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Long-term vision in hard times

Published Aug 26, 2013 10:50am


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- Illustration by Abro
- Illustration by Abro

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.

Comments (3) Closed

S. Israr Ali Aug 26, 2013 07:48pm

The country saw the debasement of national currency by 70% when the parity rate of Pak Rupee fell from Rs60 a dollar to about Rs.100 during the last stinct of said to bedemocratic rule by PPP. This otherwise simply mean that a common man holding rupee assets has lost 70% of his precious purchasing power leaving worth of his hard earned Rs.100 asset to only Rs.30 and made poorer so heavily while conversely the elite classes holding assets abroad made fortunes in same reverse proportion by multiplying from non rupee holdings.

Now this said to be another Democratic Government of PMLN having come with great fanfare, loud and tall claims and criticising the last regime for this unprecedented debasing national currency unstoppably and to bring changes and reverse this trend. What the nation instead dismally watching is a rather more rapid free downside sliding of national currency touching Rs.103.70 to US$ continuing now with no stop in hindsight making it poorer and poorer day by day and no relief to common man. The incompetence of government is clearly evident as the FM does not seem to possess necessary calibre to handle the situation with accountant like approach, which he actually he is. One wonders why then the PPP Government was replaced if same conditions intended to persist rather to make any changes and reverse the trends.

Earlier also during 1999, the same said to be democratic Nawaz Government had brought the parity rate of national currency to Rs.86 a Dollar. However, after its toppling by the military, the nation saw the same rupee having been strengthened and maintained for all that long period to Rs.60 a Dollar and common man holding assets in national currency saw increase in his purchasing power and to that extent he was made richer while those holding assets in non national currencies also expeerienced stabilising exchange rate..

The nation and a common man will in this scenario be right in questioning that in the name of democracy how long he will continue be made fool and be subjected to fraud and loot.

Ahmed Bilal Aug 28, 2013 03:01am

I am surprised as why the writer is so critical of such a plan? Is Pakistan the only country to have such a plan? Are we not allowed to plan for our future? I am not a supporter of PML-N but the finance minister looks to be trying hard to take steps to improve the short term financial condition of the country and obviously this will not be resolved over night.

I believe every country should have a 10 years, 20 years and even a 100 years plan. Even my company for which i am an employee has such a long term vision spanning up to 100 years. The plan although must be practical and implementable. Rather than criticizing the plan, I advise the author to recommend the shortcoming and negative points of the plan while the positive points must be appreciated.

Fatima Aug 28, 2013 10:17am

I totally agree to the point described in the above article. Having a long-term thinking is good enough but resolving the current issue(s) at hand is far more practical and strategic. Put the fire first applies in the present-day scenario of the country. The countrymen are not against PML-N in any case but the notion is to rationally move forward with a realistic approach to economic reforms so as to improve the economic state of Pakistan.