Khan: the man with a plan

For years, Pakistan has evaded structural reforms and has instead managed with mere cosmetic changes to satisfy the conditionalities of successive IMF programmes. But this lackluster approach is not likely to work any longer. Lenders are tired of listening to the same excuses every time. Friendly countries that had bailed out Pakistan in the past are up to the brim. IMF and other multilateral donors have become non-sparing, and with changing geopolitical realities, the generous US payouts have dried up.

Even domestically, the capacity in the economy to withstand pressure has thinned out substantially. Our exports have always been low, but populous measures by successive governments have led to insurmountable external debt. Therefore, with rising interest payments and debt repayments leaving hardly any room for a growth in import bill, even a short spell of growth leads to unmanageable current account deficit. The pressure is absorbed by rupee devaluation, which leads to excessively high inflation.

Years of inefficient economic management and decades of neglect have started to bear fruit. Institutional rent seeking and rampant corruption have eaten away the country’s foundation like termite. A rusting civil service and decaying institutions have not helped either. Pakistan can no longer afford complacency.

The country is therefore ripe for reforms, irrespective of whether we opt for self-prescribed bitter pills or let the IMF shove the medicine down our throats. The next IMF programme, which the country should expect within the current year, will make us forget the harshness of the existing programme. The only way out is to have a home-grown reform agenda and to have it fast. But the real question is who will bell the cat.

At present, Imran Khan is the only one with a plan and there is no one better than him to lead Pakistan through a difficult reform journey.

Last week Khan presented the broad contours of his reform plan, touching all the critical issues. He spoke about addressing the persistent fiscal deficit. The country needs to spend less and earn more and PTI aims to start from cutting down unproductive public sector expenditure, especially by re-structuring or privatising bleeding state-owned enterprises. We also need to defuse the ticking pension bomb and PTI is the only party having that realisation. On the revenue side, Khan indicated that bringing in already identified new taxpayers within the tax net would be his foremost priority.

The current account deficit remains our compelling constraint that forces us to knock on IMF’s door every time. The country needs more dollars without taking on external debt. The only sustainable way to do that is to reduce our reliance on imports. This means that the country would have to compensate for decades of negligence to invest in export-based and import-substitution industries, and Khan has heart set on doing exactly the same. We need to work with our industrialists to help them with product and market diversification through technology transfer, incentives and an enabling business environment.

But such measures would take time. In the short run, Khan intends to tap into 9+ million overseas Pakistanis, whose investment could bail the country out immediately. Who other than Imran Khan can these overseas Pakistanis trust? No one. But even this would need some hard work, such as ensuring contract enforcement to protect investors’ rights. A functional system of rule of law therefore will have to underpin these reforms, which forms the very core of PTI’s reform plan.

The groundwork for some of these ideas has already been done in PTI’s last tenure such as KP taking the lead on pension reforms, while for others, PTI stalwarts have already put their heads together. Parallel to a relentless political campaign, the party’s brains are at work 24/7 to chart the course for the future.

But having a plan is not enough. To be able to carry out tough reforms, the country needs a strong, stable and trust-inspiring government. Such a government should have a comfortable majority so that it does not have to bow down in front of coalition partners and make political compromises. It should also have a sufficient runway to be able to implement its plan and not give in to populist instincts fearing elections. Most importantly, such a government should enjoy full trust of the people and only then will the masses be willing to weather the harsh effects of reforms. Right now, Imran Khan is the only leader who can bring in such a government. Fresh polls are likely to give Khan a clear 5-year runway and a comfortable majority, as indicated by numerous polls and all the by-elections since the change in the government last year.

With Khan in the driving seat, Pakistan stands its only chance to change its destiny and pull itself out of the economic mess.

Published in The Express Tribune, March 20^th, 2023.

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