EDITORIAL: Following the approval of the IMF’s $7 billion Extended Fund Facility for Pakistan, Finance Minister Mohammad Aurangzeb has been at pains to point out the urgency of implementing structural reforms to reshape the country’s “economic DNA” so that this proves to be our last call for assistance to the international lending body.
As he has very rightly pointed out, “bringing structural reforms is not just an IMF requirement, but Pakistan needs them”.
Years of mismanagement, fiscal indiscipline, political instability, corruption and kowtowing to vested interests of the privileged few have left Pakistan grappling with a bloated public sector, a crippling debt burden, floundering human development indicators and an environment that stifles growth and discourages investment.
The finance minister’s call for reforms has been further augmented by the IMF’s resident representative in the country, who in a recent article in a national daily underscored the urgent need for Pakistan to transform its development model, which is dominated by state intervention.
This has allowed a rather virulent form of elite capture to take hold, where protectionist policies and preferential treatment via subsidies and tax concessions are enjoyed by a select few, while the majority bears the brunt of an unsustainable economic burden, making the country increasingly vulnerable to internal and external shocks, especially environmental disasters that have wreaked tremendous havoc on communities and infrastructure worth billions of rupees and have cost thousands of lives.
Apart from the very obvious shortcomings that mar our taxation framework, a core ill afflicting the economy is that of the perennial upward trajectory of our current expenditure levels.
A culture of profligacy pervades the public sector, where substantial sums are spent on unproductive avenues, and government departments routinely overrun their budgets by incurring entirely avoidable expenditures.
Moreover, there is significant duplication of resources, as many federal and provincial departments and ministries, designated to perform similar functions, continue to coexist.
Despite the 18th Amendment devolving numerous responsibilities and subjects to the provinces, many federal ministries and departments remain in operation, rendering them redundant and contributing to considerable inefficiency.
The disturbing element here is that even with the increased realisation among the upper echelons regarding what ails the economy, and the prescriptions provided by international lenders, there is still plenty of foot-dragging and lack of political will to structurally overhaul the economy.
One example of this phenomenon relates to the decision taken by the federal cabinet back in August to abolish 60 percent of vacant posts – around 150,000 positions – in various ministries, divisions and departments as part of the government’s rightsizing programme.
More than a month later, the pace of work on this critical matter has been painfully slow, with only 15 ministries out of 40 having made any progress by abolishing around 4,000 vacant posts.
The dithering here is unsurprising as Pakistani bureaucracy isn’t exactly known for its agility, ingenuity or for taking measures that it feels may hurt its interests, with there being considerable resistance towards making the government leaner and more efficient, even as the finance minister implores the adoption of reforms that aim for that very outcome.
The fact of the matter is that an inefficient public sector, and policies pertaining to taxation, investment and other areas that favour the elite are the core reasons behind our consistent economic decline.
If policymakers are serious about raising the living standard of the average Pakistani and building economic resilience to withstand pressures posed by, among other challenges, climate catastrophes, there is no alternative but to fundamentally transform how the economy functions by cutting down on exorbitant public spending, improving tax fairness, and advancing social welfare and human development programmes.
Only through decisive action in these areas can Pakistan hope to create a sustainable future for all its citizens.
Copyright Business Recorder, 2024