Time for transparency and reform

LAHORE: One of the biggest flaws in Pakistan’s economic management is the insular approach of our financial teams. They tend to believe they know better than independent economists or outside experts, shunning advice that might contradict their own line of thinking.

While it is true that those handling the country’s finances deal with harsh realities -- IMF conditionalities, shortfalls in tax collection, foreign exchange shortages -- that others cannot fully appreciate, this does not justify secrecy or unilateralism. The economy cannot run on closed-door firefighting. The only way forward is transparency, broader consultation and clear policy direction.

At present, the country’s economic policy remains fluid, almost improvised. There is no medium- or long-term roadmap that could instil confidence in businesses and investors. Instead, measures are introduced in haste, often with conflicting outcomes. Take the case of luxury imports: the government repeatedly raises duties to discourage consumption, yet the outcome is more revenue collection rather than a meaningful reduction in the import bill. Demand for many of these items is price-insensitive, and higher tariffs merely encourage smuggling.

Exports are another example. Policymakers emphasise export growth, but exporters are simultaneously burdened with rising energy tariffs, power surcharges and increased petroleum prices. How can firms compete internationally when their input costs are higher than those in Bangladesh, India or Vietnam? Our exporters need a stable, predictable and competitive environment to expand markets, but current policies erode their competitiveness instead of strengthening it.

This lack of coherence leaves the economy perpetually on a roller coaster. Investors and businesses hesitate to commit capital when they cannot predict government policy for even six months. Citizens, meanwhile, lose confidence when inflation is worsened by short-term revenue measures instead of addressed through structural reforms.

Against this backdrop, the recent Pakistan-Saudi Arabia defence accord has created some cautious optimism. Beyond defence cooperation, the pact could evolve into a platform for economic partnerships. If Saudi Arabia and other Gulf countries extend investment, concessional energy supplies, or even debt restructuring, Pakistan may finally secure some fiscal breathing space. Other Muslim countries might join such an arrangement, offering Pakistan not just a security umbrella but also an economic cushion.

The crucial question, however, is what Pakistan does if this relief materialises. Past experience suggests that windfalls -- whether in the form of foreign aid, loans or remittance booms -- have been squandered on short-term fixes and consumption rather than structural reform. If this cycle repeats, Pakistan will soon be back in crisis, dependent again on lenders and bailouts.

Therefore, the government must treat any forthcoming relief as an opportunity to reset economic management. First, it must commit to transparency: open consultations with economists, business associations, and civil society should define the parameters of policy. Second, energy prices must be rationalised to restore competitiveness, with cross-subsidies replaced by efficiency and investment in cheaper domestic sources. Third, the tax system must be broadened, reducing reliance on indirect taxes that punish the poor. Finally, policies must be predictable, with a clear three- to five-year framework guiding investors, exporters, and consumers.

Pakistan does not lack potential. Its geography, resources and human capital provide all the ingredients of growth. What it lacks is consistent, transparent and credible economic management. If the government embraces openness and reforms in the wake of the Saudi accord and other potential partnerships, it can stabilize the economy. If not, even the most generous alliances will only buy temporary relief, not lasting prosperity.