ISLAMABAD, Nov 15: A former governor of the State Bank has suggested that the next government should have to take some tough but inevitable decisions to reform the country’s economy.
Speaking at the concluding session of annual general conference of Pakistan Institute of Development Economics (PIDE), Dr Ishrat Husain stated that “the incoming government and the visionary leadership if it emerges as a result of the elections have to capitalise on the honeymoon period to shift the direction of economic policies and governance and establish credibility.”
“Unless this directional shift takes place the prospects for inclusive rapid economic growth do not look very promising,” Husain warned.
He identified four broad underlying trends pointing out that sustained economic development does not take place in absence of political stability.
Secondly, he said, the popular mindset in Pakistan has become highly suspicious of private enterprise and markets.
Executive branch, judiciary, parliamentary committees, accountability bureaus and the media have all created an atmosphere in which it has become difficult to make large investments and earn decent returns, he said.
The battle lines between those who wish Pakistan to become a part of global system and those want the country to withdraw, isolate and disengage itself from the international arena are being drawn sharply.
Finally, Pakistan has not faced a major abrupt and sharp downfall in its economic fortunes. Only twice in its history it has recorded a negative growth rate, the former SBP governor said.
According to Dr Ishrat with the exception of few occasions, there has never been a broad based ownership of the reforms nor has the reform package been designed and formulated by the economic managers of the country and this lack of domestic ownership translated into highly fragile implementation of reforms.
Another factor impeding the progress on reform process has been the reversal, discontinuity, uneven and lacklustre implementation record. Each set of reforms has winners and losers; the losers from reforms are identifiable, immediate and cohesive and the capacity issue of implementing the reforms. The informal asymmetric power relations within the bureaucracy also create an incentive for poor governance.
The next factor pertains to the structure of political institutions, patterns of leadership including type of regime and the dynamics within the political parties including their support bases.
Economic reforms imply important shifts in the balance of political powers among contending interests and the prevalent social and cultural norms in Pakistani society also pose a powerful deterring force to reforms particularly in the area of economic governance, he said.
Dr Husain, in his lecture, focused on the track record of reforms adopted by the subsequent governments since 1960s, and explained that the nature of reforms that Pakistan should embark upon consists of stabilisation and long-term structural reforms.
Summing up the session, Deputy Chairman of Planning Commission Nadeem-ul Haque emphasised on the growth. He said it was the most important thing to look for instead of worrying about declining tax-GDP-ratio.
He also stressed the importance of such research questions as do we need private investors or entrepreneurs. He further said that we need to focus on the soft issues rather than working on the hard issues.