Prime minister Imran Khan’s government during its nine-month rule has repeatedly promised to lay the foundation of a new Pakistan. But as time has gone by, increasingly visible gaps between the ruling structure’s intent versus the reality of Pakistan have become hard to ignore.
In recent days, Khan has replaced key members of his economic team notably the finance minister, the governor of the central bank and the head of the tax collection agency, mainly to lift the performance of Pakistan’s key institutions.
But soon, Pakistanis across the board will be hit hard by the powerful reality of adjustments to an increasingly tough economy, thanks to some of the conditions that the country is expected to fulfil under a new loan programme with the International Monetary Fund.
Typical of the IMF’s dealings with other countries that sought large new loans, Pakistanis must brace for inflation caused by a raft of coming steps.
Going forward, an economic slowdown across Pakistan coming in tandem with rising inflation fuelled by a weakening rupee appears to be the writing on the wall. Looking back at Pakistan’s economic history over the past decade, its clear that reckless economic management of yesteryears has caused a significant deterioration of Pakistan’s financial health.
Given this very powerful reality, it’s important for the country to go through a period of long overdue reform to tackle the many gaps on the economic front. While the next IMF loan offers some hope for long overdue reforms to be enforced, the IMF’s relationship with Pakistan is not a sufficient safeguard to necessarily lead to a revamping of policies.
Failure to reform
In the past, Pakistan has gone through at least 13 IMF loan programmes but the country never succeeded in reforming itself significantly. Instead, a level of completely unnecessary complacency became the norm that caused Pakistan to slip away from even modest progress on long term economic policies. For Khan, however, complacency is just not an option at a time when circumstances surrounding Pakistan’s economy are the toughest that the country has seen in years. Additionally, Pakistan realistically cannot afford to expect the kind of support from the US that Washington happily extended when ties between the two countries were much more stable.
Among policy actions needed to be undertaken urgently, Pakistan must push for a series of very bold and comprehensive steps for the government to rid itself of largely loss making public sector companies, that effectively continue to bleed the country.
Going forward it’s essential that Khan oversees a rapid privatisation of public sector companies. Some of the worst performers in this segment will require time to be reformed. For years, one body of thinking among Pakistan’s analysts has argued for handing over loss making public sector companies for a modest or even a symbolic payment. In doing so, the Pakistani government and the state stand to gain significantly if they end their recurring support to public sector companies once they are privatised.
Urgent movement on the privatisation front can benefit the country if the individuals behind this push relate back to the privatisation of Pakistan’s banks, once saddled with a large volume of bad debts. Indeed, a failure to privatise Pakistani banks would have added them to the loss making public sector companies. Eventually, Pakistan’s present day economic challenges would have certainly been far in excess of today’s reality if banks were still under the government’s control.
As Khan embarks on a reformist drive with the backing of a large new IMF loan, it’s important for Pakistan’s ruling elite to recognise the need for improving conditions for low-income households. Short of a very aggressive push to combat poverty on a massive scale, the coming high inflation as a consequence of conditions tied to IMF loan programme could conceivably lead to social unrest.
Khan’s victory in parliamentary elections last year, prompted many of his supporters to claim victory leading to the creation of a ‘new Pakistan’. But as Pakistani officials last week began wrapping up discussions with a visiting IMF team, it was clear that the outcome of the job ahead to uplift Pakistan’s economy will indeed lay the basis for a qualitatively new country.
Farhan Bokhari is a Pakistan-based commentator who writes on political and economic matters.