EDITORIAL: Remittances hit a four-month-high, as per State Bank of Pakistan (SBP) website, of 3.05 billion dollars in October 2024 against 2.46 billion dollars in October 2023 and 2.86 billion dollars in September 2024.

While the incumbent economic team leaders - Minister of Finance and the Governor SBP - may take some credit for this uptick, yet two observations are critical.

First what is patently evident is that remittances began to rise only after Ishaq Dar’s economically flawed policy, with disastrous consequences, was abandoned after the staff-level agreement was reached with the International Monetary Fund (IMF) in June 2023: the policy of artificially keeping the external rupee value high at a time when foreign exchange reserves were too low to allow for market intervention.

The net negative effect on remittance inflows in fiscal year 2023-24 compared to the year before was 4 billion dollars.

And secondly, after the passage of the SBP Act in January 2022 that granted autonomy to the apex bank a finance minister did not have the legal authority to compel the SBP Governor to support such an inane policy especially as it was violative of the then IMF lending.

However, Jameel Ahmed reportedly appointed at Dar’s insistence in 2022 followed his dictates and therefore there is a need to acknowledge that without his overt support Dar would not have been able to put a cap on the rupee-dollar parity.

One can only hope that critical lessons are learned from these observations and key appointments are made not only on the basis of an evaluation of past performance, if a repeat incumbent is in place, but also in terms of each institutional head adhering to his or her institution’s core functions before delving in other matters where expertise is not available in-house.

Another lesson that is crying to be learned in this country’s governance structures is that implementation in letter and spirit is critical for healthy management of key institutions as well as ministries.

The decision to have an electricity market that would allow bulk purchase from any supply source was taken in 2014 and to this day remains unimplemented. Last week the Cabinet approved splitting the National Transmission and Despatch Company (NTDC), itself created after Wapda (Water and Power Development Authority) was unbundled in 1998, into two – National Grid Company Projects and National Grid Company Assets.

Global as well as local experience suggests that whatever the electricity model used, fine-tuning would be required for over two to three years to ensure that objectives are met. Additionally, in Pakistan the age-old mantra that privatisation is the only way forward is not strengthened by in-depth evaluations of past privatisations but by a mindset that takes no account of evaluation studies of previous privatisations internationally or indeed bother to initiate an evaluation of a privatised local entity.

An example is the privatisation of K-Electric more than 20 years ago that is budgeted to receive a 171 billion rupee tariff equalization subsidy and is the recipient of supply from the national grid.

Today the focus is on luring foreign direct investment, a salutary objective, which is supported by economists. However, to date the inflows are under a billion dollars a year, an abysmally small amount, though the value of the Memoranda of Understanding signed since the establishment of the Special Investment Facilitation Council (SIFC) in June last year, has risen to around 25 billion dollars and rising.

There is no doubt that in a country where terror attacks are not abating, the SIFC presenting a joint civilian and military platform to foreign investors was the need of the hour and therefore must be appreciated. But this august body must not extend special monetary or fiscal incentives to foreign investors as that would act as deterrent to local investors who must remain as a prime mover of local investment.

There is a need to desist from extending incentives to specific foreign investors and to do so unilaterally. In this context while one can appreciate the government’s decision to facilitate visa for foreigners, yet there is no element of reciprocity even with the three friendly countries.

While there is salutary engagement in ending terror attacks, irrespective of their source, yet with the number of attacks rising perhaps an amended more holistic approach may be considered.

To conclude, there is a need to appoint the right people for the right job and to make it mandatory for ministries/institutions to focus on their core functions. Rehiring those who clearly did not succeed in the past is not a policy that can be supported, given the state of the economy as well as sectoral achievements today.

Copyright Business Recorder, 2024