The economic mess created and accumulated over the past ten years has tied the economy within the fetters of Rs. 28000 unsustainable public debt, $ 18 billion current account deficit; decline in the Foreign Direct Investment (FDI), chronic crisis in agriculture and manufacturing sectors, huge losses in public sector corporations, rampant corruption, money laundering and rampant tax evasion.
The international lending organisations like the World Bank and International Monetary Fund have been persistently emphasizing on genuine structural reforms rather than cosmetic ones to correct the macroeconomic imbalances. But the obduracy prevailed and sane advice was either ignored or rejected contemptuously. Instead the false mantra of prosperity and investment heaven was all along sung by the pseudo-economic wizard former planning minister Ahsan Iqbal.
Now the World Bank has pegged its future financial support to Pakistan with putting in place a viable economic plan that could provide solution to the decade old structural problems, which are hemorrhaging the $ 313 billion economy. In his first visit to Pakistan, the Vice President of the World Bank for South Asia Region Hastwig Schafer, outlined the actions that Islamabad needs to undertake in return for the Washington based lender’s future budgetary support. He met the Finance Minister Asad Umar and discussed the current economic crisis and actions need to overcome it put Pakistan’s economy on the sustainable growth path.
Schafer assured World Bank’s continued support to Pakistan through a range of financial institutions once the government has worked out its economic turnaround strategy by the end of September. The international lender has suspended its budgetary support to Pakistan after Nawaz Sharif government hit-man finance minister Ishaq Dar deliberately let the economic situation to deteriorate to the verge of default. It was because if insanity perpetuated in the finance ministry by ‘Darnomics and disastrous recipes of the now retired finance secretary Dr. Waqar Masood that for the last three years, World Bank’s loans disbursement to Pakistan declined, deceasing from $1.5 billion in 2016 to $ 769.5 billion in 2018. Pakistan’s gross external financing needs are estimated to be in the range of $ 26 to 28 billion with a financing gap of $ 12 billion.
The same concerns have been articulated by Pakistan Busin4ess Council in a letter to finance minister, urging him to unite the country behind “Make Pakistan drive’ to improve the economy. The PBC has also sent a 20 points plan to the finance minister to improve the general business environment, while extending its unflinching support for the challenging task of Pakistan’s deteriorating economy.
PBC CEO Ehsan Malik said that ‘Make Pakistan campaign’ would help create jobs, promote value added exports, encourage imports substitutions and broaden the tax base. The PBC has recommended to the new government to use the limited window of positive sentiments and goodwill to implement the fundamental reforms. The representative group of trade bodies has advised the finance Minister to opt for short term measures to overcome the prevailing economic and financial crisis. It has emphasised the much needed fiscal discipline and rigour to economic management.
The last PML-N government hectically pursued anti-manufacturing and pro-import policies to convert the status of Pakistan from exporting country into a trading nation. The Free trade Agreement with China, providing zero duty on 35 tariff lines, and Preferential trade Agreement with Indonesia accounts for the bulk of foreign trade deficit. That is why trade bodies have demanded for renegotiating FTA with China.
The electricity and gas tariffs in Pakistan are the highest in the world because of shady agreements with private power producers, default of electricity bills worth Rs. 850 billion and Rs.1.14 trillion circular debt. The proposals of PBC for announcing regionally competitive tariffs of energy inputs and reviewing the power sector agreements, privatizing power distribution companies, addressing the issues of transmission and distribution losses, off-grid renewable solutions, increasing the rate of withholding tax on non-filers twice as the rate of tax on filers are worth consideration. Moreover the suggestion to take out the state owned corporation, incurring losses of Rs. 1100billion, from line ministries, handing over their management to boards of professionals, their restructuring and privitisation of those entities which cannot be revived and made profitable are perfectly in order. Hopefully, the finance minster will seek the advice and cooperation of business community to steer the country out of economic crisis.