Body for economic revival formed
Caretaker finance minister to chair the committee. Photo: File
Interim Prime Minister Anwaarul Haq Kakar has approved the constitution of a cabinet committee for economic revival, giving it the mandate to suggest measures for long-term economic growth and offer stimulus packages to the private sector.
The PM gave the go-ahead for notifying an 11-member committee for finding solutions to Pakistan’s economic ills by adding three more members to a list suggested by the Ministry of Finance to the PM House, according to sources.
The notable addition by the PM Office to the cabinet committee was Adviser to PM on Finance Dr Waqar
Masood Khan. Sources said that the finance ministry had not recommended Khan’s name, which raised eyebrows. They pointed out that there was unease over the appointment of Khan as the PM adviser on finance.
Because of that reason, he had not started sitting in the Q-block – the seat of finance ministry, they added. Finance Minister Dr Shamshad Akhtar will chair the cabinet committee, which has been set up “to develop a plan for economic revival within two weeks”.
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Pakistan is under a short-term IMF programme and it has already committed to follow a tight fiscal and monetary framework. The government has also agreed not to give any more subsidies and to adopt a market-based exchange rate regime.
This leaves very little room for proposing changes to the agreed framework, particularly for a caretaker cabinet whose constitutional life will end by November 9. Pakistan Peoples Party (PPP) on Friday reacted to the caretaker prime minister’s decision to set up cabinet committees, particularly the committee on enacting laws and looking into whether parliament had the mandate to make any specific law.
Pakistan has been passing through the worst economic times as the loss of economic productivity, elite capture and consumption-fueled policies have brought the economy to a point where it may take years to recover from the deep crisis.
Inflation is skyrocketing. Successive governments have been passing on their cost of inefficiency to electricity consumers, forcing people to start burning their electricity bills. The loss of rupee value against the US dollar is adding fuel to the fire.
According to the approved terms of reference (ToRs), the cabinet committee for economic revival will assess the baseline of the macroeconomic situation as well as challenges and will recommend measures to address the issues.
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There have been many studies and plans to address the chronic issues facing the economy but the real challenge is their implementation. The committee has been mandated to review and suggest measures for ensuring fiscal discipline.
Pakistan booked a record federal budget deficit of Rs6.7 trillion in the last fiscal year on the back of unsustainable interest payments of Rs5.83 trillion. The federal government’s net income was Rs1.6 trillion less than the cost of loans, a dire situation where authorities are paying interest on loans by taking fresh loans.
The cabinet committee will propose economic and private sector revival measures, with a focus on short-term actions. It will examine the scope of stimulating private investment through streamlining and rationalising an incentive framework.
Sectors like textile and automobile have been striving on the back of state subsidies and patronage. In February this year, the government withdrew electricity subsidies under the IMF programme. The committee will also identify the scope of competitiveness and competition and create a business-friendly environment.
Pakistan’s private sector competitiveness has been eroded due to heavy taxation, unpredictable economic policies and a high cost of doing business coupled with elite capture of the economy. Minister of Commerce, Industries and Production Ejaz Gohar, Minister of Planning Sami Saeed, Minister of Communication, Maritime Affairs and Railways Shahid Ashraf Tarar, Minister of Petroleum and Power Mohammad Ali, Minister of Law and Justice Ahmad Irfan Aslam, Minister of Information Technology and Telecommunication Umar Saif and Planning Commission Deputy Chairman Dr Jehanzeb Khan will be members of the committee.
The other three members are Adviser to PM on Finance Dr Waqar Masood Khan, Adviser to PM on Establishment Ahad Cheema and Special Assistant to PM on Maritime Affairs Vice Admiral (Retd) Iftikhar Ahmad Rao. The committee will find ways “to facilitate export growth, its diversification and value addition”. It will expedite the inflow of foreign investment by removing obstacles.
The civil-military leadership has also set up the Special Investment Facilitation Council to bring foreign direct investment. It has to be seen how the new committee will add value in this regard. In the last fiscal year, Pakistan received less than $1.5 billion in foreign direct investment, about one-fourth less than the preceding year.
The Akhtar-led committee will propose a plan for speedy implementation of holistic energy sector reforms. The PM has also set up a separate cabinet committee on energy, which has the mandate to propose energy policies. The committee for economic revival will consider policy measures for improving income and employment opportunities and overall economic growth over the medium term.
Pakistan’s economic growth model is debt-driven and various studies suggest that economic growth of over 3.8% results in fiscal and current account deficit problems. For this fiscal year, the previous government targeted 3.5% growth but the IMF and central bank have given projections in the range of 2% to 3%.