ISLAMABAD: The Economic Advisory Group (EAG) has called for necessary reforms to transform Pakistan into a globally competitive economy. In a statement issued here on Friday, the EAG expressed hope that “the policymakers will undertake drastic reforms to boost the country’s economy, and will learn from these difficult times.”

“If Pakistan is to honour its external debt at a time when international financial markets are not willing to lend, then policymakers must let the exchange rate adjust and actively take measures that will reduce consumption and generate required savings to service the external debt. This process will involve considerable economic pain, and will result in low economic growth for the foreseeable future.

“Alternatively, the policymakers can choose to approach creditors and initiate a debt restructuring process. This will again come at the expense of meeting additional conditionalities agreed with the creditors, who will bear the cost of restructuring.

“None of these options are without economic pain, but a well-managed restructuring process can allow the economy to recover sooner than later,” the statement read.

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The EAG also suggested that there should a continuity of policies to restore the confidence of investors, local and foreign. “A policy paralysis, on the other hand, can have dire consequences,” the EAG observed.

“Unfortunately, interest groups in Pakistan have continued to capitalise on earlier crises to further their vested interest at the expense of the nation.

“The Pakistan Business Council has also historically lobbied for import of substitute policies, even when sectors benefiting from such policies have failed to compete internationally despite decades of protection.

“East Asian economies that had adopted similar policies during the 50s and the 60s were quick to appreciate the limitations of import substitution and changed direction. They opened up their economies and minimised, if not entirely eliminated, protection of domestic businesses from international competition.

“This is best appreciated by noting that the imports and exports to GDP ratio for the East Asia & Pacific region increased from 10% in the early 70s to 35%”, the statement read.