If I am the finance minister of Pakistan

Focus must be on fiscal prudence, innovative policies, strategic reforms to ensure sustainable growth

ISLAMABAD:

I would also resort to the IMF, but for me it would be the Internal Mobilisation of Financing (IMF) rather than borrowing from the institution called the International Monetary Fund (IMF). I would focus more on fiscal prudence, innovative policies, and strategic reforms to ensure sustainable economic growth rather than finding temporary, unsustainable and miraculous solutions.

Internal resource mobilisation is crucial for Pakistan’s economic sovereignty. It involves enhancing the government’s ability to generate revenue from domestic sources, such as taxes, rather than relying on external debt.

Internal resource mobilisation is a fundamental aspect that an ideal finance minister should prioritise for the economic well-being of Pakistan. Relying heavily on external sources of funding, such as loans and aid, can lead to a vicious cycle of debt accumulation and dependency.

According to the latest data, Pakistan’s tax-to-GDP ratio stands at a meagre 12.6%, which is significantly lower than the average for developing countries. This highlights the urgent need for the finance minister to implement comprehensive tax reforms to broaden the tax base, simplify tax procedures, and crack down on tax evasion.

By enhancing internal resource mobilisation, the finance minister can reduce reliance on external sources of funding and create a more sustainable fiscal framework for Pakistan’s economy. To break free from this cycle, the finance minister must prioritise the generation of internal resources through taxation, efficient revenue collection, and curbing tax evasion.

As the finance minister, I would prioritise broadening the tax base, simplifying the tax system, and ensuring compliance to increase revenue without overburdening the existing taxpayers and citizens. This approach not only secures financial stability but also instills confidence among international stakeholders about Pakistan’s commitment to self-reliance.

I would also focus on balancing growth and stability. Inflation management is a delicate balancing act that merits immediate attention.

Inflation, if left unchecked, can erode the purchasing power of consumers, destabilise the economy, and hinder long-term growth prospects.

Pakistan has grappled with persistent inflationary pressures in recent years, with the inflation rate hovering around double digits. To address this challenge, I would adopt a multi-pronged approach that combines monetary policy measures, supply-side interventions, and targeted subsidies.

By working closely with the State Bank of Pakistan (SBP), I would apply appropriate monetary policy tools to control inflation and maintain price stability. Additionally, investing in infrastructure development, improving agricultural productivity, and regulating essential commodity markets can help alleviate supply-side constraints and reduce inflationary pressures.

As the finance minister, I would employ a mix of monetary and fiscal policies to control inflation without stifling economic growth, rather than knee-jerk reactions and forcing district administrations to take impractical measures to control commodities’ inflation.

This includes targeting specific sectors for growth, revising tax policies to encourage investment, and avoiding monopolies that can lead to price hikes.

By keeping inflation in check, I would be able to maintain the purchasing power of the public, ensuring a stable economic environment conducive to growth.

My next focus would be on enhancing the domestic economic growth and productivity. To enhance economic growth, as a finance minister, I would focus on innovation and total factor productivity. This involves investing in research and development, improving infrastructure, and fostering a skilled workforce.

Moreover, productivity-enhancing reforms, such as reducing regulatory complexity and harmonising taxes across provinces, can significantly boost economic performance. By creating an environment that encourages innovation and efficiency, Pakistan would be at the right path towards a more prosperous future.

Pakistan’s economic growth has been hindered by various structural constraints, including inadequate infrastructure, low industrial productivity, and a lack of skilled labour. To unlock the full potential of Pakistan’s economy, I would implement policies that foster innovation, entrepreneurship, and competitiveness.

Investing in infrastructure development, such as transportation networks, energy facilities, and digital connectivity, can create an enabling environment for businesses to thrive and expand. Moreover, I would promote a conducive business environment by streamlining regulations, reducing bureaucratic hurdles, and incentivising private sector investment.

I would focus on strategic reforms and prudent policymaking in order to lead Pakistan towards the path of economic resilience and prosperity.

The journey is complex, but with a clear vision and steadfast commitment, it is certainly achievable. Pakistan’s economic future hinges on the actions of its finance minister, and the nation looks towards this pivotal role with hope and expectation.

All of the aforementioned, however, is too good to be true and some may term it as idealism. The ground realities warrant a different finance minister who pays heed to the interests of real politic, lobbies and interest groups, serve the popular decisions and actions as band-aid rather than painful, sustainable and impactful ones.

This is why I am not the finance minister of Pakistan.

The writer is an international economist

Published in The Express Tribune, June 3^rd, 2024.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.