Economic strategy

On August 18, Imran Khan took oath as Pakistan’s 22nd prime minister. On August 18, an English-language newspaper carried the following headline: “Pakistan’s debt, liabilities swell 83% to Rs30 trillion.” For the record, in 1971, Pakistan’s debt and liabilities were a mere Rs30 billion.

The first order of the day for the new government was to raise new loans just to pay off instalments coming due on old loans. The easy way out for the government was to go to the IMF and accept all of IMF’s tough conditionalities. The government instead took the hard way of persuading ‘Pakistan-friendly countries’ to give out loans in order for the Pakistani government to dilute IMF’s leverage.

On October 23, Saudi Arabia came forward with a $6 billion package. According to AKD Daily, “the support package should truncate near term pressures on external account and should create enabling environment for the Government of Pakistan to tap other funding sources…”

On October 24, the benchmark KSE-100 Index of the Pakistan Stock Exchange gained 1,556 points or a wholesome 4.13 percent. For the record, this was only the second time in history that the KSE-100 Index went up by more than 1,550 points in a single day.

The good news is that the near-term pressures on the external account are now beginning to ease. The government’s economic strategy is three-fold: revitalising economic growth through housing and agriculture; export incentives to the export sector and non-debt creating dollar inflows.

The building of five million housing units over a five-year period is an ambitious target. We have indeed been searching for a ‘growth driver’ for the past three decades; housing – with some three-dozen related industries – could be what we have been searching for.

Pakistan’s agriculture sector is a $60 billion industry where farmer profitability has gone down sharply. The government has already reduced the tariff for agricultural tubewells from Rs10.35 per unit to Rs5.35 per unit and there are plans afoot to improve access to finance for farmers.

Over the past five years, our exports had gone down from a high of $25 billion a year to $20 billion a year (over the same timeframe Bangladesh’s exports climbed from $24 billion to $37 billion). Exporters have long complained about input costs and stuck-up refunds. The problems are yet to be resolved. The government, however, is working on the Strategic Trade Policy Framework (STPF) 2018-23 with a $46 billion export target. Minister of State for Revenue Hammad Azhar has bright ideas on the resolution of the stuck-up refunds through negotiable instruments but the problem is yet to be resolved.

Over the past five years, Pakistan’s debt profile has been taken to an unsustainable level. We need to grow and for that we need to attract non-debt creating dollar inflows. The International Organisation for Migration (IOM) had once estimated that around one-third of total remittances to Pakistan come through banking channels. The government is working on a plan to attract some $20 billion worth of additional remittances through banking channels. As far as I am concerned, I have not seen anything substantial on that yet.

The writer is a columnist based in Islamabad.

Email: farrukh15@hotmail.com. Twitter: @saleemfarrukh