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Bold economic policy needed

May 26, 2013

THE PML-N is set to assume power shortly at a time when the country is in the midst of multiple crises. Energy, power, security and finances, all pose challenges which are central to debates on various forums. What is less conspicuous but equally important is the lack of investor’s confidence.

A move to solve the above-mentioned core issues will help build a positive investor sentiment.

Keeping this in view, Ishaq Dar, the upcoming finance minister, has to locate himself in the economic ideology spectrum nicely. Not only that, he has to be bold enough to declare it openly.

This would reflect his willingness for a meaningful change and readiness to take responsibility for his actions.

It will make, what lies at the end of the tunnel, for a potential investor, more foreseeable.

Alternatively, Ishaq Dar may pick a few key areas to lead the economy rather than swearing allegiance to a particular school of thought. East Asian economies like those of Taiwan and South Korea are good examples of such an approach.

To date, economists have failed to agree whether it was their support for free markets or their very strategic engineering which resulted in what came to be known as the East Asian miracle.

What is clear, however, is the focus of these economies on export-oriented growth and combating economic disparity. The idea of more exports meant more income while less disparity meant the prosperity was widely shared.

This brings us to an issue at hand: the IMF loan and the strings attached. Again, the government’s policy stance should be clear. It should not sign an agreement it does not intend to act by.

Suspension of yet another IMF programme in the midway may take away more finances than it brings in. If the government can make alternative arrangements to ameliorate the balance of payments position, which it is reportedly trying, this may be yet better.

But it should have a neat plan which it needs to articulate precisely.

In conclusion, while economic revival depends on a strategy to tackle with the more conspicuous issues, of no less importance is delivering of a clear signal to the market.

A bit of this economics and a bit of that may leave us worse off than where we are today.