Economic sovereignty cannot be safely pursued without a strong and stable economy which is free from the burden of excessive external debt and heavy dependence on foreign assistance. USSR (formerly Russia) loosening economy led to its disintegration. The US is losing the effectiveness of its foreign policy because of rising external indebtedness. China strengthened economy and is pursuing an assertively independent foreign policy to build its defence capability. India is emerging as a regional power only after it achieved a measure of economic stability and strength. Greece was bankrupted because foreign creditors continued to lend despite clear indications for over a decade of its growing debt unsustainability.
In Pakistan, the economy is not strong as in China and India. There is need for foreign policy independence and strong defence. Boosting the economy is necessary, although not adequate condition for an independent foreign policy and strong defence.
The government budget is experiencing a huge deficit and is largely dependent on financial support from the International Monetary Fund (IMF). The public sector has accumulated a large debt. The country’s saving rate is the lowest in the region and the government relies on printing notes to meet its expenditure.
The country is not self-sufficient even in food items. Pakistan cannot produce enough electricity to meet national requirements and have failed to explore oil and mineral resources. The country’s balance of payment is untenable. Pakistan import more than export and finance excess imports through foreign remittances and net external borrowings. Foreign remittances, in turn, depend on employment opportunities made available by the western countries and the Middle East for the Pakistani labour force. Independent foreign policy is not possible without a priority, which it is not.
A valid question is how to fix the economy. Without going into the history of poor economic management, and without using economic magic, let us say in simple terms what we need to do as a nation and as a government to strengthen the economy. For this purpose sincere and dedicated political leaders must be elected. The economy cannot be fixed by a corrupt and incompetent leadership.
We hope soon of a quick turnaround of the economy. We should begin to produce more than we consume and increase the national saving rate and exports to lay the foundations of a strong economy. The growth strategy should be such that it channels savings to areas of investment that increase production of essential consumer and capital goods.
We should give priority to import of machinery and raw materials over luxury consumer goods so as to promote agricultural production and small scale labor-intensive industries. We should devise policies to have equitable sharing of the fruits of development by all segments of society and all areas of the country.
The government should learn to live within its means both through austerity and efficiency in expenditure and better mobilization of real resources based on a broad-based but fair tax system. Our fiscal, monetary and exchange rate policies should be modernized to promote savings and exports and discourage consumption and imports. Measures also need to be taken to destroy the underground economy which promotes discernible consumption and concentration of income and wealth based on illegal activities. In this context good governance is essential for an economic reform.
There should be an independent foreign policy and have a deterrent defence capability. In its absence, we will continue to face economic decline and further weakening of our defence and foreign policy posture. The weakening of Pakistan’s economy which is on account of heavy dependence on external financing of domestic and foreign deficits require only a tightening of financial variables to bring Pakistan to its knees. Failure to take remedial structural measures will lead Pakistan down the pit that Greece landed itself in. It is necessary that the dependence on foreign financing be reduced.
Pakistan has continued to receive ‘praise’ for its economic management and uninterrupted donor financing, despite repeated failure to meet IMF’s conditionality’s receiving waivers all along. Whatever may be the criticism recent Pakistan`s upward economic path has been acknowledged globally with leading international institutes foreseeing the country among the top twenty economic powers by 2030. Economic sovereignty is the final goal for which all institutions are putting forth optimum efforts.