Pakistan knocked on the door of the IMF in 1959, only a decade after its creation. The cry for help from the young nation continues to resonate over the decades.
And even when not seeking palliative drugs from the global lender, the country is busy picking low-hanging fruits in friendly countries.
On the eve of its 75th anniversary of independence, Pakistan once again found itself negotiating with the moneylender to overcome its current – and possibly its worst – economic instability.
Faced with strong headwinds rocking the country’s economy, Prime Minister Shehbaz Sharif on Thursday posed the question that hadn’t been heard for a while: how long will Pakistan take to stand up and how long will it continue to depend on moneylenders and friendly countries?
Responding to his own question, the Prime Minister took a page from his predecessor’s book and blamed the previous government’s “laid back approach” to economic crises.
The hard truth
Experts warn that the perpetual reliance on lending and borrowing cannot bite into emerging crises, suggesting it is high time the country stopped sidestepping the real questions it needs to find answers to.
“First of all, the government must tell the hard truth to the people and keep hammering that Pakistan is living beyond its means and cannot subsidize by borrowing from other countries,” the president said. of the Pakistan Institute of Legislative Development and Transparency (PILDAT) said Ahmed Bilal Mehboob.
The PILDAT chairman stressed that the government will have to end such populist measures such as paying bonuses to government employees to do their routine jobs, saying that state-owned enterprises (SOEs) that suffer huge losses will have to be privatized.
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New entrants’ pensions should be reviewed as the pension bill is already unsustainable, he suggested, saying Pakistan needed to reduce waste, tax evasion and smuggling.
“Austerity will have to be a way of life,” he said, adding that “economics, not politics and slogans, should be our main focus.” He felt that all this requires a drastic change in mentality and that the government should devise a public education program for people to focus on the economy.
“Large current account deficits cannot be met by the kind of loans Pakistan has recently requested from friendly countries like Saudi Arabia and China,” said political analyst Zaigham Khan.
“There is a limit to the support that can be sought using goodwill.”
Reacting to the PM’s statement at a time when the government is simultaneously looking at the IMF and friendly countries, Zaigham said Pakistan needed to increase exports to overcome the perennial problem of current account deficits, admitting it was more easily said than done. .
Zaigham, who is an anthropologist and development professional, said the country’s meager national savings are channeled into unproductive sectors like real estate and our entrepreneurs are addicted to quick profits.
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He added that it was also very difficult for the industry to find loans from banks, as governments borrow a large part of the available resources to cover their budget deficits. For him, “foreign direct investment (FDI) is the only solution to this problem in the short and medium term”.
He argued that Pakistan’s best bet in this regard was Chinese investment in the export sector for which export processing zones were being considered.
The construction of these zones must be accelerated and the policy environment must be improved for Chinese investors as well as other investors, he said, adding that Pakistan must also limit its huge budget deficit by increasing taxes in sectors that have remained largely outside the tax net. namely the service sector, including traders, and agriculture.
Different countries have faced multiple problems over the years, but continued economic policies are what keep them going. For example, Israelis will return to the polls for the fifth time in less than four years, but this lack of continuity has had no impact on Israel’s economy.
However, Pakistan cannot even afford so many elections in these many years due to the chronic economic problems.
Among other things, in his speech the other day, Prime Minister Shehbaz did not hesitate to say that God never wanted Pakistan to remain poor. “He will only help those who have wanted to change themselves”.
But the question is: are we ready to do the right thing?