Pakistan cannot remain immune from the global slowdown triggered by the spread of the virus, now declared a pandemic by the WHO. The country’s exports and remittances are likely to get a severe hit and the government must take mitigating economic measures immediately to protect the struggling economy from going worse. The outflow of ‘hot money’ is going to accelerate in the coming days/weeks. While the existing scenario is challenging, it offers a one-time opportunity to take tough decisions and put the economy on a sound footing.
The proposed measures are: 1) slap a complete ban on the import of luxury and non-essential/unnecessary goods to conserve precious foreign exchange; 2) reduced international oil prices not to be passed on to the consumers; 3) 5-10 percent reduction in emoluments of all government employees, including armed forces, judiciary and state-owned entities and 25 percent reduction in case of parliamentarians; 4) Enhance taxes on locally produced luxury/non essential goods including cigarettes/sugary drinks; 5) bring down the SBP’s interest rate to 7-8 percent; 6) optimize austerity in current expenditures of the government; and 7) renegotiate with the IMF the terms of the existing programme and request for additional $ 5-6 billion funding on soft terms at zero interest rate. The revenue from additional taxation measures and savings from oil prices and others should be channeled towards a stimulus fund in the amount of Rs500 billion to kick-start industrialization. Attractive package be given to existing manufacturing units and even more incentives be provided to those adding capacity/ setting up new units for import substitution and exports in time for the global economy to rebound in a year or so. Since the private sector is shy and requires leadership, an institution on the pattern of the former PIDC be set up to initiate planned industrialization. A development finance institution be established to provide long term financing on soft terms at 2-3 percent interest. Last, but not the least, the government’s imported economic team be replaced with indigenous economic experts who know the ground realities.
Arif Majeed
Karachi