Charter of Economy can consolidate the policy outlook on the chronic issue of energy sector reform, weak tax revenues, privatization of state-owned enterprises, pension reforms, untargeted subsidies, etc., and ensure continuity of policies, something the International Monetary Fund (IMF) has been emphasizing.
This was the crux of a policy dialogue on “Pakistan’s Post-Budget Economic Outlook”, organized by the Sustainable Development Policy Institute in collaboration with the Parliamentary Taskforce on SDGs and the Friedrich Naumann Foundation for Freedom (FNF).
Romina Khurshid, Special Assistant to Prime Minister, reiterated that the government is keen to support a resilient economic development agenda and strengthen progress on climate change, energy efficiency, transition, gender equality, etc. She urged for strengthening partnerships in South Asia through consortiums as populations in the region are among the biggest victims of climate change.
She stressed that our economy must undergo reform so that it can be resilient in the face of recent and future climate disasters wreaking havoc in the country. The developing countries in South Asia, confronted with climate disasters do not need aid but trade and added that regional connectivity and cooperation is the answer to development challenges in the region, she added.
Rana Ihsan Afzal, Coordinator to the Prime Minister of Pakistan on Commerce and Industry said that the government had to present a realistic not an election budget that could be carried further. It focuses on the agriculture, IT, and SME sectors with a realistic growth of 3.5 percent after stakeholder consultation and considering growth drivers.
In the last 16 months, the government has not taken populist decisions but rather focused on reforms like bringing retail businesses into the tax net, rebasing the electricity and gas tariffs, and the fiscal deficit has been reduced compared to last year.
He said that the Charter of Economy is the right plan, and PDM parties are already discussing it. He urged for collective wisdom and kickstarting reforms including privatization, managing of imports, etc.
He stressed that we need to look inside, increase revenues, cut expenditures, and manage the macro-factors that are halting the much-needed reforms.
Dr. Abid Qaiyum Suleri, Executive Director, SDPI said that the current budget surprisingly is not a populist one and shows the commitment to bringing the IMF program back on track. He hoped that some budget numbers will be revised as coalition partners and provinces have expressed some reservations.
He further said that though faced with many challenges, the financing of the budget deficit will be made possible through both domestic and external sources, for example, from friendly countries like rollovers of 2 billion dollars from Saudi Arabia, 1 billion from UAE, new financing of 2.4 billion from IMF, 1.5 million from another financing, and commercial banks tripling their lending to the government. However, he stressed that these inflows depend on political stability in the country.
He proposed a third solution to the economic woes in the form of Charter of Economy which SDPI as well as Prime Minister Shehbaz Sharif and Former President Asif Ali Zardari have both been strongly advocating.
Bridget Lamm, Country Director, FNF Pakistan, stressed that Pakistan is facing a crucial time and is confronted with complex economic challenges. The spending projected in the budget will not be possible without large borrowings. She highlighted that the political and economic instability has triggered international companies to close their activities in Pakistan as many are struggling with production.
She highlighted that Pakistan has availed GSP plus better than other South Asian countries, but its full potential was not explored. She said that the future of GSP Plus relies significantly on stakeholders coming forward with tangible actions on international commitments, and political and economic stability in the country to restore the faltering interest of investors.
She said that if concrete plans for economic stability and reforms are not initiated, we will be missing out on economic opportunities and doing injustice to the youth of the country.
Dr. Vaqar Ahmed, Joint Executive Director, SDPI called for a viable homegrown plan. He appreciated the efforts of Minister of State Dr. Aisha Ghaus Pasha and Special Assistant to Prime Minister Romina Khurshid in moving forward and preparing a draft Charter of Economy for consideration by the PDM coalition.
He said that extensive multi-partisan engagement is underway which is good for strong buy-in for the Charter of Economy. He said that provinces will have to come forward and increase tax revenue mobilization efforts.
He highlighted that any charter of the economy should also stress, strict oversight of government expenditures, cost-cutting measures by merging government ministries and departments, and public procurement transparency.
He called for revising the debt management strategy and ensuring that future debt only finances the most productive investments and privatizing loss-making SOEs for which future debt accumulation is expected. He further called for reforms in the energy sector by ensuring no hidden or cross-subsidies; tariffs in the energy sector must cover the full economic cost of generation, transmission, and distribution, and new contracts with provinces and IPPs.
He also suggested some low-hanging reforms e.g., improving the pensions framework, promoting regional trade, certainty of interest rates, trade finance rates, and energy tariffs for manufacturing industries.
He stressed the need for focusing on infrastructure development in economically backward areas, building domestic trade linkages across provinces, promoting local investments in the backward areas, and investing in human security and adaptive social protection.
Another pillar of the charter should be a drastic reduction in the cost of doing business, an easily achievable low-hanging fruit. He called for an all-parties conference for forward-looking reforms for a progressive economic development narrative, building the commitment of provinces to these reforms. He further said that any Charter of Economy should be given cover through proper legislation and follow up through the Council of Common Interests.
GSP plus status is not a preferential trade agreement or mutual free trade agreement. GSP plus status is awarded by EU to impoverished countries to sustain themselves. In other words, it’s aid tied up the trade whose terms and conditions are solely dictated by EU. Most of the countries including South Asian countries are coming out of GSP plus status to free trade agreements. Boasting that we are utilising GSP plus status better than others shows how complete idiots are running the show.