The federal government’s austerity measures to bring down imports may simply be a panic reaction, because they neither consult stakeholders, nor does it seem that they will need to the fall in demand that has been touted. The biggest problem is that the federal government has no means of ensuring compliance by the two PTI-ruled provinces of KP and Punjab. Sindh has tried to comply, but has found a groundswell of resistance both from restaurateurs and shopkeepers, the two groups of stakeholders worst hit. The restaurants and shops have been ordered to close early to reduce their use of electricity, and thus to reduce fuel imports. As customers and diners will not be driving there, more fuel should be saved. Historically, such measures have not yielded the sort of savings the federal government is expecting and needs. It seems political posturing, for the best way of reducing fuel consumption is to allow prices to rise, something which the government is reluctant to do. It almost seems as if Finance Minister Ishaq Dar has run out of ideas and is now resorting to what will not work.
Another hope is being held out in the shape of conversion to solar power, by the government. That in itself is a major and expensive exercise, and the IMF is sure to ask awkward questions about it. If the buyback mechanism had been made simpler, there would have been a greater market-driven drive towards the sort of private sector conversion, domestic, commercial and even industrial, that would have really dented the national fuel import bill. Similarly, the electric vehicles policy has been complicated, by fuel vehicle interests, making those who want a green vehicle unaffordable.
The time for ‘greening’ with solar power and electric vehicles is probably past, as now any fiscal incentives will probably be nixed by the IMF. The PML(N) was left the handling of the economy because it was supposed to be good at it, but a pretty mess it has made of it. The austerity measures it is taking seem to be the result of panic, as it realises that it is carrying the can for the inflation and low growth that is afflicting all sectors of the economy. The attempts at austerity seem an attempt to avoid the real solution, which is the one demanded by the IMF, that of imposing a price increase on fuel, thus reducing the circular debt. Unfortunately for the PML(N), the IMF will not relent on this demand.
