Islamabad February 4 2023: Federal Minister for Planning, Development & Special Initiatives Prof. Ahsan Iqbal on Saturday put forward the fact that political instability and adventurism had been the biggest threat to Pakistan’s economy.
He was speaking at a Round Table Conference on “Pakistan’s Economics”, jointly organized by the Planning Ministry and the Lahore School of Economics, in Lahore.
The minister said in 2018, the outgoing government’s Public Sector Development Program (PSDP) was worth Rs 1000 billion and Defence Budget was Rs 1000 billion as well – Whereas in 2022, the PSDP was reduced to merely Rs 500 Billion or less and “PTI’s government started to default on public payments in their last financial quarter”.
Professor Iqbal said that in order to earn policy dividends, there needed to be continuity as policies take root, grow, evolve, and start bearing fruits over a decade. Thus, policy efforts to expand a resource base in Pakistan (undertaken by the PML-N’s government in its tenure) failed to bear fruits because they became a victim of political instability.
The planning ministry further added that the ongoing debate around the economy must not discount the political landscape and its challenges as economic measures or woes are not in.
He said in this Vision 2010, it was identified that Pakistan must expand its energy capacity (despite the fact that Pakistan was an energy surplus in 90s).
However, the minister said that the democratic government was thrown out and as a result, Pakistan faced one of the worse energy crises in 2010 and onwards.
Similarly, the minister said that in 2013, his office came up with ‘Vision 2025’ that envisioned Pakistan becoming one of the top 25 economies by 2025.
The government took all measures to actualize this goal by overcoming law and order issues, defeating terrorism, and breaking bottlenecks of energy and infrastructure (through CPEC). As a result, think tanks like PWC started predicting that Pakistan can become a top 25 economy by 2025.
Minister Iqbal said that the PML-N government for the first time ever transformed Pak-China strategic relations into economic relations – As a result, billions of dollars of investment started to pour into infrastructure/energy and other sectors. Thar Coal, a national resource was tapped for the first time ever.
He said the entire momentum that Pakistan picked up from 2013-18 got lost to the adventurism of “Tabdeeli”.
Furthermore, he said the China-Pakistan Economic Corridor (CPEC)’s initial phase of infrastructural and energy projects was to be followed by the establishment of Special Economic Zones (SEZs) by 2024, where relocating Chinese investments (worth billions of dollars) were to be housed. However, from 2018 to 2022, “work never started on 5 out of 9 proposed SEZs and there is embarrassing progress on 4 SEZs that actually got started”.
The minister said that Pakistan had two choices and stands at a critical juncture: either, It can again go through a stabilisation process and then again aspire for growth but will then be hit by circular debt/budget deficit and breaks will have to be applied “Or we can address structural issues of economy by focusing on exports to expand its overall base and by including value-added goods and services. As of now, the top publicly traded companies of Pakistan have negligible contribution towards exports, as current incentives do not push them to do so” he said.
Minister Iqbal said that its true that Pakistan needs to walk through a stabilisation process but that must be coupled with long-term industrial framework that realigns economic incentives in the country due to which Pakistan’s savings are not parked in real estate/gold/foreign currency but instead goes into making Pakistan a productive economy across all sectors.
He said that in order to extend ownership of Pakistan’s reform agenda to people at large including academic/practitioners/civil society movers and shakers, the
The Ministry of Planning, Development and Special Initiatives has launched a Champions of Reform network which is open to all and anyone interested can join it by visiting Ministry’s website pc.gov.pk
Minister Iqbal said that govt is also focusing on harnessing private and foreign direct investment in sectors related to export-oriented goods and services.
Earlier, Prof. Dr. Azam Chaudhary, WTO Chair, and Dean of Economics at LSE presenting on current economic challenges and way out for Pakistan said that in deliberations, it came out that inflationary pressure is due to high aggregate demand because Pakistan has continued to spend which is illustrated by the high budget deficit. Besides, that he said a high surge in commodity prices globally, especially in fuel, volatile exchange rates linked to Balance of Payment problems.
In proposed solutions, Dr. Azam stated that measures suggested by IMF, which the current Gov’t might be forced to implement are necessary for Pakistan’s economy.
He proposed to let the exchange rate find balance in the open market, reduce the budget deficit by cutting back on the expenditure on development projects and increase taxes.
Dr. Azam said that the government finds itself in a dilemma as on one hand there are measures to be taken to stabilize the economy but on the other hand, those measures risk making a lot of people economically vulnerable.
He stated that Pakistan should aspire for higher growth but that’s only possible if Pakistan successfully stabilises its economy.
Dr. Moazzam presenting on a Macro Economic Model quantifying Pakistan’s economic issues and potential fixes said floods have added challenges by destroying rice, crops and sugar cane crops causing a supply shock of billions of dollars to Pakistan’s economy.
The flood shock can disrupt Pakistan’s growth rate by a reduction of up to 3.5 %, he said adding that floods along with causing supply shocks have also caused demand shocks. dependent of the political landscape but in fact are directly proportional.
