Pakistan rarely puts an economist in charge of its budget

Why he waited for the final budget

Muzamil explains why he held off on a budget video despite many requests. A government announces a budget, then parliament debates it, pressure groups push back, and the final version often differs from the first. He wanted to wait until the National Assembly passed it, so he could work from the final picture.

This episode is the background. The detailed analysis, he says, comes in the next video. First he wants viewers to understand what the government’s job is, and who Pakistan has hired to do it.

Who to follow for the details

For line-by-line detail, Muzamil points viewers to people and platforms he trusts on Pakistan’s economy:

• Ali Khizar and Shahbaz Rana, finance journalists who cover the IMF, debt, State Bank policy and major government and private sector decisions.
• Ammar Habib Khan, formerly chief risk officer at K-Electric, who regularly makes economic and financial news accessible.
• Pakistonomy, a podcast by Uzair Younus, which he describes as detailed and technical, with conversations with the right stakeholders and coverage of history and geopolitics too.
• Profit magazine, which covers economy and business with well-researched stories.
• Pakistan and Counting, a new YouTube channel from Junaid Iqbal, who hosted a finance and stock market show on Geo News around 2005-06. Its aim is to simplify economics.

“These things are very important. They affect all of us,” he says. “Nobody has ever tried to simplify them and explain them in easy words.”

The government’s one real job in the economy

Muzamil argues that Pakistanis often expect the wrong things from government. Those expectations push governments outside their role and into bad decisions made to please people.

He splits the economy into two stakeholders. One is everyone who participates in it: individuals, businesses, workers, buyers. The other is the government. “The government’s only role in the economy,” he says, is to oversee its direction: what growth requires, and which areas to encourage or discourage through policy.

If an activity makes money now but will cause harm later, the government can tax it or add barriers until it becomes unprofitable, and people move elsewhere. If an activity is productive but slow to pay, the government can give incentives so people go there on their own.

This maps onto micro and macro economics. A person earning a good salary selling plot files does not ask whether the work is productive. “I will make my decisions selfishly, and there is nothing wrong with that,” he says, speaking as that individual. Macro policy asks what happens if a hundred thousand people make the same choice. The budget matters because it is the main framework that sets the economy’s direction for the year.

That is also why he dislikes how budgets get discussed. People look only at the item that affects them. Those who gain stay quiet. Those who lose make noise. In his view, no single policy change can make or break an economy. The overall direction does.

Real estate, and two warnings from abroad

Muzamil returns to a theme he raises often. He calls Pakistan’s real estate sector largely unproductive: “gambling”, “Vegas”, a scheme where people put money in, no new wealth is created, and some people get paid out at any given time. He compares it to a family savings committee, except a committee is transparent and carries little risk.

He gives two examples from abroad. In 2008, even the US, with all its expertise, failed to see its housing market turning into a bubble, and one industry’s crash took the whole economy down. Around 2020, China faced a similar property build-up. In his telling, the Chinese government carried out a controlled demolition of the sector. Evergrande, its biggest company, declared bankruptcy, investors and workers lost out, but the wider economy did not crash as many Western analysts predicted. Government stepped in at the right time against an unproductive sector.

Who Pakistan hires to run its finances

Building economic models across GDP, wages, imports, local production and the dollar rate is hard work. That is what economists do. Muzamil draws a firm line: in his definition, an economist is someone with PhD-level research, published work, and a record of applying models to real problems. A bachelor’s in economics does not count.

Then he walks through Pakistan’s finance ministers over the last 16 years, as he describes them:

• Ishaq Dar, an accountant, served briefly in 2008.
• Naveed Qamar, a business manager by profession and a long-time politician, served for about five months.
• Shaukat Tarin, a banker with a long career in banking, served from late 2008 to early 2010, and later again under PTI.
• Abdul Hafeez Shaikh, a Harvard-educated economist with academic experience, served from 2010 to 2013. Muzamil calls him the one person in this history who truly knew the economy.
• Saleem Mandviwalla, a pilot by profession whose family owns Mandviwalla Entertainment, served for a few months in 2013.
• Ishaq Dar returned from 2013 to 2017.
• Rana Afzal Khan, a businessman, served from late 2017 to mid 2018.
• Miftah Ismail, an economist with a Wharton PhD in public finance and economics and years at the IMF, served for about a month.
• Asad Umar, from business management and a former Engro CEO, served for about eight months under PTI.
• Abdul Hafeez Shaikh returned as adviser from 2019 and became federal minister from December 2020 to March 2021.
• Hammad Azhar, a lawyer, held the post for a month, followed by Shaukat Tarin until the April 2022 vote of no confidence.
• Under the PDM government, Miftah Ismail returned, was sidelined, and Ishaq Dar came back.
• After the caretaker period, Muhammad Aurangzeb, the former HBL CEO, who gave up his Dutch nationality to take the job.

His summary is blunt. “Except for economists, there is every kind of person in it.”

Dar’s golden years and the Shaikh period

Muzamil singles out two stretches. He calls 2013 to 2017, Ishaq Dar’s longest term, a golden period for global conditions: plenty of dollars, good foreign investment, and near-zero US interest rates. In his view, that was the time to consolidate and make productivity-driven decisions. Instead, he argues, power plants were added without proper demand projections, which later fed the capacity payment burden. When pressure built on the pegged dollar, it had to give.

He credits Abdul Hafeez Shaikh’s 2019 to 2021 period, which included Covid, with putting the economy back on a better path. He says many macro decisions then had good long-term effects. But a federal minister must be an elected member, and Shaikh lost his Senate race in March 2021, which ended his time in the role.

He also gives examples of decisions he sees as short-sighted: the PTI government’s amnesty scheme, which in his view made an already pumped-up and unproductive real estate market even less productive, and the push for an IT city in Punjab built around new buildings, when the world is moving to hybrid and remote work.

Accountants, bankers and the missing vision

Muzamil’s argument is about skills. He uses a barber analogy: hire the world’s best butcher to cut your hair, and however sincere and confident he is, a good haircut would be “sheer luck”. He stresses that many of these ministers may be honest, patriotic and capable people. The job is simply “way above their pay grade”.

In his view, accountants know how to manage books and control numbers, so they control the dollar or the wheat price, and the problem bursts out later in a boom and bust cycle. Bankers, he argues, set the books tight to satisfy the main lender, in this case the IMF, to unlock the next 8 or 10 billion dollars. Banks do well in their tenures and the economy stabilises for a while, but it weakens over the long term.

An economist with a vision, he says, can also explain it. He can tell people which sector is unproductive and why moving to another will pay off in four or five years. Muzamil points to India’s 1991 reforms under Manmohan Singh, who was an economist. Without a vision, he adds, a minister cannot convince the IMF or the public.

Change the system so technocrats can serve

Muzamil ends with a proposal. If the rule that ministers must be elected keeps professionals out, he suggests Pakistan change its laws. Elected representatives would legislate and protect citizens’ rights, while technocrats with the right training run the day-to-day functions of ministries.

He promised his budget analysis in the next video and asked viewers whether they think the budget is good or bad for Pakistan, and whether bankers and accountants belong in the finance ministry.