WITH the support of the ongoing IMF programme, economic discipline being enforced and measures being taken to attract foreign investment by the caretaker government under the umbrella of the Special Investment Facilitation Council (SIFC), although some signs of Pakistan’s economic recovery are visible, yet Pakistan has to make intense efforts to achieve the ultimate success. This would require concrete domestic and foreign policy imperatives to be implemented resiliently for the next five to ten years.
Before discussing policy imperatives, let us first have a brief overview of Pakistan’s current economic situation and the challenges it faces in the economic revival. According to the World Bank report, despite the IMF programme, Pakistan’s reserves are expected to remain low, necessitating continued import controls and constraining economic growth rate/recovery. Real GDP growth is projected to reach only 1.7% in FY24 and 2.3% in FY25. High inflation due to increasing domestic energy prices and fluctuation in rupee’s value is likely to keep economic activity subdued.
The short-term macroeconomic stability is predicated on the robust implementation of the SBA, continued fiscal restraint and external financing inflows. Financial sector instability and policy slippages due to social tensions pose significant risks. Continued high inflation and weak growth can worsen the situation of the existing poor. Without quick reforms, risks will remain exceptionally high, economic activity will remain constrained by import controls and weak confidence, while low investment and exports will undermine medium-term growth potential.
The World Bank’s suggested reforms include measures to increase revenues by broadening the tax base, including tapping revenue from agriculture, retail and property. It would also entail measures to rationalize fiscal expenditure by reducing wastage/subsidies and to restore private sector confidence through business regulatory reform and reforms to state-owned enterprises and to address inefficiencies and high costs in the energy sector.
However, it is expected that capitalizing on Pakistan’s untapped potential in defense production, agriculture, mining, information technology (IT) and energy through domestic and foreign investment under the SIFC (a facility to act as a “single window” to facilitate investors, establish cooperation among all government departments and fast-track project development) and action on the above-mentioned World Bank suggested economic reforms will greatly help in reviving Pakistan’s economy.
Moreover, Pakistan will need to reform its taxation system, its major state institutions, such as Railways, PIA, Karachi Steel Mill and some others to make those profitable. For all the above-mentioned measures to progressively succeed in about 5 to 10 year time, it is necessary to ensure sustainable political stability through free and fair elections, ensure internal stability by suppressing foreign supported terrorism, addressing the corruption and ensuring the continuation of the economic reforms agenda by discouraging any kind of political expediency.
To create consensus on maintaining the political stability and the continuation of the economic reforms agenda, it would be prudent to hold a pre-election conference of all the major political parties under the facilitation of the Pakistan Army, being one of the primary/major stakeholders of Pakistan’s economic security/revival, which finances the country’s defence capacity and its social cohesion by ensuring wellbeing of its people.
For economic revival, Pakistan will need to pursue the following suggested domestic and foreign policy imperatives. To maintain political stability, internal peace and good work environment in Pakistan, Pakistan needs people-friendly domestic policies with the objective to improve the people’s education, health, discipline and skills to enable them to work in the country or abroad more efficiently to earn/produce more.
To satisfy the Pakistani population, the police and judicial reforms should be brought to prevent the crimes and provide quick justice to the people. There is a need to bring quick reforms in all the government departments to enable the employees to work honestly and efficiently. All officers and employees of the related departments should facilitate private entrepreneurship to expand their businesses, create employment opportunities for the people to produce more.
Agriculture, industry and services sectors should be encouraged and supported by the related government departments to enhance their economic activity and production. The new power transmission lines should be installed on priority to prevent line losses to end load shedding. Export industries need to be given subsidies on power to reduce the cost of production and enhance exports. Skill training should be better organized to send more people abroad to increase foreign remittances.
Reforms are needed in the tax department for broadening the tax base and improving tax collection system, supported with the economic digitalization/documentation policy to be implemented by the government. Reforms are also needed in the PIA, Railways, Pakistan Steel Mill, Customs, agriculture, industry etc to create an efficient working environment free of corruption to make these departments more productive.
In the context of reviving Pakistan’s economy, Pakistan needs a foreign policy, which also supports the economy. First of all, since Pakistan would need at least two consecutive IMF programmes in the next ten years, it is necessary that Pakistan’s relations with the major IMF donors, especially the US/EU major countries remain friendly. In this context, Pakistan also needs to maintain cordial relations with the World Bank and the Asian Development Bank.
As Pakistan would also need the Gulf countries and China’s financial assistance, it would need to maintain cordial relations with them also. This task of keeping relations good with both China and the US/EU powers and also with the Gulf countries in the prevailing tense geopolitical world environment would be a challenging task for our foreign policy managers. Also, whereas Pakistan needs to fight out terrorism with full power, it would need to exercise calm, patience and pragmatic peace with its immediate neighbours.
Pakistan’s foreign missions abroad will also need to convince the potential foreign investors to invest in the productive sectors of Pakistan’s economy. Our missions abroad should also search for and suggest suitable export destinations for Pakistani goods and our skilled manpower abroad to increase foreign exports and remittances.
In view of the above discussion, to avoid the likely political impasse on the implementation/continuation of the agreed upon economic revival agenda, it would be better if the Army assumes the responsibility of facilitating the implementation of the economic revival programme under the umbrella of the SIFC. And, the political parties should take this vital role of the Army in a positive spirit.
—The writer is also a former Research Fellow of IPRI and Senior Research Fellow of SVI Islamabad.
Email: [email protected]
views expressed are writer’s own.
Economic recovery: Pakistan’s policy imperatives ahead
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13.12.2023
WITH the support of the ongoing IMF programme, economic discipline being enforced and measures being taken to attract foreign investment by the caretaker government under the umbrella of the Special Investment Facilitation Council (SIFC), although some signs of Pakistan’s economic recovery are visible, yet Pakistan has to make intense efforts to achieve the ultimate success. This would require concrete domestic and foreign policy imperatives to be implemented resiliently for the next five to ten years.
Before discussing policy imperatives, let us first have a brief overview of Pakistan’s current economic situation and the challenges it faces in the economic revival. According to the World Bank report, despite the IMF programme, Pakistan’s reserves are expected to remain low, necessitating continued import controls and constraining economic growth rate/recovery. Real GDP growth is projected to reach only 1.7% in FY24 and 2.3% in FY25. High inflation due to increasing domestic energy prices and fluctuation in rupee’s value is likely to keep economic activity subdued.
The short-term macroeconomic stability is predicated on the robust implementation of the SBA, continued fiscal restraint and external financing inflows. Financial sector instability and policy slippages due to social tensions pose significant risks. Continued high inflation and weak growth can worsen the situation of the existing poor. Without quick reforms, risks will remain exceptionally high, economic activity will remain constrained by import controls and weak confidence, while low investment and exports will undermine medium-term growth potential.
The World Bank’s suggested reforms include measures to increase revenues by broadening the tax base, including tapping revenue from agriculture, retail and property. It would also........
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