Thursday March 30, 2023

Economic challenges

January 05, 2023

LAHORE: Those looking for improved economic credentials of the country are living in a fool’s paradise. Pakistanis should consider themselves lucky if there is no further run on their current beleaguered resources. They should not expect much from a stressed government.

Economic Aristotles suggest a 100 ways to improve the situation. But the ground reality is that nothing is in order in the country at the moment.

The government is helpless. No government aspiring to get a nod from the public in the upcoming election, would want to annoy its electorate.

We are perhaps the only country in the world that operates on a huge fiscal deficit equivalent to 25 percent of total revenues. Ironically, we are still doling out free money in the shape of cash or a subsidy on power.

We even provide gas on subsidy to industrial sectors like fertiliser manufacturers and the exporting sectors making them parasites on national resources.

These issues must be resolved to reduce the fiscal deficit by at least Rs1,200 billion.

The economists do not have the courage to highlight bluntly resolvable issues that have taken our economy hostage.

We have been bombarded with the notion that the government has no business in doing business yet after more than 25 years of this realization, the government is still the largest stakeholder in our capital market.

The public sector companies are inflicting directly and indirectly a loss of over Rs20,000 billion annually on the exchequer. Direct losses include those suffered by the public sector companies like PIA, Railways, Pakistan Steel Mills and scores of other public sector enterprises.

The subsidies and PSE losses contribute Rs3,200 billion to the fiscal deficit.

Indirect losses come from the circular debt in the power and energy sectors. We have taken these losses for granted and no government has seriously bothered to address these issues.

Over the years, various governments have tried to streamline PSEs, but have always failed and wasted more resources. The only solution is immediate privatisation of the PSEs.

However, that needs a firm resolve too. No government ever dares to privatise the

loss-making entities for they fear public reprisal.

The public is instigated by vested interests that are benefit from the deadlock. They earn more than the likes of Mansha, and Tabbas earn cumulatively from scores of businesses they operate on huge profits.

There must be no ifs and buts on privatisation, which should be carried out immediately through a transparent process taking the judiciary in the loop as was done in the Reko Diq case.

The government would save hundreds of billions of recurring losses plus handsome privatisation proceeds that might be considered low by some so-called experts.

Any government that takes this bold step would face criticism and might even lose favour of the electorate, but it will save the country. The choice is between the desire to cling to power and the prosperity of the country.

There is no use in seeking consensus that has not been achieved in the last 30 years. We need to save as many resources as we can to make ourselves fiscally sustainable.