Dr. Ikramul Haq & Abdul Rauf Shakoori
The weak and the defenseless in this world invite aggression from others. The best way we can serve peace is by removing the temptation from the path of those who think we are weak and, for that reason, they can bully or attack us. That temptation can only be removed if we make ourselves so strong that nobody dare entertain any aggressive designs against us. Pakistan has come to stay and no power on earth can destroy it— Quaid-i-Azam Muhammad Ali Jinnah
Year 2022, ending in just a few days, held significant importance for Pakistanis as the country celebrated its 75th anniversary of independence on August 14, 2022. During 2022, Pakistan faced daunting challenges on economic and political fronts. The year commenced with imposition of taxes of over Rs. 350 billion by the coalition government of Pakistan Tehreek-e-Insaaf (PTI) to secure the tranche from the International Monetary Fund (IMF). During the fifth review, the IMF asked the PTI government to implement the conditions agreed upon with reference to autonomy of the State Bank of Pakistan (SBP). Earlier, PTI showed hesitation in introducing the reforms agenda agreed with the IMF dubbing it as violation of the Constitution of Islamic Republic of Pakistan [“the Constitution”]. However, the PTI government under pressure from IMF amended the State Bank of Pakistan Act, 1956 [“the Act’] extending certain powers that are principally considered as the prerogative of both federal and provincial governments.
In the wake of amendments in the Act and mini-budget, the PTI government managed to secure the tranche from the IMF. However, it failed to initiate fiscal reforms for curtailing circular debt and regulation of state-owned enterprises (SOEs) etc. At the time of moving no confidence resolution by the opposition parties against premier, Imran Khan, the country was witnessing formidable challenges on the economic and political fronts.
For countering political crisis, the PTI government led by Imran Khan, violated the agreement with IMF by announcing a relief package for the public to gain sympathies because of which the national treasury had to incur a heavy cost due to unfunded and untargeted subsidies it offered. The ouster of Imran Khan from prime minister’s office on April 9, 2022 brought yet another wave of protests and unrest in the country. Allegations by Imran Khan against the United States for connivance in his departure attracted criticism from sane quarters and independent analysts as being an effort to ruin Pak-US relations. On realising his mistake, Imran Khan took yet another of his infamous U-turns and started blaming the “neutrals” (establishment) for supporting the opposition in the no confidence move.
After assuming power under the premiership of Shehbaz Sharif, the coalition government of Pakistan Democratic Movement (PDM) has also failed to do much and is rightly facing criticism from the public for not bringing promised relief. The unelected finance minister of PDM, Miftah Ismail, who while in opposition made tall claims of giving relief to the public if given a chance, not only over-burdened the public by raising prices of POL products but also imposed taxes of nearly Rs. 1700 billion in the annual budget for fiscal year 2023 for revival of IMF programme. During his tenure as finance minister (April 19, 2022 to September 27, 2022), Miftah Ismail yielded largely to the demands of IMF by agreeing to raise petroleum levy as well as imposition of 17% sales tax on POL products in case the Federal Board of Revenue (FBR) failed to meet revenue target of any quarter. Though Miftah Ismail agreed with IMF for levying new taxes and duties, he violated the agreement by imposing ban on imports. Resultantly, the importers suffered huge losses. Though he claimed to be a strong believer of the open market operation for exchange rate, he failed to stop manipulation by mafia-like players in inter-bank/money market.
During the Miftah Ismail’s tenure, the Pak Rupee devalued over 30 percent pushing inflation to historic high. After his unceremonial departure, the PDM government assigned the economic affairs to Muhammad Ishaq Dar, considered as a financial wizard of Pakistan Muslim League Nawaz (PMLN). Even before assuming the charge of Federal Finance Minister, he claimed to bring the dollar under Rs. 200 and bring about the much needed relief to the general public. However, as of today, the developments have proved his failure to fulfill his commitments.
Till the writing of these lines, Ishaq Dar has failed to convince the IMF for timely completion of the ninth review though he claimed to have a vast experience of over 25 years dealing with the lender of the last resort. The US dollar is presently trading in the inter-bank close to Rs. 225, but in the open market, it is scarcely available and that too at an exorbitant premium. The import ban is still posing extreme difficulties for importers and also pushing prices upwards. Pakistan is even facing shortage of life-saving drugs due to import ban and/or adverse conditions imposed for opening Letters of Credit (LCs) by the regulator. Ishaq Dar recently gave a little relief to the general public by reducing POL products’ prices by ten rupees. However, the depleting foreign exchange reserves are posing a threat in averting the risk of default and restoring the country on the road to prosperity.
Despite challenges on internal and external fronts, Pakistan secured success by satisfying the global money laundering and terrorist financing watchdog, Financial Action Task Force (FATF), by complying with its two action plans. It took Pakistan four years to address concerns of FATF and finally they removed us from the grey list in October 2022—the only good news, the outgoing year brought for us at the international forum! However, sustainability of this white list status requires extensive work on the part of our authorities. We are bound to address the remaining concerns related to technical compliance of FATF recommendations as well as improvement of their rating on effectiveness which is still lacking on many levels.
Unfortunately, like previous years, Pakistan could not improve its ranking on the rule of law index. Some of the decisions of our apex court remained under scrutiny of international jurists. Though the Constitution is clear about separation of powers in determining functions and boundaries of each organ of the state to avoid any conflict, yet it appears that our judiciary has used unbridled suo motu powers.
The alleged interference in executive matters started consequent to lawyers’ movement for restoration of judiciary is still continuing. The world justice project report 2022 ranked us at 129 out of 140 jurisdictions. Our ranking on civil justice is 125 out of 140, whereas in criminal justice which is considered factor 8, we ranked at 97 out of 100. Our ranking on the regulatory enforcement is 127 out of 140. Constraints on the government powers in Pakistan were ranked as 91 out of 140. The report further suggests that ‘absence of corruption’ ranking as per the world justice project report, Pakistan ranked at 118 out of 140. Similarly, the latest Transparency International Corruption Perception Index ranked us at 140 out of 180 countries.
While our ranking on the rule of law index remained unchanged, the conventional ‘change of stick’ ceremony in the General Headquarters (GHQ) on November 29, 2022 finally bid farewell to General Qamar Javed Bajwa. He remained the center of power in Pakistan for six years. He introduced ‘Bajwa doctrine’ and suggested solutions to meeting the challenges of fifth generation warfare. Unfortunately, General Bajwa’s name got involved in the controversies of the general election of 2018. In the wake of success of motion of vote of no confidence by opposition, Imran Khan, head of PTI, blamed him for toppling his government.
It is hoped that the new leadership in the GHQ will realise the boundaries set by the Constitution and at the same time our political leadership demonstrate its collective responsibilities to ensure that Pakistan’s political stability that is a pre-requisite for the country’s economic revival and progress. As we are entering in the new era of fourth industrial revolution, it is imperative to transform our political, economic as well as cultural behavior accordingly.
In the last 75 years, we have achieved so much on various fronts as the fifth largest populous country and seventh nuclear state in the world but are, unfortunately, still dependent on global lenders/donors and “friendly countries” to meet our economic/fiscal needs. As a nation, we need to understand that our deteriorating economic situation is a threat to our national security and, therefore, all the stakeholders should abide by the role assigned to them under the Constitution, without which putting the country back on the road to prosperity is not possible in 2023 and beyond.
Dr. Ikramul Haq, Advocate Supreme Court, specialises in constitutional, corporate, media, ML/CFT related laws, IT, intellectual property, arbitration and international tax laws. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He isVisiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).
Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, investment companies, money service businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).