Need for charter of economy
Two major worrying indicators of Pakistan’s economy are the falling exports and ballooning public debt. The World Bank in its report titled “South Asia Focus Fall 2017”cautioned the previous PML-N government to take corrective measures to overcome these macro economic imbalances but in vain. The incumbent PTI led government has also not initiated the requisite measures to improve the worsening macroeconomic indicators.
There is a need of charter of economy because government’s borrowing is increasing and exports are not growing which are critical for strengthening of the economy. In the past few years, it has been noted that Pakistan is sinking deep into a debt trap and has not been able to strengthen industries to step up exports. The Prime Minister has repeatedly shown concern over the unsustainable public debt that was created by the last PML-N government but the debt management strategy has remained unchanged. The federal government’s recent move in the debt market has raised questions over the debt management strategy as it has rejected Rs. 94 billion long term loan at a relatively lower price but borrowed Rs.86 billion for 10 years at a higher rate of interest. The Finance Ministry acquired on Wednesday this much expensive loan through Pakistan Investment Bond (PIB) at a fixed interest rate of 13.12 percent, which is one of the highest return in recent years.
Exports of Pakistan decreased to Rs. 246.015 billion in November from Rs.248.128 billion in October this year. Decline in exports has increased pressure on foreign exchange reserves. According to Bloomberg, “Pakistan’s dollars reserves are depleting at a faster rate in Asia and may soon have a buffer that is smaller than Cambodia—an economy that is less than 10th of its size.”In order to increase exports and ease pressure on foreign reserves, all political parties need to bring in ideas, discuss them and implement them in short and long run. In the formulation of charter of economy, necessary input should be taken from business leaders, scientists, engineers, technologists, farmers and labrourers.
Declining exports to the United Arab Emirate, Saudi Arabia and Turkey despite having good political relations are quite worrying. There is a dire need to revive economic diplomacy in foreign relations. The point has already been emphasised by the foreign Minister Shah Mehmood Qureshi in his speech at the recent envoys’ conference. The role and effectiveness of commercial councilors in improving relations with trading partners is extremely important. But the postings of these officers are not made on merit with the result that they cannot admirably perform their job.
Pakistan adopted a private sector oriented strategy some what earlier than other economies in the region but was reversed by Z.A Bhutto government. The strategy reversal adversely affected the quest for innovations, productivity and growth in the industrial sector, resulting in a constant decline in exports. There is an urgent need to assist private entrepreneurs who are dynamic, open to innovations and have managerial capabilities by providing favourable business environment with good governance, appropriate institutional and financial support mechanisms, and adequate legal support framework besides provision of physical and social infrastructures. The industrialists have developed a tendency of not maintaining a linkage with public sector institutions of Research and Development and the elected governments used to financially strangulate these important entities and made them redundant, thus wasting the expertise of their manpower and available technical and research infrastructure.
Pakistan may begin by creating a competitive market in labour intensive production of goods and gradually progress to more skilled and technology-intensive activities. There is need to devise policies and strategies to increase production through capacity utilisation, capacity expansion and productivity growth. For productivity expansion diversification of production base of goods and services with greater comparative advantage and global demand is inevitable. Some of these industries are electronics, telecommunication equipments, auto parts, biological pharmaceuticals, renewable energy and petro chemicals. The productivity growth will come automatically from substantially increasing investment in human capital and promoting innovations.