The country seems to be on the threshold of a cultural change with social activists, educationists, economists, progressive stakeholders, and policymakers actively exploring options for a challenging, long-term transformational change.

“Factors that appear highly significant within one set of circumstances may become relatively insignificant or absolute non-factors when the combination of variables is altered,” says a concerned citizen referring to social science-derived knowledge.

While struggling with the International Monetary Fund’s (IMF) structural reforms, the authorities have also taken initiatives to usher in some much-needed economic stability. No doubt, the breathing space has been provided by the IMF, other international lenders, and friendly regional countries.

The Business Confidence Index of the Overseas Chamber of Commerce and Industry (OICCI) shows some positive signs of economic recovery with a rise of -14 per cent in March-April 2024 compared to an earlier -18pc in the previous survey of October-November 2023.

Alterations sweep across development policies and financial planning as the nation braces for the upcoming budget amidst a brief economic respite

“This upward trend, albeit small, indicates a more optimistic business environment, supported by improving economic growth, a stable exchange rate, and declining inflation,” OICCI President Rehan Sheikh said in a recent statement.

Pakistan’s initiatives may be seen as a part of the Global South’s ‘reclaiming intellectual space’, as PHD scholar Shazia Anwar Cheema observes while referring to evolving platforms and events organised in the lesser developed world to initiate dialogue on international issues — Israel being politically isolated in the international arena by the Global South from pursuing its declared policy objectives in Gaza.

There is a growing realisation that Pakistan needs to shape its own future by identifying and utilising the opportunities opening up within the system. To quote educationist Tahir Ali, “Pakistan is a big market for big picture or vision books.” Meanwhile, Former Senior Advisor to the IMF Saeed Ahmed says Pakistan needs to get the Fund’s agreement to formulate home-grown economic policies

Islamabad has decided to prepare the new budget at an exchange rate of Rs295 to a dollar, instead of the IMF forecast of Rs328 to a greenback for the next fiscal year, according to a report in The Express Tribune.

In the past the IMF assumptions of the exchange rate have proven incorrect, say officials. For example, the IMF assessed the rupee-dollar parity this fiscal year at Rs300. And, while the rupee-dollar parity was set at Rs290 to a dollar for ongoing budget purposes, the average for the current fiscal year ended up at Rs285.

On another note, Mr Sharif has reportedly asked officials to renegotiate the IMF’s recommended increase of the salaried class tax burden.

Similarly, there is no move to revise the National Finance Commission (NFC) award to improve federal finances, as suggested by the Fund.

A critical aspect of negotiations with the IMF involves agreement on key assumptions related to the forecasts of the exchange rate, inflation, GDP growth, and balance-of-payments as fiscal planning and monetary policy decisions depend on these variables, says Saeed Ahmed. Previously, projections by State Bank economists, based on advanced forecasting models have proven more accurate than projections used by IMF teams, he adds.

Views of international lenders and Pakistan, however, coincide with Islamabad’s move to drastically reduce the federation’s provincial project funding.

The Annual Plan Coordinating Committee (APCC) recently reduced by 59pc the allocation for the social sector to Rs83 billion against this year’s Rs203bn to align them with the NFC award.

The allocation for Sustainable Development Goals — a parliamentarian’s privilege — has been completely abolished for the next year. The amount earmarked for this year was $61bn during the current year. APCC decisions are finally subject to the Cabinet’s approval.

The share of the provincial projects and programmes in the federal Public Sector Development Programme (PSDP) is currently around 33pc, though these fall under the jurisdiction of the sub-federations after the 18th Amendment. The provincial projects have thus been excluded by the APCC from the federal PSDP, except those related to the 20 least developed districts.

To reduce federal expenses, a committee, headed by the planning commission deputy chairman, had also recommended the abolishment of some government entities and the merger of others. Mr Sharif has directed the committee to finalise its report.

He has also ordered for the Public Works Department (PWD) to be liquidated, as the corrupt department has failed to achieve its objectives while seeking alternate mechanisms for the development projects handled by the PWD.

The PSDP size, as a share of GDP, shrank from 1.7pc in 2013 to 0.9pc in 2023-24. It is also decreasing in real terms due to inflation and rupee depreciation.

The Ministry of Planning laments that development projects and programmes are delayed beyond repeated annual deadlines, resulting in cost overruns and significant loss of opportunity cost.

There is also a big problem of governance, which is unlikely to improve without a genuine, representative, three-tier participatory government elected by and accountable to the voters.

Punjab’s local government has once again failed to recommend long-delayed amendments to the existing local government act within the stipulated time — within 15 days as of April 15 — assigned by Chief Minister Maryam Nawaz.

Furthermore, on June 5, the Islamabad High Court also sought a date from the authorities to hold local body elections in the federal capital within seven days.

A recent event organised by the Human Rights Commission and participated by some members from ruling parties also called for the abolition of bureaucratic control over local bodies. The required changes may be delayed for a while, but they are inescapable.

Published in Dawn, The Business and Finance Weekly, June 10th, 2024

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