The focus of the Nawaz Sharif government on Vision 2025 at a point when the country is faced with grave economic issues of immediate nature raises some doubts about its ability to grapple with the existing complex situation.
The over-arching problems call for a ‘fire-fighting’ approach, followed by short-term urgent corrective steps in tackling imbalances in the economy.
“How can the planning minister even suggest discussing long-term policy when the country is on a few weeks distance from sovereign default, and when revenues are sliding, expenditures are rising and the value of currency is eroding? I did receive an invitation from the planning minister to a meeting on Vision 2025, but I excused myself,” informed a senior economist in Lahore.
“Well, first things come first. The long-term is immaterial at the current level of economic uncertainty. Yes, the government should try to ward off immediate threats to the foundation of the economic system,” Dr Hafiz Pasha commented from Lahore over telephone.
“The formation of an economic advisory body is on the cards. The problems are complex and require cooperation and coordination of all stakeholders and the support of the pool of economists in the country. Please give us some time and we will put the economy back on the rails,” responded Dr Waqar Masood, the federal finance secretary.
Last week, Federal Minister for Planning and Development Ahsan Iqbal unveiled a bare outline of the Vision 2025 in Islamabad. It included a proposed integrated energy plan, modernisation of infrastructure, mobilisation of indigenous resources, self-reliance, institutional reforms and governance, value addition in production sectors, export and private sector-led growth while leveraging social capital.
Mr Iqbal listed the whole range of problems facing the country, which raised hopes that the Vision may harmonise development in various sectors of the economy through an integrated approach that should help avoid tragic failures such as an unprecedented energy shortage.
But at the same time, the Vision 2025 left an impression that it was no more than a ‘wish-list’. One just gets a faint idea of the government’s priority in the minister identifying three underlying factors for economic revival as: increasing tax revenue, investment and exports. Otherwise, there is no clear picture of the Vision, for which one has to wait for the detailed plan to be announced before the end of this calendar year.
The planning commission needs to come out with an indicative five-year investment schedule to help domestic and foreign investors to pick up projects of their choice while the gaps should be filled in either by private-public partnership or the state sector. Where-ever needed, the government should offer an incentive package and common facilities, if possible.
At the conference where Ahsan Iqbal made his presentation, he invited input from different stakeholders, the private sector, analysts, economists and think tanks. The planning commission, he said, would hire experts in the relevant fields.
“To me, it is a joke, but a very cruel one. No one was expecting wonders from Ahsan Iqbal as minister for planning and development. Reviving the economy would be difficult even for the brightest of bright economists, given the complications,” an economist nursing the ambition to head the planning commission said privately.
“With all his attributes, the mild-mannered politician is not cut out for the job. His chances to succeed, if at all, rest on his ability to create an intellectual support infrastructure to feed him with ideas and strategies,” he added.
“Economics is a science of trade-offs. A pool of economists can help the government to set the priorities straight. The role of the planning minister is then to keep whispering them to the PM,” a top notch economist of the country told this writer from Switzerland over phone.
“My fear is that the planning commission lacks the professional capacity to deliver plans and visions,” said Pervez Tahir, a former chief economist of the planning commission. He said there was also a question mark on the planning commission itself, as to what extent it had the authority to work after the 18th amendment in the constitution.
Meanwhile, the hike in tax rates has yet to translate into higher revenue collection, despite all the shuffling of officers in the Federal Board of Revenue (FBR). One wonders if the government even considered the impact of raising taxes on growth prospects.
The clearing of Rs500 billion circular debt of the energy sector also did not produce the expected results. The energy crisis largely persists, and the PM has declared that the situation will take PML-N’ whole term to improve.
The budget proposals have put in motion the inflation spiral, confirms data released by the Pakistan Bureau of Statistics. After easing to 5.1 per cent in May 2013, inflation has risen to 8.3 per cent in August — a 3.2 per cent hike in the first two months of the current government, which should ring alarm bells in Islamabad.
The currency is loosing value and the rupee has slid to Rs103 to a dollar in the open market. The monthly average exchange rate, according to State Bank data, was Rs98.3 to a dollar in April 2013. The meltdown of the foreign reserves and the perpetual imbalance in external payments carries the risk of sovereign default.
“The situation is not going to play out well for the man on the street dodging threats to his livelihood and struggling to make both ends meet. So far, the private sector has shown greater tolerance for revenue measures for the goodwill PML N enjoys among the business community,” said an economist.
“It will turn really ugly if they get antagonised and start reacting to the government moves. With society divided on all conceivable lines, another misstep by the government may worsen the economic situation,” he concluded.