Daily Times

In politics, perception is critical. It is the people’s perceptions of how a particular party has served its term that brings them out in droves to elect who they think can fairly lead them towards progress and the attainment of dignity and their rights. On its 44th founding anniversary, the Pakistan People’s Party (PPP) is suffering from a bad case of negative perception. Prime Minister Yousaf Raza Gilani on Monday addressed a party workers’ convention where he categorically ruled out any “misadventure” to destabilise the government and that “change can only come through the people”. In the run-up to the 2013 elections, the PPP needs to ensure that no complacency sets in when it comes to satisfying the aspirations of the people. For that a certain amount of introspection and reflection is needed by the party.
At present, the PPP leads a government that is alleged to be rife with corruption, nepotism and cronyism. Nawaz Sharif on the same day displayed his usual rhetoric at a party workers’ convention where he accused the centre of “bad governance”, amongst other things. Although this is not unusual for the opposition, the fact remains that in the minds of the people this rhetoric is beginning to acquire a ring of truth. The masses are being overburdened by skyrocketing inflation, political intrigues where allegations of corruption and partisan politics are reported every day and where the problems of the country, including the war against terror, are leaving people out in the cold, sometimes as cadavers. Maybe it is the very weight of these problems that has left the PPP seemingly somewhat indifferent in managing the affairs of the state for the people’s welfare. Even its repetition of measures taken in this regard sound increasingly hollow. Pakistan today is the proverbial bed of thorns, beset with so many problems that there are hardly any contenders eager to come forward and urgently tackle its woes. Criticism by itself or for its own sake is no solution, something one wishes the opposition would come to terms with. The PPP needs to get its act together on a war footing.
Gilani also stated that it “respects” criticism from the opposition, media and coalition members. Why then, does it not respect criticism from within? The recent suspension of senior PPP stalwart Naheed Khan’s party membership has raised many eyebrows. Even though she is a dissenting voice within the party, her thoughts too must be respected and tolerated. The fact that inner-party dissent has been dealt with similarly in the PPP’s past further compounds the fact that, after Benazir’s murder, the party is risking fragmentation due to its intolerance of internal criticism. This must change.
The PPP was founded to give the masses a voice through the adoption of a socialist agenda. The PPP came to alter the power structure, to give the people a sense of self-worth and a platform to challenge the status quo. That manifesto remains, to a large extent, unfulfilled. Deserting its leftist principles and ideology to embrace the liberal free-market paradigm, the PPP has wandered far from its original goals. The past 43 years have delivered a rather chequered and tragic history for the PPP, the loss of Zulfikar Ali and Benazir Bhutto being the two lowest points. Despite the many twists and turns the party has faced and the accusations that are being hurled against its key members, it is still not too late for the present incumbents to improve their performance. It is time that public perceptions are altered. Too many perceive a drift in policy matters, both in the party’s own ranks and in the links that keep the leaders attuned with their people. The PPP has always gained victory when there has been a good turnout at the polls. It should remember that a disillusioned constituency and public may refrain from casting their vote come election time. g

Misplaced SBP formula

The State Bank of Pakistan (SBP) has once again increased
the key interest rate by .50 basis points to 14 percent. Although the ostensible purpose is to curb inflation by limiting government borrowing, this is provable neither theoretically nor empirically. The impact of this measure is exactly the opposite: it boosts inflation.
The SBP has criticised the government for excessive borrowing, which is squeezing out private sector credit. However, increasing the basic rate is hardly the solution to this problem. In reality, it has a similar effect as that of government borrowing, i.e. it hampers the private sector’s ability to borrow by increasing the cost of doing business. Whatever good will be produced will be dearer than those produced from cheaper credit, reducing their competitiveness. Quite expectedly, chambers of commerce and industry across the country have criticised the SBP for increasing the interest rate. Even if we concede that government borrowing could be limited by the SBP, its positive impact will be eroded by the increase in the cost of production. Three consecutive raises in policy rate during the last six months have shown that this measure had a marginal, if any, impact on inflationary trends, which are driven by other factors. Core inflation has been galloping along despite these measures, because it is very difficult to manage prices in a deregulated free market economy, as borne out by a steady escalation of the consumer price index to 15.3 percent last month from 8.9 percent in the same month last year. Traders take advantage of any change in market dynamics to make profits at the cost of consumers. Take the example of the rise in fuel or electricity prices. After every such increase, the inflationary trend receives a boost. The SBP cannot focus just on the policy rate for curbing inflation, ignoring all other factors, which contribute massively to the increase in prices.
The truth is that this formula has not yielded the desired results and induces the very process that the SBP is trying to curb. What, then, is the point of indulging in this futile exercise every few months? In times of recession, when governments provide incentives to business and industry, the SBP is going on an opposite track. When government is not interrupting its unremitting cycle of overspending and filling that gap by borrowing from the SBP, the central bank can do little to improve matters through monetary measures alone. It needs to come up with reduced borrowing and expenditure in coordination with the economic managers of the government, who should ensure that the borrowing limit set by the SBP is not violated. *