MUCH of the current debate in our society is focused on whether or not the IMF programme can be put back on the rails. And if it can, then when? The hope is that when the IMF returns, it will unlock loans and help from friendly countries as well as loan programmes from other multilaterals. But the message, even from friendly countries, seems to be that Pakistan needs to put its house in order before it can expect money and help.
If it does not, what is the point of sinking more money into a bottomless pit? The IMF programme is seen as a sign that Pakistan is at least taking the initial steps to get its act together.
Can Pakistan put its house in order? This seems to be the big question. The reluctance of this government to carry out reforms is not out of line with the disinclination that previous governments showed. Reform will be hard and costly. In the short run, it will impose significant costs on various groups within the country. Governments have been resisting imposing these costs for fear of losing their popularity and vote.
Since every government has been kicking the can down the road, the malaise has become a lot deeper; so the reforms too would have to be a lot deeper. Can any government muster the political strength to enact reforms? Will the opposition sit with that government to ensure that there is wider support for the reforms? Both scenarios seem unlikely.
The most likely course of action seems to be that the government in power will do the minimum needed to get the IMF programme back, thus enabling it to borrow from friendly countries. And so the full crisis will be averted for some time — until it becomes the problem of the next government. The fact that the pit will get deeper and the challenges more difficult is unlikely to concern the government of the time. It will be someone else’s problem soon enough. So we will continue living in crisis mode.
There is another issue here as well. Some quarters have started a dialogue on ’reimagining’ Pakistan. There have been some events and debates around the issue. But what has become crystal clear from these fledgling dialogues and debates is that there is not much thought that has gone into a) what are the deeper reforms that need to happen in Pakistan to tackle our basic issues, b) how are these reforms to be implemented, and c) how are the coalitions which are supposed to implement change to be constructed and sustained.
Can Pakistan put its house in order? This seems to be the big question.
What are the deeper reforms that are needed? Basic reforms need to be implemented in most sectors of the economy. Legal reforms, property rights reforms, market reforms have to come in. There have to be major changes in the taxation set-up, especially the property tax system and other local taxes. Expenditure priorities need to change a lot too.
There will need to be major changes in policies for education, health and social welfare. Higher education policies need to be revamped. There will not be a single sector that will not have to be reformed. But this requires detailed work before reforms can be implemented.
And it is clear, from the dialogues as well as the general conversation in society, that we have not done the work at the sector level and on the details required to be able to know what will need to be done in case a government, however unlikely, wants to carry out the deeper reforms.
I was looking at some of the ideas that were being put forward for reforms in the education sector. Our education system is quite poor. Too many children are out of schools and too many who are in government and low-fee private schools are getting poor-quality education.
Yet, the only thoughts that were put forward were for privatisation of the system, offering vouchers and so on. There was no deeper engagement with issues or any thoughts about the viability of the reforms being proposed and the reason why it was thought they might be effective in our context.
Even if the reform work were in place, do we possess the bureaucratic competence to implement reforms? This remains a big question. There are major concerns about the quality of the bureaucracy and systems in Pakistan and this will not make implementing reforms an easy exercise.
Take the history of reforms in any area in Pakistan and the matter becomes clearer. The Federal Board of Revenue and our taxation system have been major areas of reform efforts for the last four decades or so. Is the FBR today any more competent or effective than other departments of the state that have not had similar reform priorities? Is it more transparent and less corrupt? It would be hard to argue that it is.
The Indian economy was also in a lot of trouble in late 1980s and early 1990s. Some of the issues India faced were similar to where we are at the moment. They enacted reforms. But the preparations they did for the exercise were quite impressive.
They had done a lot of sectoral work before opening up the economy and when it happened, the economy was able to respond quite quickly. There might be useful lessons for us there.
The next few years for Pakistan won’t be easy. Most likely we will not carry out the needed reforms and continue to limp along on handouts. But, in case we do want to implement reforms, the problem we are going to face is that we do not have the needed background work in place and we do not have the competence levels needed for implementing the reforms. So, even if we choose to go down the needed path, we might not be able to. Testing times will continue for the people of Pakistan.
The writer is a senior research fellow at the Institute of Development and Economic Alternatives, and an associate professor of economics at Lums.
Published in Dawn, February 3rd, 2023
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