Prime Minister Shahid Khaqan Abbasi constituted an Economic Advisory Council (EAC) on 27 March - exactly one month prior to the budget 2018-19 speech in the National Assembly scheduled for 27 April as per the Advisor to the Prime Minister on Finance, Revenue and Economic Affairs Miftah Ismail; and a mere two months and a few days before the end of the tenure of the PML-N government. In principle, the idea of setting up an EAC could be supported given the widening current account deficit that continues to be a source of serious concern even after the export incentive package and the levy of higher taxes on luxury imports late last year as well as two depreciations - in December of 5 percent and in March of 4.5 percent. Additionally, the foreign exchange reserves are shrinking at an alarming speed and at present are insufficient to cover three months of imports, the minimum reserves suggested by economists as well as multilaterals. Thus a bevy of qualified economists as well as other notables in related fields would, it can be argued, provide critical input into policymaking in general and into the ongoing budget exercise in particular.
The establishment of the EAC at this late stage would have been fully supported had the Prime Minister empowered it with some executive powers. At present, the EAC will, as its name suggests, be merely an advisory body and it is doubtful if the ongoing budget exercise spearheaded by the Ministry of Finance under the leadership of Miftah Ismail will have time to consider comprehensive suggestions at this late stage other than the imposition of one tax or another and some cosmetic changes here and there. Given that the PML-N tenure ends by end May taking on a few EAC suggestions on board would merely provide face saving for the EAC members.
Additionally, to enable the EAC to give sound advice with significant positive impact on key macroeconomic indicators would require the Ministry of Finance taking the EAC on board on a daily basis till the announcement of the budget - an exercise that one would assume would not be carried out on the grounds that the team engaged in budget formulation simply does not have the time. Besides, all members of the EAC have other engagements and a rather full itinerary and it is doubtful if individual members have the time even if the Ministry of Finance decides to take them fully on board.
Failing to extend any executive powers to the EAC, one would argue that the government should at least consider extending monitoring powers. This would be critical for two reasons. First and foremost, irrespective of what Ismail claims is a state of the economy that the government is comfortable with, a statement that economists dismiss as unrealistic and politically motivated, the areas of concern are widening with the International Monetary Fund (IMF) stating in its March report that external financing needs are expected to rise from 21.5 billion dollars in 2016/17 to 45 billion dollars in 2022/23. Secondly, Pakistan, currently on the grey list of the Financial Action Task Force (FATF) as stated by Ismail, would have to defend implementation of the recommended measures by June and in the event that it fails to convince FATF Pakistan could be placed on the black list. Thus the EAC could provide some continuity in terms of adjusting economic policy as and when required as well as defending the pace of implementation of agreed proposals with FATF after the government's tenure ends.
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