Country’s economy being at its lowest ebb needed to be reformed on immediate basis. Growing fiscal and trade deficit along with fast dwindling foreign exchange reserves have made it impossible for the incoming government to achieve almost all macro economic targets set in last budget unless steps are taken on war footings to revamp the economy.
Government need to set up reform agenda for bringing in fiscal discipline, by broadening tax net, making public sector spending pro poor and growth-oriented, drastic cut in expenditure of all tiers of government and public sector organizations, adopting liberal investment policy for attracting both foreign and indigenous investments. Further instead of going to IMF the financial assistance offered by governments of China, Qatar, Turkey and Saudi Arabia government ‘s offer for defer payment facility for import of oil can be accepted and most importantly policy of austerity and self-reliance must be adopted for all sectors of economy.
Further Pakistan’s placement in grey list by Financial Action Task Force (FATF) has damaged the country’s overall image besides adversely impacting external economy and making its risk profile worse. As such efforts are needed to remedy the situation through strategies suggested by FATF on immediate basis so that confidence of nations trading with Pakistan is restored and transparency and integrity of Pakistani banks branches operating outside Pakistan is regained.
In order to refurbish forex reserves exporters both of industrial and agriculture sectors and also service industry must be provided easy business doing environment enabling them to enhance production of quality exportable items and widen the horizon of destined buyer countries. Continuous increase in import of capital goods and investment in CPEC projects has worsened the trade deficit position. Keeping in view dire need for the growth of industrial sector and overall economy of the country out flow of foreign exchange at this count is unavoidable, therefore In order to rectify trade deficit imports of luxury and reconditioned cars causing sizeable surge in oil import bill should be completely banned. Further use of big cars exceeding 1300 cc should be stopped by law till economy picks up. In order to combat growing pollution due to substantial increase in the number of vehicles plying on roads all over the country use of bicycles should be encouraged for youngsters at least in educational institutions.
Overseas Pakistanis remittances form a sizeable chunk of forex reserves as such all incentives should be provided to migrants for remitting their funds through banking channels in their family members’ accounts. Recent instructions to banks for surveillance of non filers accounts will discourage overseas Pakistanis remittances. It is very much possible that large number of families of overseas Pakistanis are outside tax net or are non filers. As such accounts wherein remittances are received through banking channels should be exempted from charging withholding tax at higher rate.
For achieving macro-economic stability through balanced growth rate reforms and restructuring process need to be undertaken in all sectors of economy, being the imperative need for generating employment opportunities, reducing intensity of poverty and reducing fiscal and trade deficits. As envisaged by newly established government all loss incurring public sector entities must be restructured ensuring austerity in their operational expenses and thereafter be privatized at the earliest to lessen fiscal deficit. Restructuring and privatization of leading financial institutions during first decade of current century greatly improved the operational efficiency of these banks particularly through creation of Industrial Restructuring Corporation, which acquired huge quantum of non performing loans from these banks for onward passing on the related liability and assets to third parties (in way outsourcing the process) for ultimate recovery from borrowers. Besides that after privatization intermediation cost was also reduced drastically.
State Bank of Pakistan (SBP) being an autonomous body must be totally free to formulate monetary policy best suited to control inflation and rising prices by striking a balance between measures to reduce inflation and steps needed to achieve targeted economic growth rate.
Recent efforts to make institutional credit available to medium and small enterprises through specialized institutions like Microfinance banks and SME Bank which are now providing digitalized/ online service in this respect are credible. However procedure to open account and for obtaining loans must be made cost effective for the major chunk of clients who do not have access to Internet service.
Immediate target towards reforming economy of the country must be to achieve fiscal discipline. In view of mounting debt GDP ratio and critical status of both internal and external economy country is very likely be entangled in another debt trap. Reform related policy in this context should ensure debt sustainability over the medium term rather than concentrating on reducing fiscal deficit through temporary measures like floating tax amnesty schemes and unjustified increase in tariffs bringing additional burden to both consumers and business community. Newly sworn government, which aims at bringing justice to both economic and social sector of the country must not rely on steps like collecting revenue through tax amnesty schemes as in a way it provides protection to corrupt segment of population.
No doubt at this initial stage of new federal government it is not possible to manage the economy without external borrowings, but it is essential that external borrowings are utilized for development of all government’s infrastructure projects prudently with the sole aim of making watch project viable enough to service portion of its debt from its own generated funds and for accelerating overall economic growth rate to achieve budget surplus.
Apart from enhancing economic growth rate, direct poverty eradication measures are need to be undertaken. No doubt expansion of Microfinance banks operation in the country and liberal financing being made available to small and medium size industries by conventional commercial banks has given boost to micro businesses and SME sector, which if provided relief with regard to taxation and tariff rates and congenial business doing secured environment with necessary infrastructure particularly regular delivery of utility services can generate largest number of employment and self employment opportunities for country’s youth.
Pakistan’s economy reflects severe social and economic imbalances particularly between urban formal and informal rural sectors. Poverty and unemployment levels are much higher in rural areas. Hence lack of employment opportunities make household income shared among family members thus raising poverty level. Merely providing social safety nets and to install low cost social services for the poor is not a sustained approach towards alleviation of poverty of such magnitude, which country is experiencing. Focus should be on development of human capital through formal and informal employment and rapid development of infrastructure and making informal sector exposure to new technologies for enhancing overall economic growth rate of the country.
Pakistan’s overall poor performance with regard to education and health care has further aggravated the poverty status. Country has failed to achieve even basic stage of MDG relating to providing primary education to all. Education sector reforms must aim for providing quality education to all by restructuring all public sector schools through improvement in curriculum and teaching staff. Training of teacher must be made a compulsory and continuous process.
Emphasis should be on higher and technical education. Students seeking admission for science faculty must be provided guidance to go for subjects like mathematics and physics, knowledge of which forms the integral part of all sort of advanced science and business education and above all it is key to achieve Sustainable Developmental Goal (SDGs) set out for education.
Improvement in education and health sector need to be evaluated on the basis of its impact on development of human capital, which is an imperative need for achieving sustained high economic growth rate.
Social sector reforms in education and health must aim at formulating policies to produce highly skilled and energetic work force, capable of making use of new technologies.
Spending on health sector no doubt has been enhanced, still majority of areas in the country do not have access to health facilities. Despite significant increase in the number of doctors and paramedical staff hospitals and dispensaries in rural areas are under staffed and also do not have necessary equipment and apparatus. Due to lack of supervision and monitoring at all levels funds allocated for health sector are widely misused. Hence reform agenda for health sector in particular must be directed towards improving delivery of services.
Restructuring and capacity building of institutions and improving governance at all levels should be integral part of reforming the socio economic status of the country. Structural change is always an unfinished task and efforts required in this regard is of constant adaptation to changes which are outcome of reforms program.