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National Debt Crisis: Financial “Pre-Poll Rigging”

We had been reporting since January that between mid-year and year-end, Pak Rupee value could hit 140 and may even cross the 150 mark.

JUL 18, 2018 (BE2C2 Analysis): Less than two weeks before Prime Minister Shahid Khaqan Abbasi wrapped up his cabinet and PML-N led federal government to make way for a caretaker setup to oversee July 25 polls, he signed off his John Hancock on several impact moves of far-reaching  significance for the country’s economic and financial sector.

The Tax Amnesty Scheme announced by him in March is yielding results 10 times more than any previous schemes doled out previously. Politically, it has been timely and savvy for his party PML-N as it would extract maximum mileage so close to the polls. However, it could have been launched much earlier to extract maximum dollars and cents much needed for the country since the last 2 years — independent analysts say Pakistanis hold more than US$150 billion in hidden assets abroad — domestically the figure, analysts say, could be much more, as much as 3 to 5 times the country’s formal economy: GDP is $304 billion.

Rather than having made a well-crafted business decision in the best interest of statesmanship going back several years, the amnesty was doled out untimely (and may be too little too late) for narrow political gains at the polls. Analysts say the country has the wherewithal to reverse-flow at least 5 to 10 percent of the $150 billion hidden assets abroad and almost the same if not more from the domestic undeclared and benaami assets. But the short time given to declare hidden wealth and sanitize them and the timing chosen to do so makes the essence of the decision wanting for more traction on overall basis.

As of July, the country is in need to “I’ve to go the Money Store” mode. IMF and cash-rich China state-owned banks are two avenues. While IMF, an institutional platform controlled by the US, before again making any commitments to a bailout package will insist on Pakistan opening up its financial books of account specially related to short term and long term commitments made on huge loans piggybacking China Pakistan Economic Corridor (CPEC), and most recent commercial loans and bonds–and restructuring its revenue collection and debt servicing modules, state-owned Chinese banks already dishing out cash without asking could provide only stop-gap assistances — good or bad notwithstanding at this stage and the state of affairs continuing as it is, IMF would be the mostly likely choice.

The new Pakistani envoy to US Ali J Siddiqui told Bloomberg earlier this month Pakistan is looking for US investments in energy sector while welcoming recent news ExxonMobil and ENI have formed joint venture with state entity to conduct offshore drilling. Add to the mix, is US having exported– in a first, LNG to Pakistan as it expands its footprint worldwide for energy dominance — key to Trump doctrine of geoeconomy preceding geopolitics to secure America’s national interests.

Two subsequent Abbasi signature moves dovetail financial related moves with IMF bailout in mind.

One was the nod given to Ali Siddiqui’s appointment. A novice in diplomatic nuances but a financial expert and investment banker “very close” to the former PM– his rush to US capital Washington as the country’ new envoy where the movers and shakers of the World Bank, IMF and several other multilateral lending associations berth raised interests of financial experts and independent economists — some have even raised eyebrows.

Siddiqui’s agenda is top heavy including insuring PML-N cuts good pre-deal assuming it will again be in power even if hung parliament is a sure sign, politicos predict.

Siddiqui’s huddle to the US — 2 days before expiry of the government tenure — and man the country’s most important diplomatic outpost overseas amid fast and furious geopolitical great game being played out by the US and others with Pakistan as epicenter, and concurrent downward spiral of its finances, has already raised eyebrows and not so good comments in editorials and op-eds.

But it’s a done deal for now –as part of PML-N’s continuation of fiscal policy laid out by Dar & Company, which include preparing for next government with IMF bailout package in mind– transgressions and indiscretions, including conflict of interests if any exercised in his political installation in Washington, notwithstanding.

Another move former PM Abbasi made was appointing Shaukat Hussain Abbasi – who in a span of just five months got elevated as chairman of the Securities and Exchange Commission (SECP) from the position of a junior director. He however, faces another challenge, as an application is filed against his appointment in the National Accountability Bureau (NAB).

An advocate of Supreme Court of Pakistan has requested NAB Chairman Javed Iqbal to order an inquiry into appointment of Abbasi as the SECP chairman, claiming that “the appointment was based on favoritism and nepotism”.

The applicant has claimed that the last PML-N government’s decision to install Abbasi at the top in the SECP was also in violation of transparency and level playing field and deviation from the rules settled by the Supreme Court of Pakistan in its 2013 judgment.

The federal government appointed Abbasi as the SECP chairman on May 11, 2018 — two weeks before caretaker setup stepped in.

On January 8 this year, he had been promoted as the executive director of the regulatory body.

Abbasi had not yet completed his six-month probationary period when in March he was elevated as commissioner of the SECP. In less than two months, he was appointed head of one of the most important regulators of the financial and equity sectors.

His appointment has also been challenged in the Lahore High Court (LHC).

The applicant has also cited a recent order of the apex court in which it directed NAB to look into appointments where the people were getting monthly salary of over Rs1.5 million.

“This is a perfect case for the inquiry as Shaukat Hussain (Abbasi) is now drawing salary of over Rs2 million per month along with huge additional perks,” said the application.

The Supreme Court in its order in Ashraf Tawana VS. federal government case – announced on April 13, 2013 – elaborated the principles for appointment of the SECP chairman. The applicant has claimed that Hussain’s appointment was also in violation of the SC’s judgment.

In the judgement, while setting aside the appointment of M Ali as SECP chairman, the court declared that appointment of the SECP chairman can only be made” once all commissioners, that is, five are in place”.

It said the government after considering credentials of all the five commissioners shall appoint the most competent person as chairman.

However, in the case of Abbasi, this essential principle was not followed as there were only four commissioners at the SECP and one advertised position is yet to be filled, said the applicant.

He further claimed that all other three commissioners were more qualified, more competent and have more dynamic experience as compared to Abbasi.

Moreover, in the same judgement, the Supreme Court had directed the federal government that appointment of the SECP chairman shall meet the requirements of the SECP Act including sections 5, 6 and 7 thereof, in a credible, rigorous, transparent and open manner.

The apex court also ruled that government, while appointing new SECP chief shall adhere to Articles 8, 10A, 14 and 18 of the Constitution of Pakistan which are consistent with provisions of the SECP Act, ensuring independent and objective decision-making without fear or favor, required of an independent regulator.

The applicant claimed that the decision was also in violation of the provisions of the SECP Act, whereby he was selected merely because of his political relationship especially with Khaqan Abbasi, the former PM.

Why was Abbasi elevated in such a fast-track basis, while bending rules, by PM Abbasi? If perceptions matter, the move raises questions beyond last name coincidence. Abbasi’s competency notwithstanding appointment timing, bending rules, etc. morphs into an issue of significance if scaled over time, as roads ahead ate rough not smooth for a “submissive and compliant officer”.

Is Abbasi and Siddiqui going to Oscar Tango the IMF deal? Looks like so, as time is of the essence and much is at stake if PML-N comes to power again with simple majority or as a national government.

Throughout his career, Abbasi has only served in the SECP’s company registration department. He has no exposure to other core and sensitive areas being regulated by the SECP, such as capital markets, specialized companies, insurance and enforcement departments, according to the application.

The senior most position at which he has served was In-charge, Company Registration Office, Islamabad. It was only in the middle of 2017 that he was made head of the registration department as a stop-gap arrangement, as the regular head of the department, Bushra Aslam had got seriously sick.

The applicant alleged that Abbasi started thriving and he was promoted as executive director in January 2018. By that time, the shortlisting of candidates for the vacant positions of commissioners at the SECP was already completed.

The names of five shortlisted candidates were also published in newspapers and the record of ministry of finance would confirm this fact. The shortlisted candidates included eminent professionals in the field of finance and capital markets. Even some other candidates who had applied from within the SECP were more senior, more qualified and having more dynamic experience.

“However, on the intervention of then prime minister, the first shortlisting was annulled and couple of names were added including that of Shaukat Hussain Abbasi who was earlier not shortlisted.”

He said the finance ministry record would confirm that Abbasi had even not applied for the vacant position within the period specified in the advertisement, published in Sep 2017 to invite applications. But such matters fade out when larger picture of potential moves emerges: pre-poll rigging of country’s financial albeit fiscal policy the next government could face along with whopping billions in debt to pay – both short-term and long-term.

The country’s reserves has depleted the worst in Asia — 34 percent; stock market is in a slide on a 6-month time scale, and foreign direct investments other than from China have almost stalled, with gradual scaling down of remittances from overseas Pakistanis.

We have been reporting since January that between mid-year and year-end, Pak Rupee value could hit 140 and may even cross the 150 mark.






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