The Advisor to Prime Minister on Finance, Shaukat Tareen seems to be quite confident in addressing the urgent issues of the economy. In a news conference in Washington after attending the annual meetings of the World Bank and the IMF, he ruled out the possibility of the country defaulting on its international payment commitments and voiced his optimism to bridge the financing gap of three to four billion dollars during the year through a range of measures, including additional resources from international financial institutions.
While Pakistan was expecting 2 to 2.5 billion dollars additional support from the IFIs, including World Bank, Asian Development Bank and Islamic Development Bank, to overcome the financing gap, the country could get additional 1.5 to 2.0 billion dollars more in foreign remittances if they are channelled through government sovereign banks. The government would also welcome assistance from Friends of Pakistan meeting next month in Abu Dhabi.
The country has, therefore, enough resources for an orderly move forward and the Sukuk (bonds) maturity in January will be met in a very timely manner. "We are making multiple arrangements and also have back-up plans," Tareen reassured the audience. When asked about the western media reports that Pakistan was on the brink of bankruptcy, he rejected such speculations categorically, saying "over my dead body".
The Advisor on Finance looked equally firm about implementing certain policies which were in the larger economic interest of the country. He pledged to bring all sectors, including agriculture and real estate, under the tax net to strengthen the economy and declared that "there will be no sacred cows". Tax to GDP ratio will be enhanced from the present 10.5 percent, expenditures will be cut and fiscal deficit would be drastically reduced from last year's ratio of 7.4 percent.
The government is also trying to correct imbalances in macroeconomic indicators and working on eight or nine initiatives to move the country forward including safety net for the poor, skilled-based training, health insurance, promotion of agriculture to eliminate food shortages, integrated energy policy and enhancing competitiveness of trading and manufacturing sectors.
We feel that Shaukat Tareen has advocated Pakistan's case before the international community in an impressive manner during his visit to Washington. From the reports filtering from different sources, it seems that he has been quite successful in assuring the chiefs of the IFIs and other donors that Pakistan is fully prepared to follow sound macroeconomic policies and hence need exceptional assistance in an abnormal period to tide over the situation. The extraordinary confidence exuded by him since assuming office at a difficult time, in our view, has helped the matters.
Obviously, if he had not played his role to perfection, other stakeholders would have become jittery by now which would have made the task of stabilisation of the economy much harder. However, it needs to be pointed out that the ground prepared by him needs to be fertilised properly and his promises in Washington need to be met meticulously. Economic managers of the government have to further negotiate with the IFIs and other donors to devise acceptable policy parameters for stabilising the economy in order to obtain their assistance and seal of approval for the satisfaction of private investors.
Pakistan may have also to demonstrate that it would achieve a sustainable position in the external sector in the near future. On the domestic front, it would be extremely hard to sell the idea of taxing agriculture sector and treat the sacred cows like ordinary cows. Lobbies of agriculture and sacred cows are so strong that Tareen would need full political backing to pursue a just cause.
Only time would tell if the present Advisor on Finance would succeed where his predecessors had failed. Needless to say, his high hopes also rest on the assumption that security and law and order situation in Pakistan would improve and normalcy would return to the country in the coming months. There are of course many odds but a certain measure of optimism as shown by Tareen always helps to get out of a very tough situation.