adamant at putting the entire blame of present energy crisis on PPP-led government. One of the possible gimmicks is that the federation releases handsome amount to partially resolve the circular debt issue. The first move has been made by releasing paltry amounts that could ensure purchase of fuel by the power generation companies. Releasing fund may ease some pressure but a permanent solution has to be found to improve cash flow to power distribution companies. Ashraf's government will have to take measures to contain blatant theft of electricity and improve recovery of outstanding dues, especially in Punjab, having 65% of Pakistan's population. His government will also have to take action against gas pilferers in Punjab; the reported quantum of unaccounted for gas of SNGPL is over 300mmcfd, most of which is stolen.
The second contentious problem is depleting foreign exchange reserves of the country. Ensuring release of over US$2.5 billion due under CSF and another US$800 million withheld by Etisalat can immediately improve country's forex reserves as well as ease borrowing from the central bank. It would be advisable to resolve the two issues through diplomacy by improving US-Pakistan relationship and opening up Nato Challenges Facing The New Prime Ministersupply route. Release of fund under CSF should not be linked to opening up of Nato supply route. Experts believe that once US-Pakistan relations improve, inflow of funds under aid and assistance will also increase. The decision has to be made in the light of rules of engagement between Pakistan and United States approved by the parliament.
One of the factors responsible for the erosion of foreign exchange is ballooning oil import bill. The short term solution is that Pakistan supplies wheat to Iran in exchange of oil, as this transaction will not involve payment in foreign exchange nor would it pose any threat of economic sanctions. Otherwise, the United States should be asked to finance oil import bill of Pakistan. Other Muslim oil producing countries may also be approached for supply of oil at concessional prices, that too on deferred payment. Experts are still of the view that entering into a barter agreement with Iran for oil will be a win win situation for both the countries.
Overcoming energy crisis and ensuring uninterrupted supply of electricity and gas can help in boosting GDP growth rate. Despite many odds Pakistan is expected to achieve around 3% GDP growth rate and succeed in US$25 billion exports for FY-12. Therefore, it may not be wrong to say that boosting output of industries can help in optimizing cost of production through economy of scale and achieving higher exportable surplus. A little extra focus on agriculture can help in containing import of food items. Increase in cotton and sugarcane production will bode well for the two agro based industries.
However, it is necessary to point out to the government that appropriate steps have not been taken as yet to face torrential rains and subsequent deluge this monsoon. According to metrological experts the world in general and Pakistan in particular, is likely to witness extra ordinary downpour and subsequent floods during this year. It is still not too late to begin cleaning of watercourses and strengthening of embankments.
During first eleven months of FY12 financial institutions have disbursed more than Rs250 billion and the risk has to be mitigated. The system is already there, it only requires compliance. It is necessary to remind the central bank that many of the financial institutions are not following its instructions. A large number of farmers have not received claims originating from 2010 and 2011 floods. National Insurance Corporation (NIC) working without Chairman is carrying a load of unpaid claims of around half a billion rupees.
Pakistan faces enormous shortage of gas, and demand is growing for the import of LNG, but no effort is being made to resolve ongoing litigations concerning a few mega size gas fields. Experts believe if the litigation is resolved, indigenous production of natural gas can be increased by more than 1000mmcfd. This will not only bring down oil import bill but also help in enhancing electricity generation by the power plants.
It has been highlighted that due to extensive load shedding, monthly import of motor gasoline has surpassed 250,000 tons as compared to 80,000 tons in 2007. This increase has been due to closure of CNG stations as well as use of smaller and highly inefficient generators in homes, commercial buildings, shops and industries. If the spell of outages can be brought down, containing the motor gasoline import will be much easier.
Some of the quarters are suggesting to the government to approach the International Monetary Fund (IMF) to avoid balance of payment crisis. But others oppose this as they believe Pakistan can live without the crutches of IMF. However, to achieve this, an elaborate 'home grown plan' has to be developed and implemented in letter and spirit. Experts are of the consensus that following good governance, overcoming inefficiencies and wastages can improve all the indicators. Over the years coalition government has not be been successful in overcoming energy crisis, raja as new incumbent can take some bold decisions and strengthen PPP's vote bank. PPP faces highest opposition in Punjab; can he show some good work and wash away all the bad memories?

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