Pakistanis deserve better. It is imperative for an elected government to strive to enable people to live lives free from want, fear and indignity. Securing the next International Monetary Fund (IMF) tranche and striving for another longer, larger programme is important.

However, history unequivocally demonstrates that a government’s success hinges on recognising its citizens as the purpose and agents of development. Prime Minister Shahbaz Sharif’s government and his economic team, led by Finance Minister Aurangzeb Khan, need to clarify the vision of the ruling coalition in this regard.

The targets of a five-year economic revival plan — currently in development — encompass reducing poverty, creating jobs and improving revenue generation. However, the precise strategy for achieving these objectives remains to be seen, particularly for a resource-starved coalition government pursuing stabilisation policies under the close watch of the IMF.

Historically, stabilisation policies have entailed economic hardships, which the people of Pakistan have repeatedly borne with the promise of future gains. Unfortunately, they have not always been able to partake equitably in the benefits of subsequent economic growth spurts. This dynamic partially explains the unpopularity and abrupt exit of past regimes despite the higher average growth rates recorded during their tenures.

The government’s wellbeing depends on prioritising and protecting its people grappling with falling family incomes and rising living costs

During his first week in office, Finance Minister Aurangzeb Khan shared his insights and economic priorities through interviews and media interactions covering various issues. Expressing confidence in the prime minister’s leadership, he pledged to continue the ‘commendable’ work initiated by caretaker finance minister Dr Shamshad Akhtar.

Mr Khan highlighted the improvement in key economic indicators during the first quarter of the current fiscal year, attributing it to Dr Akhtar’s strict adherence to stabilisation policies. He emphasised that these measures have bolstered Pakistan’s position, enabling successful engagement with the IMF to conclude the review and secure the release of the last $1.1 billion tranche of the nine-month Stand By Arrangement.

He was hopeful that the successful completion of the current programme would pave the way for negotiations for a larger, longer programme during the IMF and World Bank’s meetings in Washington in April. Emphasising the importance of stabilisation policies, he referred to them as the ‘Pakistan programme’ for which he vowed to seek the IMF’s backing.

He mentioned plans for the digitisation of the Federal Board of Revenue to curb leakages, expand the tax base by roping in untaxed and undertaxed segments, committed to curtailing public expenditure by scaling back Public Sector Development Plan (PSDP), and propose involving the private sector in public works through adoption of the successful public-private partnership model used in Sindh.

Rather than seeking loans from friendly nations, he aimed to persuade them to invest directly in the country. He commended the efforts of the Special Investment Facilitation Council and envisioned its pivotal role in mobilising local and foreign investment.

Mr Khan anticipates opening avenues for commercial borrowing from Gulf Cooperation Council banks once Pakistan enters a longer-term IMF Programme. With the economy consolidating, he foresaw an improvement in Pakistan’s credit rating, which would enhance its standing in the global credit market. He also discussed the possibility of issuing Panda bonds and expressed a desire to tap into the Chinese bond market.

He shared his intension to expedite the second phase of the China Pakistan Economic Corridor, which focuses on cooperation in the industrial, agricultural and technological sectors. Specifically, he showed keen interest in advancing operationalisation of special industrial zones.

He stressed the importance of export-led growth for sustainability and committed to providing competitive energy rates, particularly for the textile sector. He foresees substantial gains from freelance information technology (IT) work, with projected IT exports exceeding $3.5 billion in 2024. Additionally, he anticipates rice exports to fetch $2bn this year.

The government remains steadfast in its support for agriculture and mining, projecting a five per cent economic growth rate over time if plans proceed smoothly.

Privatisation is a priority, with plans underway to privatise Pakistan International Airlines (PIA) and, eventually, power distribution companies. The finance minister also hinted at forthcoming reductions in both foreign exchange and policy rates.

Notably absent from the discussion were the concerns of workers and salaried classes facing immense economic strain, grappling with dwindling family incomes and depreciating asset values. His stance appeared to lean towards the overly simplistic trickle-down theory, perhaps assuming that all members of society, regardless of class, gender, region or profession, would inevitably reap the benefits as the economy stabilises and grows.

Such unfounded assumptions have failed to materialise in the past, and clinging to them now could pose significant risks for a fragile government and a nation already teetering on the brink of an economic crisis.

“It’s absurd for Shahbaz Sharif’s government to test peoples’ patience at this time. While direct cash transfers to the poorest are essential given Pakistan’s lack of a social security net, the working masses in the middle of the social spectrum are feeling the squeeze with falling family incomes and rising living costs. The government must provide policy support to them, along with caring for risk-averse bankers, barons and brokers,” remarked an analyst.

Speaking on the resilience of the Pakistani people, he noted, “Whether it’s rooted in faith, strong family ties or other factors, Pakistanis consistently demonstrate their ability to rebound from adversity. Despite enduring dictatorships, natural disasters, war fallout, the pandemic, terrorist strikes and governmental betrayals, they exhibit remarkable resilience. Not only do they persevere to survive, but they also actively engage in the political process.

“Imposing higher fuel and power rates on citizens would be not only unjust but also risky. I firmly believe that the future of both the government and the country hinges on recognising the primacy of citizens and prioritising their wellbeing. Policies must give due consideration to their aspirations for sustainable, inclusive development.”

Published in Dawn, The Business and Finance Weekly, March 18th, 2024

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