EDITORIAL: Federal Finance Minister Muhammad Aurangzeb while talking to the Dutch Ambassador reiterated the government’s resolve to move the economy on a path of sustained and export-led growth.
This reiteration is not limited to the time he took oath as the country’s finance minister on 11 March 2024 but dates all the way back to more than three decades ago – a stance that civilian and military administrations supported through monetary and fiscal incentives, which are being legitimately challenged by the International Monetary Fund (IMF) in the twenty-fourth programme to Pakistan whereby cheap credit or utility tariffs or tax incentives to exporters, a wealthy group, is no longer tenable.
Additionally, with poverty rates as high as 41 percent in Pakistan, elite capture of our budgeted expenditure or resources is likely to generate socio-economic unrest and hence must be avoided at all costs.
That exports are a desired form of foreign exchange earnings, as are remittances, is a fact. One would however hope that Aurangzeb is cognizant of the fact that our remittance inflows have surpassed export earnings in the first four months of the current year – 11.848 billion dollars against 10.508 billion dollars. Empirical data suggests that any decline in remittances and exports is due to flawed government policy.
In 2022–23 remittances plunged by 4 billion dollars because of the economically insane policy to control the rupee-dollar parity that led to multiple exchange rates which, in turn, made the illegal hundi/hawala system attractive to the remitters once again after its cessation during the Covid-19 epidemic.
And the argument that withdrawal of incentives for exporters may be the root-cause behind the decline in exports in recent years; however, this does not detract from the charge that flawed government policies account for lack of export competitiveness and diversification as existing exporters continue to focus on traditional mainly low value-adding consumer items, exporters use their considerable political influence to procure incentives (with a failure to get incentives leading to a decline in exports), lack of research and development that accounts for a steady decline in volume of exports (though their value may rise if there is a global rise in prices due to a supply shortage), and high import duties on raw materials act as export disincentives.
While it is obvious that the ongoing IMF programme is critical to ensure that the possibility of default is averted yet calls for restoring previous incentives, in part or in full, by the exporters continue to this day.
The Ministry of Commerce is in the forefront of such demands, which are being resisted by the Ministry of Finance that is taking the lead in negotiating with the Fund.
What is, however, baffling is the failure of the government to understand that the fast evolving global communication technology is providing valuable export revenue to not only firms but also individuals and the ongoing attempt to stop its usage, by labelling it digital terrorism, is compelling the government to incur higher debt with obvious negative repercussions on the quality of life of the general public.
There is no doubt that other countries are also grappling with the menace of fake news in the digital realm; however, the way to effectively tackling it is not to take measures that would cripple a fast-growing export earning sector. A cost-benefit analysis is required to determine the best way forward, instead of taking a simplistic, albeit disastrous, approach to shut it off as was the case previously when foreign reporters could be made persona non grata, and television channels shut down.
There is, therefore, a need to formulate policies after taking account of the advances in technology, an approach that is critical to achieving economic stability, rather than in dealing with the situation based on a defunct technology.
Copyright Business Recorder, 2024