EDITORIAL: Renowned economist, Dr Hafeez A Pasha, has told Business Recorder that the Special Investment Facilitation Council (SIFC) is qualified and empowered to take appropriate economic decisions. The SIFC was established on 20th June 2023 and was tasked to act as a single window to facilitate foreign and local investors, establish cooperation between all government departments (federal and provincial) and fast-track development, including privatisation – objectives that required representation from the senior-most members of the executive and civilian bureaucracy (federal and provincial) as well as the military.
There is absolutely no doubt that the SIFC representatives have very good intentions and are focused on decisions that would take the country out of the current economic quagmire that ranges from extremely disturbing macroeconomic indicators (particularly the almost exclusive reliance on borrowed funds to strengthen reserves that, in turn, provides some stability to the rupee-dollar parity, the trade deficit controlled by import restrictions rather than any significant rise in the total value of exports, the net inflow of foreign loans less than the outflow as foreign debt repayments are made, and last but not least the rising budget deficit due to the massive rise in government borrowing from the domestic commercial sector) to a continuing narrowing of the fiscal space of a household’s kitchen budget as inflation remains near 30 percent and unemployment continues to rise as the number of factory shutdowns rise. In other words, the quagmire is bottomless and a concerted effort is required to determine its depth before taking corrective measures.
Critics may be tempted to cite the proverb ‘the road to hell is paved with good intentions’; however, Business Recorder supports the mechanism that allows for seamless decision-making across provinces and throughout the country — decisions that are critical to turning the economy around, which, for the past 75 years of our history, were held hostage to (i) constitutional provisions including those that allow provinces the authority to tax farm income, etc.; (ii) political considerations determined by influential people or those that are favoured by the ruling party or parties, and (iii) a sustained lack of capacity by all successive economic team leaders to either think out of the box due to lack of academic credentials, or backing down due to fear of losing their job.
A source of concern with respect to SIFC was identified in the first review documents of the ongoing Stand-By Arrangement (SBA) documents uploaded on the IMF website on 19 January 2024 in which it was explicitly stated under the Staff Appraisal sub-head that “institutional reform is essential—including introducing sufficient governance measures for the newly-created Sovereign Wealth Fund and SIFC alongside business environment improvements and critical climate change adaption efforts.”
In the event that this concern is not dealt with appropriately there is the distinct possibility that this may become a prior condition for the release of the second tranche of the SBA or a prior condition for the next loan that is necessary to meet all external obligations by the end of the current fiscal year and thereby avert the threat of default.
Be that as it may, we do acknowledge the potential of the SIFC to deal effectively with all lacunae that stem from lack of policy implementation in the past — be they due to constitutional provisions or inability of members of the executive to take appropriate decisions due to political considerations as opposed to economic considerations.
Sadly, economic policies today, nearly seven months after the SIFC was established, continue to cater to political considerations evident from the rise in current expenditure by nearly 25 percent in the current year’s budget as opposed to the revised estimates of last year, heavier than ever reliance on domestic borrowing to fund this expenditure, one of the major causes of inflation today, and a tax structure heavily reliant on indirect taxes whose incidence on the poor is greater than on the rich.
To conclude, there is overwhelming evidence of good intentions of the SIFC representatives; however, while they are certainly poised to facilitate the implementation of policies yet the formulation of these policies must be undertaken by sector experts, with no conflict of interest, while macroeconomic policies require a team of independent economists, preferably well-respected academics based abroad who one would hope are less susceptible to influence, rather than placing total reliance on a Fund team that has shown poor design skills (given the support for the budget for the current year).
Copyright Business Recorder, 2024
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