Pakistan should stop living off borrowed money

ISLAMABAD:

Pakistan knocked upon the IMF’s door in 1959, merely a decade after its inception. The young nation’s call for help continues to echo through the decades.

And even when it is not seeking palliative medicines from the global money lender, the country is busy picking low-hanging fruits from the friendly countries.

On the eve of its 75th anniversary of independence, Pakistan has again found itself negotiating with the money lender to tide over its current – and perhaps the worst –economic instability.

Faced with strong headwinds buffeting the country’s economy, Prime Minister Shehbaz Sharif on Thursday asked the question not heard in a while: how long will Pakistan take to stand on its own feet and for how long will it keep relying on money lenders and friendly countries?

Answering his own question, the premier took a page out of his predecessor’s book and pinned the blame on the previous government’s “laid-back approach” to the economic crises.

The harsh truth

Experts warn that perpetual reliance on loans and borrowing cannot bite into the burgeoning crises, suggesting it is high time the country stops skirting the real questions it has to find answers for.

“First of all, the government has to tell the harsh truth to the people and continue to hammer it down that Pakistan is living beyond its means and it cannot subsidise by borrowing from other countries,” the president of the Pakistan Institute of Legislative Development and Transparency (PILDAT) Ahmed Bilal Mehboob said.

The PILDAT president pointed out that the government will need to stop such populist measures like paying bonuses to government employees for doing their routine jobs, saying the state-owned enterprises (SOE) making huge losses will need to be privatised.

Read more: Russia sanctions adding to Pakistan’s woes

Pensions for new entrants should be reconsidered as the pension bill is already unsustainable, he suggested, saying Pakistan needs to cut waste, tax evasion and smuggling.

“Austerity will have to be a way of life,” he said adding “economy, and not politics and slogans, should be our main focus.” He felt that all this requires a radical change in mindset and that the government should design a public education program to make people focus on the economy.

“Large current account deficits can’t be filled through the kind of loans Pakistan has sought from friendly countries like Saudi Arabia and China recently,” political analyst Zaigham Khan said.

“There is a limit to the support that can be sought using the goodwill.”

Reacting to PM’s statement at a time when the government is simultaneously looking at IMF as well as friendly countries, Zaigham said that Pakistan needs to grow its exports in order to overcome the perpetual problem of current account deficits, admitting that it is easier said than done.

Zaigham, who is an anthropologist and development professional, said that country’s meagre national savings get directed to unproductive sectors like real estate and our entrepreneurs are addicted to quick profits.

Also read: Rs80b ‘burden’ passed on to salaried class

He further said that it was also very difficult for the industry to find loans from banks as governments borrow a large chunk of available resources to cover their fiscal deficits. For him, “foreign direct investment (FDI) is the only solution to this problem in the short to medium term.”

He maintained that Pakistan’s best bet in this regard was Chinese investment in the export sector for which export processing zones were envisaged.

The construction of these zones should be expedited and the policy environment should be improved for Chinese as well as other investors, he continued, adding Pakistan must also limit its huge fiscal deficit by increasing taxes in the sectors that have largely remained out of the taxation net namely the services sector, particularly traders, and agriculture.

Different countries have faced multiple issues over the years but the continuation of economic policies is what keeps them going. For instance, Israelis will head back to the ballot box for the fifth time in less than four years yet this lack of continuity has had no impact on Israel’s economy.

However, Pakistan can’t even afford that many elections in that many years because of the chronic economic issues.

Among other things in his speech the other day, PM Shehbaz had no hesitation in saying that God never wanted Pakistan to stay poor. "He will help only those who wanted to change themselves".

But the question is: are we ready to do the right thing?