Money Matters

Premature excitement!

Money Matters
By Zeeshan Haider
Mon, 08, 20

In literal sense, the government has declared victory in the first round of fight against the new coronavirus.

In literal sense, the government has declared victory in the first round of fight against the new coronavirus.

After a meeting of the National Coordination Committee, Planning Minister Asad Umar announced measures for resumption of normal life and business activities in the country with warning to the people that they stand guard against another wave of the pandemic and continue observing standard operating procedures (SOPs).

All businesses are told to resume their normal timings of work, tourist resorts are also being reopened, while educational institutions would be reopened by mid-September.

Before this announcement, feel good stories also made headlines.

Umar, who also holds the portfolio of “special initiatives”, tweeted that despite coronavirus, the FBR tax collection in July exceeded 57 billion rupees from its target.

Moreover, the construction industry, which was the first to be opened after government eased lockdown, has shown significant progress as cement consumption registered over 40 percent increase.

The export industry is also working at full potential, while the stock exchange has also almost recovered the losses incurred since the onset of the pandemic in the country five months ago.

According to the State Bank of Pakistan, workers’ remittances posted six percent rise to an all-time high of 23.120 billion dollars in the 2019/20 fiscal year as against 21.739 billion dollars remitted to the country in 2018/19.

This rise is attributed to easing of COVID-19 lockdowns in affluent countries, which allowed Pakistani workers to send more money back home.

All these reports are a breath of fresh air in an otherwise depressing economic situation.

However, it would be unwise for the government leaders as well as economic managers to become complacent on such news as they know well that the challenges lying ahead for Pakistan are far more serious.

When this government came into power, Pakistan faced an imminent balance of payment crisis because of its miserably low foreign exchange reserves, but that threat was successfully averted first by borrowing on “war-footing” from the friendly countries and then finally by entering into a bailout package deal with the International Monetary Fund (IMF).

Pakistan’s current foreign exchange reserves are in a stable position, but we need to keep in mind that a bulk of them is still borrowed money and we have to fill in them with money earned through exports, private investment as well as remittances from abroad to curtail dependence on borrowing.

A recent report that Saudi Arabia, which always contributed significantly to financial support for Pakistan, has squeezed monetary assistance for the country should be a disturbing factor for our economic managers.

According to the report, Pakistan has to borrow one billion dollars from China to return one out of the three billion dollars it was lent by the Kingdom two years ago.

An unusually strong statement by Foreign Minister Shah Mehmood Qureshi suggesting Saudi-led OIC not to drag its feet on Kashmir issue is reflective of some kind of friction creeping in the ties between Pakistan and its traditional friends in the Gulf region.

Moreover, the sword of Financial Action Task Force (FATF) still dangles over Pakistan’s head. The government has geared up its efforts to get the requisite legislation passed by the parliament that could enable Pakistan to get out of the notorious “grey list” of countries lacking efforts to combat money laundering and terror financing.

On the domestic front, the government faces the challenge of high inflation and squeezing purchasing power of the ordinary people that could stir public unrest.

This situation requires far more concerted and serious efforts by Pakistan to bring about a genuine economic turnaround.

These little achievements so far scored by Pakistan would become redundant if the government failed to introduce long-delayed and much-needed structural reforms.

These reforms are a must to plug in deep pilferage and loopholes in different sectors of the economy.

Inordinate delay in the implementation of these reforms, particularly in the taxation system and energy sector has virtually crippled these sectors.

Though the energy shortages have been significantly overcome in the past few years, the actual crisis would stay in place unless necessary reforms are undertaken to plug slippages in the energy sector.

Same goes true for the taxation system where successive governments have considered achievement of ambitious revenue targets as their main objective without realising that the taxation system has virtually died because of unbridled corruption and mismanagement.

Similarly, dead or sick public sector entities like Pakistan Steel Mills, Pakistan International Airline have become a persistent liability on the national exchequer, but successive governments failed to address this issue in a proper manner.

Also, too much politicisation of these issues by the various political parties for petty interests has made the issue to explosive for proper handling.

For example, the PTI while in opposition has fiercely opposed privatisation of sick public entities and now after coming into power is facing the same opposition from its rival.

In view of the serious economic challenges faced by the country, the political leaders are required to close their ranks and draw up a joint strategy to tackle these problems.

The feel-good stories we are hearing in recent days is not a new phenomenon for Pakistan.

If we gloss over the history of the past two decades, we could find many instances when we were assured that we are getting out of the woods, but we got trapped in the same web of problems after every few years.

A careful analysis of these instances shows that political instability and uncertainty as well as lack of political will to introduce painful and difficult structural reforms were the main reasons that the initial achievements on the economic front could not be consolidated.

Consistency in the economic policies and political stability are must for the economic progress of any country.

In Pakistan, elections, as required by the constitution, are held regularly after every five years since 2002 but they have, unfortunately, failed to bring political stability in the country.

The entire ruling elite and stakeholders have to genuinely try to ensure a credible electoral process in the country. Such a process can bring political stability and ultimately economic progress to Pakistan.

The writer is a senior journalist basedin Islamabad