Today Pakistan is in grave economic crisis and immediate measures need to be taken in order to avoid a financial debacle the country may face in the near future. These measures must be home-grown and not taken at the behest of outside pressure.

For such kind of revolutionary measures the government should stand steadfast and give them time to bear the desired results by facing the storm that is sure to be unleashed by the interests that would be hurt.However these reforms should yield desired results in the shortst possible time.

What Pakistan needs today is not a platform to launch an economic revival programme. What we need is an actual ‘economic revival.’ Pakistan’s main problem is the foreign debt which has risen to unmanageable proportions in the last decade and the repayment of which has upset our external balance to such an extent that we cannot meet our minimum necessary development requirements. At present we cannot survive without fresh borrowings from from foreign donor agencies.

These donors keep on putting up fresh conditionalaties which hurts the very basic structure of our economy and our policy-makers cannot plan anything which can really add to economic growth. Our economic planners are mostly recruited by the donor agencies and they are busy in pleasing their ex-bosses by doing what they are directed to do.Their actions not only further affect the overall balance of payments adversely but also the internal financial structure of the country. Therefore, a ‘revolt’ is needed against our economic policies and the pressures and interference of foreign donors.

Yes this will put a break to the inflow of foreign assistance we are receiving today. But this is what we want. These donor agencies must be asked to pack up and leave. Immediate short term policies must be announced simultaniously to improve,on permanent basis, the foreign exchange reserve position of the country enabling it to meet its national requirements and to pay the foreign debt instalments as per schedule without any foreign assistance. Some immediate economic measures are outlined hereunder which can pull the country out of this crisis in the shortest period of time, by enabling it to make payment of debt instalments in time and also meet the annual requirements of development. Our foreign exchange receipts estimates and expenditure needs are as follows:

Freign exchange annual expenditure = $15bn

Break-up:

Public sector imports = $7bn

Private sector imports = $6bn

Foreign debt repayment = $2bn

Foreign exchange annual earnings = $13bn

Break-up:

Exports = $11bn

Remittances (overseas Pakistanis) = $2bn

Deficit to be covered = $2bn

Presently there are three rates of exchange i.e. the bank rate, the inter bank rate and the open market rate. The following reforms need to be made immediately and simultaneously.

i) Public sector imports should be pegged with the SBP foreign exchange rate so as to control inflation.

ii) Private sector importers should be stopped payment of foreign exchange by the SBP to import goods. Instead they should be allowed to buy foreign exchange from the open market for L/C margins, retirement of documents, etc. This demand of $5 billion annually on the open market will certainly push up the open market rates of foreign exchange considerably.

iii) In order to control this increase in open market rate, the inflow of foreign exchange in the open market would have to be increased. This can be done by taking the following two steps:

iv) allow the exporters to sell their foreign exchange earnings in the open market;

v) allow overseas Pakistanis to sell their remittances in the open market.

The above two measures will create fresh inflows in the open foreign exchange market and increase the quantum of funds as now the exporters and overseas Pakistani remitters will be getting a fair foreign exchange price for their earnings and would not rely on “under-invoicing” or “hawala operators” to get a better price.

It is expected that the foreign exchange inflows under exports would cross the $11 billion mark and the open market remittances of $3 billion within one year.

The overall position, at the end of the year, would be as follows:

Exports $11bn

Remittances $4bn

Total receipts $15bn

Public sector imprts $7bn

Private sector imports $6bn

Foreign debt repayment $2bn

Total expenditure $15bn

The overall effect on the foreign exchange rates should not be more than 5 to 6 per cent as the increased inflow of foreign exchange would neutralize the effect of the increased demand of private imports. If the foreign exchange earners and remitters keep on getting a fair exchange rate for their earnings, it is visualized that in the next few years exports can touch the $15 billion mark and overseas Pakistani remittances can fetch $5 billion.

Of course there will be a pressure on foreign exchange for import requirements of both the public and private sectors due to increased business activity but these will be balanced by the evergrowing receipts from exports and remittances. Furthermore if liberal export facilities are made available to the exporters, exports have a great potential in Pakistan and they can be increased manifolds. Following steps are suggested for further liberalization of exports:

i) Liberal general examination by customs.

ii) Compensatory rebates and duty drawbacks at suitable levels.

iii) Liberal examination/policy.

If the above decisions are implemented then Pakistan shall be having a foreign exchange surplus after one year and the country will be debt-free within a decade.

Increased economic activity and influx of foreign exchange will improve the GNP of the country in all spheres of industrial, agricultural and services sectors, thereby resulting in overall increased production, lowering of prices, reduction in taxes,etc, No future borrowings will be needed.Below are explained the proposals suggested above:

The proposed measures will have little impact on foreign exchange rates. It is visualized that in the beginning it may have a little negative impact for a short period of time but as time passes and the inflow of foreign exchange increases with the implementation of the above decisions smoothly there will be a positive impact and within a period of two years our currency may gain strength and we may see a reversal in foreign exchange rates. It is expected that within the next few years ,foreign exchange inflows from exports and remittances would easily cross the $20 billion mark and would comfortably meet the increase in import requirements and foreign debt payments.

Since there is expected a surplus in balance of payments which would keep the foreign exchange open market subdued and rates at reasonable level. This can be understood by the following example. Every year during the Haj season for one month there is immense pressure on the buying of foreign exchange from the open market as about 100,000 Pakistanis perform Haj through the sponsorship scheme. Every year but there is only a marginal increase of 1-2 per cent in foreign exchange rates and as soon as the Haj seasons is off, the rates come back to their normal position. This proves that our foreign exchange open markets can easily bear an overall additional burden of $ 2.4 billion if spread over a period of 12 months without actually having any impact on the foreign exchange rate.It was only the wrong implementation of the policies that had kept up the devaluation of our currency every year to the tune of almost 10 per cent.

Let us open our country in all its policies, open for all with equal opportunities for everyone with the intentions to contribute to the national interest rather their personal interest, to avail their contributions to national good and not to fill personal coffers. Then one can see and really feel what potential Pakistanis have and how they can contribute to the country’s progress.

We do not need any advise from any outside powers, agencies, institutions,etc. What we need is an open Pakistan, open for all. With the implementation of the suggested measures,the coming decade will prove to be a period of huge influx of foreign exchange and increase in trade activity which would stabilize the foreign exchange reserves requiring no more borrowings and making timely payments of foreign debt. There will be no more interference and meddling of foreign countries, agencies in our internal/external affairs and our planners would be able to plan better in the interest of the nation.

Caution: Opening up of our trade and foreign exchange markets will certainly create resentment among both the internal vested interest and the donor agencies. They would try their utmost to nullify the results of these measures. They would also stop all foreign assistance and put pressure for repayment of foreign debt instalments, cancelling all rescheduling arrangements. To counter such black-mailing tactics the government should first get ready to meet such a situation.

Here the money exchanges who have been introduced in our society must be taken into confidence and they must be used as substitute source of supply of foreign exchange should such tactics are adopted by the donor agencies. Few selected/big money exchangers should be persuaded to bring in large quantities of foreign exchange in order to supplement the shortfall to be created by negative steps.

These precautionary measures would be for a short term just in order to see the country through the interim period of hard time which it may face to substitute open market policies and free the trade from all kinds of artificial and superficial controls which only directly or indirectly benefit the vested internal and external interests and result in a yearly increase on the burden of the common man .

There is nothing to fear in a country where resources are enormous if exploited properly and the problems are very few if tackled properly. Only one short period of taking a bitter pill is needed to strike this favourable balance between the resources and their utilization if sincere efforts are made in the interest of the nation as a whole and not for personal gains by vested internal and external elements. It will also immediately stop the flight of capital and human resources to foreign countries.