EDITORIAL: Prime Minister Shehbaz Sharif in his address to the fifth UN-sponsored conference (5-9 March) on Least Developed Countries (LDCs) pledged that Pakistan would implement the Doha Programme of Action maintaining that it is an opportunity to accelerate sustainable prosperity in the least developed economies.
While critics would no doubt draw comparisons with India, a country widely regarded as Pakistan’s nemesis, hosting the G-20 summit later this year as it holds its presidency from 1 December last year till 30 November 2023 and the recently concluded G-20 foreign ministers summit held in Delhi, yet one would hope that this would at last bring it home to all stakeholders in this country that the way to compete successfully is through economic development which would require abandoning the elite capture of the country’s resources and a concerted effort to formulate and implement economically viable decisions.
There is ample evidence to suggest that the three-time finance minister Ishaq Dar, the twice-appointed Miftah Ismail (albeit always as an interim to Dar), the twice-appointed Shaukat Tarin and Dr Hafeez Sheikh (both having served under the Zardari-led government as well as in the Imran Khan administration) have contributed to the current economic impasse and no one, not even the incumbent finance minister who enjoys unprecedented clout within his own party, have been willing or able to implement a series of critical reforms required urgently in all sectors that were agreed with lenders time and again but never implemented as they were held hostage to political considerations.
A look at United Nations Conference on Trade and Development (UNCTAD) website highlights the six challenges facing the LDCs all of which are applicable to this country. First, effective debt relief and its management has been a long-standing issue with administration after administration raising current expenditure that strengthens elite capture while slashing development expenditure that would prioritize infrastructure development (physical infrastructure which remains a major priority of administrations at the cost of social infrastructure - education, health – with long-term economic benefits).
In this context it is relevant to note that the present government is continuing to focus on procuring additional external loans (budgeted at 40 billion dollars for this year) as well as domestic loans to meet its rising current expenditure requirements.
Second, export diversification and sadly here too Pakistan continues to export its surplus rather than producing to export. This accounts for lack of diversification over the years coupled with exporters continuing to demand subsidies that the government can ill afford.
The 6 October 2022 inexplicable decision of Ishaq Dar to extend an electricity subsidy of 110 billion rupees to exporters while a sizeable portion of the 33 million flood-affected people required assistance had to be withdrawn as part of the IMF prior conditions.
Third, stronger productive capacities to make quality goods and services. Here too the research and development budget of the government as well as private sector is appallingly low and heavy reliance on import of machinery as well as raw materials and semi-finished products continues.
This reliance puts massive pressure on the balance of payments position which time and again compels the country to go on an IMF programme.
Fourth, to graduate from an LDC or in other words, to stop being an LDC. The policies of the past that are continuing into the present necessitate informed decision making by economic team leaders/sector experts and not members of the executive (which for example accounted for investment in coal plants that are globally opposed due to their negative climate implications and, to add to the folly, these plants were established away from the source of coal with health implications).
Fifth, increased investment capacity and today the state of the economy is so appalling that this objective is only rhetorically supported by the executive.
Pakistan’s foreign direct investment declined by 44 percent July-January 2022-23 against the comparable period of the year before and large scale manufacturing registered a negative 3.5 percent growth in July-December 2022 against the period of the year before as per data released by the Finance Division.
And finally, UNCTAD notes the need for a just, balanced and low-carbon transition – an objective that is not only achievable by domestic policies but by other countries.
As repeatedly stated by Pakistan after the devastating 2022 floods we contribute 0.8 percent of the global carbon footprint but are among the 10 most climate stressed countries of the world.
The current economic team leadership provides little comfort that things would change, that reforms would be implemented in letter and spirit and that the elite capture as an overarching expenditure priority will be abandoned.
Holding press conferences and blaming predecessors is not sending the right signal to the general public or the lenders for that matter.
Copyright Business Recorder, 2023
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