Pakistan seeks UK advice for economic plan

Official circles puzzled by PM’s decision to seek outside help despite IMF script

ISLAMABAD:

As the United Kingdom government starts advising Pakistan to develop a “home-grown” economic plan, confusion persists in official circles about the prime minister’s move to outsource the planning when the script of a new International Monetary Fund (IMF) programme has already been finalised.

Stefan Dercon, the policy advisor of the Foreign Commonwealth and Development Office (FCDO), along with members of the PM’s committee on homegrown economic development plan, held discussions with Pakistani authorities on Monday.

They convened separate meetings with Finance Minister Muhammad Aurangzeb and PM Shehbaz Sharif.

The Prime Minister’s Office this month broadened the committee's membership for the homegrown economic development plan, welcoming Professor Stefan Dercon, policy advisor to FCDO, and Dr Adnan Qadir Khan, FCDO's chief economist, into the forum.

Stefan Dercon has previously highlighted the issue of elite capture of resources in Pakistan, which has hampered the country's progress. Professor Adnan reiterated earlier this month that a country operating normally would not require an IMF program.

At a juncture when the government has nearly finalized the future economic policy trajectory under the IMF's guidance, engaging with FCDO officials suggests limited manoeuvrability outside the IMF's framework for implementation.

The planning ministry has also unveiled its long-term 5Es framework, encompassing exports, e-Pakistan, environment and climate change, energy, and equity and empowerment—key focal points for Pakistan's forthcoming development.

Sources informed The Express Tribune that ambiguity prevailed during these discussions regarding the rationale behind involving the United Kingdom government while Pakistan was negotiating a deal with the IMF.

The IMF has gone back to Washington without reaching a staff-level agreement and is waiting for the approval of its dictated budget by the National Assembly before striking a deal.

Under the rules of the business of 1973, economic planning is the job of the planning ministry but it has been overshadowed by an enlarged role of the finance ministry.

The IMF also now hardly consults with the planning ministry about the medium-term economic projections. As a result, the economic policies are being framed with the ultimate objective of fiscal consolidation which in turn suffocates economic growth.

The members of the home-grown committee were also not clear whether their advice had been sought for the budget or for the IMF programme and to what extent their advice could be incorporated under the IMF programme, according to a member of the committee who spoke on condition of anonymity.

There were more questions than answers during these meetings, according to another participant in these meetings.

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During the meeting with the prime minister, one of the participants raised the point that there was a need to get clarity on the purpose and then articulate it accordingly. The issue of buying-in of these reforms was also emphasised.

According to the planning ministry, by consistently growing at a rate of 7%, Pakistan can overcome its economic challenges and become a trillion-dollar economy by 2035. However, according to the IMF’s projections given its staff level report Pakistan’s economic growth would hover around 4% to 5% from the medium to longer term provided there remains economic stability.

The planning ministry 5Es framework, which includes exports, e-Pakistan, environment and climate change, energy, and equity and empowerment, has also been projected as a significant milestone in Pakistan's journey towards sustainable economic growth and development.

The 5Es framework aims to promote exports, build a knowledge economy, address environmental challenges and climate change, ensure affordable and sustainable energy solutions, and foster inclusive economic growth and universal access to health, education, and social protection services.

Stefan Dercon has been engaged by the government due to his work on Pakistan’s economy.

In an interview with The Express Tribune last year, Dercon had said that Pakistan’s elites are engaged in a battle for the capture of resources and power as part of a clientelism patronage state. He had emphasised that their motivation would not prioritise the economic growth and development of the country.

Dercon argued that there is an underlying elite bargain for the status quo among powerful elite groups comprising the leading political class, leading business class, leading individuals in the military, leading figures in civil society, leading members of the civil service, intellectuals, and journalists.

According to him, all these groups have an implicit agreement to maintain the status quo, with growth and development not being a core motivation for the dominant political class or the military. Those not in power would attempt to disrupt any stability to gain power and control the clientelist state.

According to Dercon, growth and development would disrupt the status quo; hence, it does not align with the interests of these groups.

During the PM’s meeting, Planning Minister Ahsan Iqbal pointed out that without peace, stability, policy continuity, and reforms, Pakistan's growth would remain stunted. He highlighted that even a Nobel laureate would be ineffective in aiding Pakistan under such circumstances.