As a new elected government is about to come into office, there is talk of who should be the finance minister. Notwithstanding the choice, what is important is the objective at hand, which is to approach a green, sustainable, inclusive economic growth, that allows approaching a climate- and ‘Pandemicene’ resilient economy, while reducing inflation, decreasing debt distress, and in lowering inequality, and poverty levels significantly.

Moreover, if history is any guide both domestically and in the international context overall, the underlying economic philosophical underpinnings should be to move away from the otherwise virtually consistent practice of following neoliberal, austerity-based, pro-cyclical economic policy and towards social democratic – a healthy basis or ‘middle way’ as the Scandinavian countries otherwise call it between capitalism, and socialism, or between ‘market fundamentalism’ and state capitalism – non-austerity-based counter-cyclical policy.

In addition, to make this needed shift while being in an International Monetary Fund (IMF) programme through bringing to negotiating table – for the likely extended fund facility (EFF) programme, that needs to be negotiated after the current standby arrangement (SBA) is scheduled to end in March – extensive non-neoliberal economic reform package, which includes cautious privatization, and liberalization, considerably enhancing tax base while curtailing indirect taxation, and shifting subsidy focus from high to lower income groups, and that allows following non-austerity policies for squeezing cost-push inflationary channel, and unclogging supply chain, which together with productivity, and inclusivity enhancing non-neoliberal economic reforms, would likely result in positive impacts for increasing efficiency of expenditures, protecting development, stimulus, social, and resilience-related spending, enhance domestic production, exports, employment, economic growth, while reducing inflation, twin deficits, and debt distress.

The enormity of challenge at hand – from the fast-unfolding existential threats of climate change, and ‘Pandemicene’ phenomenon, to avoiding the threat of sovereign default, along with reducing cost of living and of doing business, while also reducing significant levels of inequality, and poverty –calls for rethinking the role of finance minister, and the likely need of creating an economic ministry, with a position of economic minister – along with corresponding economic departments, and economic ministers at the provincial levels, respectively.

While the above should be considered for countries in general, both in global North, and South – in the particular case of Pakistan, there is also a need to relocate the functions of ministries of planning and development, and that of economic affairs to the ministry of finance, and more broadly to other economic ministries, including certain aspects to the proposed office of economic minister.

The underlying reason for relocation of the functions of these ministries is to bring in functions of ‘specialization’ and ‘localization’ on one hand, and ‘harmonization’ and ‘alignment’ on the other. Hence, under the first aspect — localization, and specialization – instead of ministry of planning, monitoring development projects/programmes, and duplicating with regard to sectoral projects, respective ministries should do these functions to bring in the advantages of second aspect — harmonization and alignment — within their focused area of domain; for instance, at the federal level energy, and petroleum ministries, and education, and health ministries at the provincial levels, planning and implementing their own projects, while allowance of such projects, and overall country level economic planning and targets — including that of economic growth and regarding macroeconomic stability – done by the ministry of economy after taking input on availability of finances, and financial viability from the ministry of finance.

This would mean doing away with the ministry of planning at the federal level, and planning departments at the provincial levels, while such functions taken on by individual ministries in terms of planning and monitoring execution, while economic ministry passing these projects after receiving financial viability input on these projects from the ministry of finance on one hand and, on the other hand, doing national level planning, and coordination with finance ministry, and finance departments, and the State Bank of Pakistan. Given this over-arching role, instead of minister of finance, minister of economy should then be heading the Economic Coordination Committee (ECC), that is, when the Prime Minister is not heading the ECC.

The other ministry which should be done away with is the economic affairs ministry, whereby its two functions of negotiating foreign economic assistance, and external debt should be placed under the purview of the ministry of finance, once again to achieve the functions of localization, and harmonization more optimally.

This is because ministry of finance is mainly responsible for raising finances; so in addition to domestic finances, external finances, and managing related debt obligations should be its responsibility. Its current function regarding expenditure allocations to line ministries and the same function in the case of provincial finance department doing for other line ministries should be the prerogative of the ministry of economy.

This is because it is the custodian of the overall national- economic plan and economic targets, and therefore should make expenditure decisions, including giving go-ahead to projects/programmes and spending made under them, while the ministry of finance should only coordinate towards fluent releases of funds as per the expenditure decisions of the ministry of economy.

Then, given the country is a federation, and therefore the underlying quite significant extent of provincial autonomy, especially after significant devolution of constitutional subjects, and resources through the 18th Constitutional Amendment, and the 7th National Finance Commission (NFC) award, the platform of Council of Common Interests (CCI) needs to evoked more regularly, while the office of economic minister at the federal level should harmonize national level economic effort with provinces by creating a formal platform to interact with provincial economic ministers on creating better economic consensus on economic- issues and targets, especially those entailing to (but not limited to) managing the twin deficits, enhancing tax base, bringing allocative and productive expenditure efficiency, targeting subsidies towards lower income groups and in enhancing competitiveness, reducing inflation, rationalizing debt, and reaching green and approaching green, inclusive sustainable economic growth of a consequentially meaningful level.

Such reform of economic institutions, mainly the economy related ministries, including creating an over-arching, consolidating economic ministry, is needed given the economic challenge at hand, where an expanded view of economy is needed to properly navigate it through existential threats, and managing issues of inflation, debt, inequality and poverty.

Therefore, a ‘new normal’ economic paradigm – a term coined during the heydays of the pandemic – calls for taking a multi-disciplinary approach to economic policy, and primarily including both environmental, and epidemiology concerns while making economic policy.

Moreover, there is a need to reform the ‘players of the game’ if institutions are seen as providing the environment in the shape of setting the ‘rules of the game’ where the bureaucracy serving in these ministries needs to be employed in terms of the technical capabilities of those officers.

So an economic minister should prepare legislation for possible passage reform of the public service, whereby two streams of public servants are introduced – one to deal with law and order, and the other to serve at economic policy formulation and implementation roles - and with the principle of coordination practiced between the two streams; where actions require overlapping of functions.

The other coordination function that is needed is with the State Bank of Pakistan (SBP), whereby instead of ministry of finance, an over-arching economic ministry is represented on the monetary and fiscal coordination board so that aspirations of an ‘elected’ minster of economy are better internalized into the monetary functions of SBP, especially in matters of monetary policy.

Copyright Business Recorder, 2024