This is in response to Dr. Ishrat Husain’s April 15 post, “SIR – Save, Implement, and Review.” Pakistan’s economic issues are well-known, and solving them isn’t difficult. Rebooting the economy necessitates the deployment of unpopular policies that may not be warmly received by the general public. Can a coalition of political parties that used to rail against the previous government’s price hikes muster the political courage to take unpopular but necessary steps? To close the trade gap and minimise the current account deficit, import substitution must be a foundation of our economic policy. Due to capacity limits in the agriculture and manufacturing sectors, a significant growth in exports is not possible. Our exports contain a large percentage of imported goods and barely cover 40% of the total import expenditure.
The reopening of the IMF programme, which had been stopped, is anticipated to bring onerous economic terms. There is currently only one option: to endure even more economic difficulties. The government’s priority should be economic growth, not political expediency. The IMF will resume its lending programme, preferably sooner rather than later, albeit we will have to swallow a number of unpleasant pills — some now, some after the next budget — as the new finance minister, Miftah Ismail, stated in his news conference. The IMF’s lead will be followed by other multilateral lending institutions.
Mr Ismail has already travelled to Washington to’renegotiate’ the deal and secure the approximately $1 billion in funding that has been delayed. Bilateral lenders are also anticipated to renew their loans and’safe’ deposits with the State Bank. Before the next budget, many of our issues will be resolved by others. The question is whether the ruling class has what it takes to put a stop to our cyclical “boom-and-bust” cycles and set the economy on a long-term growth path that will alleviate poverty and create jobs. It is unreasonable to expect the incumbent coalition leaders to make difficult decisions. Despite Mr Ismail’s claims that the measure was “absolutely ill-advised and irrational,” they have refrained from reversing the unsustainable freeze declared by the PTI administration on energy prices.
The IMF also wants this cap lifted because the subsidy is causing the budget crisis to worsen. It indicates that, in the months ahead, the coalition would likely focus on firefighting and resolving short-term issues before handing over the reins to a caretaker administration to supervise the next elections.
Nobody wants to jeopardise their electoral chances at a time when the new opposition is pressuring the government to hold elections immediately. Unfortunately, Pakistan’s political parties have a track record of failing to implement long-term governance and economic reforms. If the past administration’s economic experiments have taught us anything, it is that hasty fixes are ineffective. Tough decisions will have to be taken if the economy is to be rescued from its current state of low growth.
Despite the fact that the coalition administration is working under a tight deadline, it is just enough to set the economy on a long-term path. Inaction, even if just for a short period, is not an option for the current administration or the next elected administration.
The IMF also wants this cap lifted because the subsidy is causing the budget crisis to worsen.
