In just under a year since prime minister Imran Khan took charge to rule over Pakistan, his Pakistan Tehreek-e-Insaf (PTI) or Pakistan Justice Party has repeatedly told its critics that the party has inherited the worst economic framework in the country’s history. That claim is now set to be put to test as Pakistan prepares to embark on a series of steps to lift its economic outlook.
These range from a new loan programme from the International Monetary Fund or IMF which is likely to be concluded in the coming weeks, to Saudi Arabia’s very timely promise of shipping oil worth more than $3 billion (Dh11 billion) annually to Pakistan for the next three years, where the payment will be deferred for future settlement. The Saudi gesture will help Pakistan receive some badly needed breathing space to build up its exports and other avenues of offshore earnings, to a future stage where the country is able to meet its obligations to its foreign creditors.
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This is the second time that Saudi Arabia has stepped forward in this way since Riyadh similarly deferred oil payments due from Pakistan for three years from 1998 onwards, after Pakistan was slapped with punitive global sanctions following its maiden nuclear tests that year. That past Saudi gesture helped Pakistan tide over one of the toughest periods in its history.
So far during the financial year which ends next month, the Imran government has received $10.2 billion in loans from Saudi Arabia, the UAE and China to help Islamabad tide over its immediate economic challenges. Once the IMF agreement is put in place, additional funds are set to flow in from other multilateral agencies, notably the World Bank, the Asian Development Bank and the Islamic Development Bank.
Going beyond past legacy
With this framework in place, the bottom line is indeed just one — as time goes by the Imran government will have to become increasingly accountable for its own track record going beyond the past legacy inherited from Pakistan’s previous rulers. Though faced with tough economic challenges, the government faces mounting criticism for its failure to put in place a clearer sense of direction for Pakistan’s economic journey.
Last week’s resignation of Haroon Sharif, a well respected technocrat brought in by Imran to lead the federal board of investment, marks the latest departure of an economic decision maker installed just last year. Earlier, Imran’s first finance minister Asad Umar, head of the national tax collection agency and the governor of the central bank were all shown the door so that the government could bring in people of its own choice.
Few governments in Pakistan’s history have had a similar opportunity to not only install people of its own choice but to oversee policies of its own liking. And yet, instability on the economic front remains palpable. A large part of Pakistan’s prevailing challenges must relate to the failure of Imran’s government to put in place a clear sense of direction that is visible to a range of stakeholders, from investors and professionals across the country to ordinary citizens.
At the same time, Pakistan’s government nowadays receives much flak for unleashing what is a visibly open ended anti-corruption drive. Its indeed true that any country which seeks to become economically prosperous must also put in place a robust and efficiently functioning anti corruption mechanism. But its equally true that a mechanism which comes to be seen as open ended, without a clearly defined road map only raises unending uncertainty.
Armed with what are clearly visible bailouts to help Pakistan tide over its economic challenges, the Imran government needs to return immediately to the drawing board. Among its priorities, one of the first objectives before the government must be a long overdue clarity on how to cut Pakistan’s many losses.
Though the appointment of Shabbar Zaidi, a widely respected Pakistani chartered accountant to head the tax collection agency, has sent a positive signal, that alone is just not enough.
The country’s tax collection system is indeed in a very bad state of disrepair. Though the appointment of Shabbar Zaidi, a widely respected Pakistani chartered accountant to head the tax collection agency, has sent a positive signal, that alone is just not enough. The more profound challenge which is still waiting to be resolved is the arrival of a credible game plan to lift the quality of performance of one of the world’s worst performing tax collection mechanisms.
At the same time, Imran and his team must get down to making difficult choices related to the largely bloated public sector that surrounds Pakistan. Some of the country’s most dysfunctional and largely loss making companies range from the official air carrier — Pakistan International Airlines or PIA to the largely loss stricken Pakistan steel mills in Karachi.
A number of other companies too, owned by the Pakistani state have repeatedly run in loss for years. It’s essential that harsh decisions including the matter of privatisation on a fast track, even for modest financial returns must be considered. Ultimately, Pakistan’s success in ridding the state of recurring large financial deficits on account of a loss making public sector, will go a long way in lifting the country’s future prospects. The savings gained from an end to otherwise open ended annual subsidies to keep on running loss making public sector companies, can go a long way in transforming Pakistan for the better. At the very least, the country’s ordinary citizens deserve support which is otherwise missing through the creation of welfare platforms dedicated to affordable health care and education.
Notwithstanding Imran’s frequent references to Pakistan’s past history, he will soon have to confront questions on how his government is performing in taking care of the needs of Pakistanis across the board.
Farhan Bokhari is a Pakistan-based commentator who writes on political and economic matters.