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In his victory speech, soon-to-be prime minister Imran Khan has set a lot of well-meaning targets and the direction of his government’s economic policy that seem no different from those of any leader in the recent past.
Mr Khan has gone on to the extent of yearning for a welfare state like Madina of Prophet Muhammad (PBUH) and yet idealising China’s economic policy that has traversed through communism to controlled capitalism and referring to the China-Pakistan Economic Corridor (CPEC) as a “game changer” — the pet phrase of his predecessors.
The role of the finance minister-in-waiting — Asad Umar — would be crucial to transform this agenda into reality in five years. Mr Umar would be the fourth finance minister with an MBA in the last three decades.
Policy literature suggests reforms get successful when they are undertaken at the very beginning of the term and carried forward with desired adjustments along the way
The other three MBAs were Syed Naveed Qamar, Shaukat Aziz and Shaukat Tarin. Mr Qamar and Mr Tarin had rather short stints in office. While Mr Qamar had a few months at his disposal to leave any mark, Mr Tarin, otherwise a distinguished banker, is either despised for or credited with the landmark 7th National Finance Commission (NFC) Award of 2009.
Nearly all federal stakeholders, from the armed forces to the Ministry of Finance and independent economists, still regret that NFC award as it left the federation a pauper even after almost a decade of its passing.
Whether a large enough economy worth $313bn facing significant challenges and needing deep-rooted economic reforms gets a helping hand from a man with a degree in business administration and who ran a $1bn company is going to be interesting to watch. It would also be interesting to see if the new government is able to make adjustments to fiscal federalism to satisfy increasing demands of the security quarters and yet be able to create job and business opportunities while others resist a reversal of hard-gained fiscal autonomy to the federating units.
The foremost and immediate outcome of the formation of the new political government and its road map will be the signs of relative confidence to the market to settle the exchange rate to a reasonable level and recovery in the capital market spoiled by rather longer political instability. But its extent would again depend on the depth of the strong opposition crying foul over the election process.
According to former PML-N finance minister Miftah Ismail, some of the promises made by the PTI entailed an additional expenditure of almost Rs1.6 trillion per annum or about Rs8 trillion over five years. But there appears to be no matching plan to generate required funds.
The good sign is that the PTI has sufficient numbers of its own to form a comfortable government immediately and start working without wasting time. However, it will require the support of a coalition for securing major policy initiatives and reforms to sail through the approval process. Mr Khan has promised no political victimisation which, if ensured, will earn a space to make policy choices easier.
More positively, there are no signs of an upfront economic crisis, although problems have been heating up and the new government has a reasonable time to take stock of the ground realities and start acting immediately.
Declining foreign exchange reserves are still enough to finance about two months of imports unlike 2008 and 2013 when they were down to a couple of weeks. The financial system is stable and the stock exchange, although down from an elevated level of 50,000 points, is still above the 42,000-point level, needing a fresh psychological and monetary injection to boost activity and create a feel-good environment with fresh investment potential.
Debt levels are on the higher side, but within manageable boundaries along with a reasonable time span. The energy sector’s circular debt is another potential challenge on the fiscal side. But these issues are not as big as they were five or 10 years ago despite supply-side expansion.
All this would need seriousness in the policy approach to steer the economy, rather than the tendency of political blame game that would reduce the space to operate.
It is important that the new government based on its political capital takes difficult decisions and serious reforms at the start of its tenure rather than falling prey to populism and then start reaping the benefits halfway through for the next elections.
All available literature suggests reforms get successful when they are undertaken at the very beginning and carried forward with desired adjustments along the way. Playing to the galleries with notional gimmicks seldom earn long-term political and economic rewards.
Published in Dawn, The Business and Finance Weekly, July 30th, 2018
Comments (45) Closed
Inshallah the economy of the country will become better and clean under PTI.
Sell the assets of corrupt politicians, everything will be perfect.
Yes; financial and economic challenges are there because of pathetic and disloyal governess by N League especially Ishaq Dar who ruined the economy of Pakistan in last five years. At least this man will not be dishonest and will make sincere efforts to recover out of doomed financial health of Pakistan.
We as a nation have developed a feverish habit to expect as large as we can but never keep on eye on realities and the possible solution. Nothing is impossible if there's a strong will. Whenever there is a chance of change,we start focusing on the doubts and not on the possibilities. And how can one whosoever bring an overnight change. Be wise and support what is right. Don't talk about can't rather can.
You don't need mba to manage finances. You don't need miracles to turn the economy around. All you need is patience, common sense, and a basic adherence to the fundamentals: don't take loans, don't take sood, learn to live according to your means. Anytihng extra - like some clever investment policy, etc - will be nice to have but not critical. Our current financial mess is only because of the greed of the rulers who have plundered the country's wealth. Merely checking it and making sure it does not happen anymore will do wonders for the economy. Taxes should not be a problem when people know that 1) they are fair, 2) everybody is paying them, not just the poor, and 3) they are being spent correctly on strengthening the country and 4) 200% transparency and accountability w.r.t tax money's usage is available to the public and those in charge of managing tax money can be questioned anytime.
IK ought to select a professional who has solid background in international finance and who understands macro and micro economic policy implications!
still lots more challenges but the nation are with you and believe that PTI will overcome the economic issues soon.
AU is very light for this post, he is a good worker for the party management.
2-way action plan is needed, through a technical expert who helps plan and delivery plus strategic direction setting. And then start following this aggressively in best interest of the country.
Mr Asad knows about that better than anyone in the country.
....and the man who put us in this mess was flown out of the country under false pretexts by the sitting government ..... and his boss has now been shifted from jail to the comfort of a VIP hospital suit.....no wonder nothing changes in Pakistan.
The new government should exercise all powers at its discretion to bring all sectors, without exceptions, into tax net to expand the tax base and increase revenue. All should be treated equally when it comes to tax payment.
@Adnan easier said than done
@Faisal
Agreed. A lot of well meaning Pakistanis have embraced this idea that the country's economy will get back on track simply of we manage to recover all the money that's been looted over the years, but sadly life isn't that easy.
For a start, of all the money - most probably tens of billions at least - that has been siphoned off the national exchequer throughout history, at best we may be able to recover a few hundreds of millions; just a drop in the ocean in terms of restoring our national reserves.
Secondly, even if, somehow, all the corrupt elements in Pakistan were made to pay back every last penny they had bled from the country, our economic problems are much deeper rooted and much more long term.
Hopefully Mr Umar is suitably qualified to make the core structural changes that are needed to actually secure future prosperity; for now, I have full faith in him.
Hasan
Where there is a will there is a way.
Asad Umar is an MBA as qualifies as Dar the accountant to run a country’s economy. But he won’t steal and in Pakistan apparently that is the best qualification these days. Asad has said so himself in many interviews: I am not an economist. It would be a shame to handover the economy to a non economist but then PTI will pay the price of they mess up the economy. There should be Council of Economic Advisors and to make Asad happy put him at the head. Make sure the proceedings are minuted and then it will be fine.
Asking for donations to run the country’s economy will be just sad but it was done Nawaz in the 90’s so why not?
Select a finance minister who is not only capable but honest to the bone , Pakistan needs honest and capable ministers .
Is Imran Khan s leader or a politician? IK is a leader by heart but now turned a politician to win election. So do not pay much value into the “words” he has been using quite recently. He just just realized that the masses are truly truly ignorant and illiterate and they understand certain words easily than the words they are not aware of.
IK is a leader and will remain a leader. And he will bring a change - a change to uplift poor status by bringing free education, water and free medical health and also subsidized housing to those who cannot afford living in a decent house on their own. Change is on its way.
No Conditon Pakistan economy can back on good stage It has to pay billion to China and now Pakistan company do able to compete with China. So do not dream about good economic . Enjoy
Only option left for him is to increase the TAX base, no other option left. FBR needs to be corrected.
he who fixes the economy will rule again.
The task is huge - my advice for the finance minister would be to worry less about the loans and actually start Pumping the economy more - if they come in with austerity it will damage their chances of re-election - it’s best they spend more and invigorate the economy and then look at ways to bring the debt down
Khaleeq kiani shame on you
Some inheritances are indeed a burden to tackle with. Specially those which one has got through a fight, whether by words or sword is irrelevant.
Two things that are different this time. Asad Umar has hands on experience running and GROWING a business and has the most clear view of economy and finance than anyone I have seen in any Pakistani finance minister to this day.
And even more important, the head of the government is an honest man with integrity and dynamic attitude unlike any since Jinnah, though Musharraf comes close. Imran is not perfect but best imperfect choice.
Probably the first time in Pakistan history who actually deserve to be a finance minister. Well Deserve Asad Umar!
Good Omen.
Get back the looted billions by SS and Zardari clan and with good financial planning Pakistan will do quite well. One good change is that looting has stopped.
From the comments and write-ups I have seen, I do not think Asad Umar understands policy making, fiscal and monetary policy and the economy well. Running a business and an economy are two very different things. Imran should beg someone like Atif Mian to handle the economy and he can probably ask Amir Sufi to join him for a few years and they can correct a lot of structural problems that exist. However, I wish Asad Umar well and wish him all the success because his success is Pakistan's success now.
The trio of international trade and finance, money and banking, micro and macro economics - these require a seasoned professional who can build a multidisciplinary team, keep it clean and accountable. The next finance minister must above all be sadiq and ameen.
I'm not sure Pakistan could have a more sincere leadership than this. While the debt and export situation is dire, this leadership is probably the right one to carry Pakistan forward in these conditions.
@Dr Riffat Jabeen ....And, who has the will to even talk about reduced defense spending, let alone actually reducing it!
While the intentions of the write may be well meaning, he forgot to mention the most critical aspect of the economy which has been neglected during the last 10 years i.e. Exports. For any sustainable development, strong export growth is a must. However the export performance since the last 02 democratic govt is pathetic at the best. Growth based on local consumption, funded manily through foregin debt, is a time bomb which is about to explode - thanks to Dar Economomics of keeping the USD / PKR rate fixed for most of his tenure as the finance minister.
For the govt to provide sustainable long term growth, sectors need to be identified and supported during the next 05 years to enable them to start contributing to long term growth of the ecomonomy.
He has capability to deal with such scenario. I have no hesitation in saying that after very long period of time there will be a competent and capable Finance Minster.
Pay attention to the last paragraph.
While his elder brother Mr. Zubair a PML-N member and now Ex governer of Sindh continues to vent his jealousy by bad mouthing elections and PTI win and further trying to throw roadblocks in smooth change of government.
Promise everything to everyone seems to be the policy. On one hand Ik says that we will formulate policy with consultation of business and on the other that every policy will be for the poor. It is the most fundamental debate with n political science. Interest groups have more sway over non organized masses. I don't doubt IK intentions but I seriously doubt his understanding of politics and economics. We need to increase our labor productivity and export of labor. After all labor (expats) are our largest export. Seems too difficult to increase Agri productivity. Manufacturing has its constraints. All in all services sector can grow but services create domestic revenue and doesn't bring foreign exchange. All we can do is to create high tech and technical labor force through University at every district level and try to export our labor.
@Saif Zulfiqar yes inshallah !
@Adnan 100% agree!
A very very simple solution. MASSIVELY TAX ALL Imported luxury items. Massively tax all domestic luxury items and luxury services like travel, entertainment, Hotels etc. Problem solved.
I would love to see what u will do when IMF will say no under US pressure
It will take time but please do your best to bring back the 98 billion+ dollars that have been looted and use this money to repair the economy. The IMF loans are just digging us deeper into trouble.
If anyone is expecting PTI to change all that overnight, you are in for a rude awakening, it didn't get this bad over night, it ain't going to get fixed overnight. But it needs to start on a good note, good planning, good solid people in place, I hope that Mr. Khan will inject some good solid business people into the financial planning and management.
@Pakistani. Common sense and patience alone is not enough, I disagree. You do need educated business minded people to run the financial system who know and understand the markets, finances, trading and so on.If all it took was patience and common sense, everyone would be a businessman.