Monday May 27, 2024

Can a country survive on loans?

By Hassan Baig
July 07, 2023

Almost all things in Pakistan — from politics to economics — are managed purely through an ad hoc approach. The phenomenon of ‘adventurism’ has been the hallmark of our struggle as a nation right from the beginning.

Instead of making a solid strategic plan to reform our political and economic systems, we have been groping in the dark to find our destiny. We are always waiting for some Divine intervention.

It is important for us to understand that hope cannot be a ‘strategy’, and countries need a full-fledged action plan for their prosperity. Pakistan is a country where action plans are ignored.

Pakistan needs a Marshall plan to improve its economic, political and social indicators and forge a patriotic social cohesion to make things better. This will make this nation earn respect in the comity of nations.

The economic woes are unending because there is no concrete plan to address them. Debt management is a daunting task, as the whopping volume of about $132 billion external loans is unmanageable. Debt retirement needs an elaborate plan to restructure and re-profile it on a long-term basis.

There seems to be no plan, as Pakistan is getting more bilateral and multilateral loans from the World Bank, Asian Development Bank, IMF to pay back the existing loans. There seems to be no plan or strategy to improve investment climate or to enhance exports and cut imports.

Industrialization is another concern, which could not be prioritized despite all efforts on the part of the government in the past. The large-scale manufacturing sector has been worst hit in this period of hyperinflation.

If we look at the brief history of our country, we will find numerous factors responsible for our backwardness. One is our political system which have been bearing the brunt of several ‘experiments’, mismanagement and manipulation for years now and have failed to serve this nation. The country’s first constitution could not last for more than two years. In the 1970s, Pakistan finally passed its third constitution (which is still in force). However, over the years, there have been periods where non-civilian governments ruled over the country, resulting in weak institutions.

The same happened with our economic system, as we struggled to improve our economy right from our independence in 1947. The weak economy picked up some strength in the 1960s owing to a comparatively stable political system but generated a sense of deprivation in the eastern part of the country. The breakup of East Pakistan was a hybrid mix of a weak political system run by a general and a strong economy that lacked the equitable distribution of wealth, creating a sense of deprivation. It was the period of 22 elite families who ruled over the country that resulted in the creation of Bangladesh in 1971.

This elite capture paved the way for socialistic ideas in the 1970s, which led to the nationalization of big businesses and industries to break the monopolies of 22 families. The nationalization policy of Zulfikar Ali Bhutto proved to be a disastrous setback to the economy, resulting into an even weaker state. The Zia era was the worst era of Pakistan, as the very fabric of the society was shaken and broken by militarization and drugs from Afghanistan. Further, the society suffered from right-wing religious orthodoxy that is still prevalent, haunting our society.

Economic managers saw foreign aid as a boon to the economy. Their misplaced hope meant they waited for another godsend opportunity — owing to Pakistan’s geographical location. The total dependence on foreign aid or loans can never be a strategy to grow the economy. But our political and economic managers took it as a growth strategy, and now we are witnessing the consequences of this ill-thought-out plan. Pakistan faced the lingering threat of default for a year.

What should be done to instill hope among the people to inspire this nation? Hopes are dreams that can only come true if followed by a proper action plan. There needs to be a definitive action plan to address the issues faced by Pakistan.

First, we need to hold elections on time to achieve the objective of political stability in the country. Then, we need to hold local government elections soon after general elections. The local government system will ultimately strengthen the weak political system as well as ensure development through decentralization.

Second, a charter of economy on the pattern of the Charter of Democracy is badly needed as part of the Marshal Plan to make things right in the field of economy. Debt management is the most important issue and must be addressed first. A long-term strategic plan is required to revive the economy through incentives to industry, enhancing exports, substituting imports through local goods and services, creating investment climate to attract FDI in the country.

The cost of doing business needs to be addressed first, as the factors of production or cost of inputs needs to be reduced to make goods and services competitive. The problems of exchange rate and rupee depreciation need immediate attention. The exchange rate needs to be stabilized for the stability of the economy.

The interest rate is another anomaly along with inflation in Pakistan, which must be fixed to create investment-friendly climate and achieve economic growth. Large-scale manufacturing is badly suffering due to these factors.

The economy has nose-dived and needs to be stabilized through budgetary support to industry and large-scale manufacturing.

The prevalent security issues must be given the highest priority to provide security to investors and industrialists. Investors tend to exit the market if they feel their investments are threatened; they flee immediately to invest somewhere else where their investments are secure.

Pakistan must establish industrial clusters like special economic zones (SEZs). But it needs an elaborate action plan to implement such policy for investors and industrialists. Who will deal with all these issues and problems we are suffering right now and get the country out of this mess?

Political leaders must understand one thing that they should get the consensus of all stakeholders for the ultimate objective of making this nation proud and great.

Otherwise, hopes against hopes will produce nothing but a fragmented society. There needs to be a proper strategy in place to implement action plans.

The writer is a former additional secretary and can be reached at: