Baqir urges new govt to tackle 'economic hurdles'

Stresses need to address sustainability of Pakistan’s debt

KARACHI:

As Pakistan eagerly awaits the outcome of its 2024 elections, the nation finds itself at a critical juncture, grappling with economic challenges that have long plagued its stability. Former central bank governor, Reza Baqir, highlighted the pressing need for sustainable economic policies in a recent interview with Bloomberg TV, underscoring Pakistan’s daunting debt burden and the imperative of restoring investor confidence.

With ballots being tallied, citizens from all walks of life are looking to the incoming government with renewed hope, yearning for policies that will alleviate inflation and stimulate economic growth.

“Pakistan’s new government will need to start negotiations early for a new loan package with the International Monetary Fund (IMF) as the country has ‘significant’ payments due to the global lender,” said the former central bank governor. Baqir underscored the significance of Pakistan’s relationship with the IMF and the urgent need to curb inflation, which has soared to unprecedented levels of 30-40%.

“In my view, the number one priority has to be how to protect the poor from the very high inflation that Pakistan has seen over the last couple of years. Headline inflation of around 30%, food inflation of 40%. These are unprecedented levels in decades,” he said, adding that, “I think the number one challenge is going to be how to put the economy on a sustainable footing and how to manage its relationship with the IMF,” said the former SBP governor.

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Speaking about what conditions Pakistan will have to fulfill in order to secure the next IMF programme, Baqir highlighted the need for ownership of the reform program. “The first goal is going to be how does Pakistan make a more equitable tax system? How does Pakistan bring into the tax net people and privileged classes, who have avoided taxes instead of continuing to squeeze those in the middle class and the salary-earning people? How Pakistan can broaden its base? These are fundamental questions of ownership, and if the new government generates the ownership around the reform momentum and is less seen as dictated from above by the IMF, the chances of it being sustainable are going to be much higher,” he said.

Published in The Express Tribune, February 9^th, 2024.

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