At KLF, experts offer Pakistan solutions to its economic woes

KARACHI: Experts have called for consistency in policymaking, and prioritising development to ensure Pakistan gets rid of its economic woes during a session held on the second day of the 13th Karachi Literature Festival (KLF).

In the session titled ‘Pakistan’s Economic Journey: Expecting Miracles’, renowned economist Dr Kaiser Bengali, former finance minister Miftah Ismail, Chief Executive Officer (CEO) at InfraZamin Maheen Rehman, and former chairman of the Federal Board of Revenue (FBR) Syed Shabbar Zaidi discussed the reasons behind Pakistan’s consistent economic problems.

“I would like to state that Pakistan is a rich country, resource wise,” said Dr Bengali, as the session began. “We have the potential and ability to bring poverty and unemployment rate in single-digits, if we cannot completely eradicate it.”

Divided economic history

Dr Bengali, who has also held various roles with the government including being Balochistan’s representative at the 8th National Finance Commission, said Pakistan’s economic history can be divided into two phases.

“During 1947-77, Pakistan saw different types of governments. In the 1960s, the then-government had a capitalist mode of economic management. In the 1970s, the government featured a socialist mode of economic management.

Some of the biggest issue I have seen in the last 15-20 years in Pakistan is a lack of consistent policymaking. That is the one thing which stops the private sector from making significant investments beyond a three-year horizon: InfraZamin CEO Maheen Rehman

“However, the two governments have one common thread between them, and that was during their tenures, economic development was given priority, and during this time Pakistan developed economic assets.

“After 1977 Pakistan became a security state,” said Bengali, adding that priorities of the state changed at that time.

Dr Bengali stressed Pakistan’s development budget in the 1970s increased by 21% annually in real terms, however, in the 1980s the growth rate dropped to 2.4% annually.

“Meanwhile, in the 1970s defence expenditure growth was around 2% annually, which increased to 9% annual growth rate in the 1980s,” he said.

“We have not been able convert Pakistan back into a developing state, and this is the reason behind our decline.

“Technically speaking, Pakistan cannot pay back its loans. We only take loans to pay back previous loans, whereas none of the funds are utilised for a development project. However, I would like to reiterate that Pakistan has a strong economy, and if the state reverts its direction towards it was in the first 30 years of its independence, we can achieve economic growth.”

Finding a solution

As the discussion delved deeper into Pakistan’s economy, Maheen Rehman, who also served as CEO of Alfalah GHP previously, said the country needs to play to its strengths.

“Some of the biggest issue I have seen in the last 15-20 years in Pakistan is a lack of consistent policymaking,” Rehman shared. “That is the one thing which stops the private sector from making significant investments beyond a three-year horizon, and at present, most businesses are looking at 3-6 months rather than even a year.”

If there is one thing that the government should do, it is to provide quality education to every citizen so that they could compete internationally: Former finance minister Miftah Ismail

Rehman said that in the 1950s and 1960s emphasis was placed on planning.

“Where is the 10-, 15-year plan? she questioned. “This will give our businesses the visibility and the confidence that they plan on a longer-term horizon.”

She added that Pakistan has one of the youngest populations in the world, which can be used as a strength as they are natural adopters of digital technology.

“We have to make our labour force skilled, and that means investing in them as individuals through education and skill training.”

Stressing on the IT sector, Rehman said that recently, the government and other institutions have announced a number of incentives. “However, beyond the incentives, we need a long-term policy.”

Rising population growth

Meanwhile, talking about government’s role in economic development of the country, former finance minister and political economist Miftah Ismail expressed concern over the rising population growth in the country, which is increasing 2.4% annually and creating a stress on limited resources.

“If there is one thing that the government should do, it is to provide quality education to every citizen so that they could compete internationally,” said Ismail.

Shabbar Zaidi said Pakistan needs to ‘depoliticise’ its economic planning.

“Throughout our country’s history, there have been very few times when we have decided any economic or social policy based on indigenous thinking,” said Zaidi.

“The problem in Pakistan is that economic decisions are being made for political reasons.”

As the discussion became more intense, with a bit of back-and-forth between Dr Bengali and Zaidi on Pakistan’s economic viability, participants began to see the topic for what it is – there are no miracles with economic policymaking, except perseverance.

Bringing the discussion back to the mainstream topics, Ismail highlighted Pakistan’s export base is stagnating, while growth is fuelled based by imports.

“In the 1990s, Pakistan’s exports accounted for 0.18% of the global exports. Today, it is 0.12%, meaning we are stagnating. However, our country has the resources to achieve growth. “We need to focus on achieving sustainable growth that is inclusive.”

Highlighting ways to reduce the import burden, Rehman said that Pakistan should look for other alternatives as oil prices hit multi-year highs.

“This is the time to talk about solar, wind, hydro and other renewables, and see if we can replace some of our dependency on oil.

“We should focus on reducing our energy cost, improve labour productivity and push the private sector,” she said.

In concluding remarks, Dr Bengali said that the country faces two crises – a dollar gap and a rupee gap.

“A dollar gap means that imports are twice the size of our exports, which are stagnating. While rupee gap is that government’s expenditure is 2.5 times more than its revenue, and there is no room for increasing revenue as the economy is very weak,” he said.