How not to manage the economy
The fundamental problem that economy is facing is the ad hoc approach taken by Pakistan’s economic managers.
Board members of the IMF are making it abundantly plain that the government has undertaken virtually none of the reforms necessary to fix the structural problems facing the economy. DESIGN: ESSA MALIK
On the surface of it, all seems to be going well. The International Monetary Fund (IMF) declared on December 19 that reforms in Islamabad are continuing at a satisfactory pace, which led it to release the second tranche of the $6.7 billion bailout package, amounting to $550 million. But underneath, board members of the IMF are making it abundantly plain that the government has undertaken virtually none of the reforms necessary to fix the structural problems facing the economy. We would go one step further and say that on some crucial matters, most notably taxation, the present government seems geared to make things worse.
The Fund already highlighted the myriad of issues that need to be addressed, most notably the dwindling foreign exchange reserves, the increasing inflation and the constant bleeding in state-owned companies. But underneath it all, the fundamental problem facing the economy is the ad hoc approach taken by Pakistan’s economic managers. Finance Minister Ishaq Dar has been given credit for being more forthright and forceful in his job as custodian of the nation’s finances. But he seems to be suffering from the same affliction that has previously stunted the efforts of his predecessors: he seems so overwhelmed by the immediate crisis that he neglects the strategic drift. The short-termism that got us into the mess keeps on being exacerbated. Take, for instance, the government’s attempts to shore up the foreign exchange reserves, which appears to have been accomplished largely by asking textile exporters to bring back their foreign cash hoard. Soon after, the Economic Coordination Committee of the cabinet approved the diversion of natural gas away from power utilities and towards the captive power generation units of the textile companies, violating the one cardinal principle that the present government had sworn to uphold: that the power sector would be prioritised for cheap fuel supply. This is not a coincidence. This is how a promising start on the path to reform is squandered. The finance minister has allowed himself to get so bogged down in everyday firefighting that he seems to have lost sight of his strategic vision. He will find himself adrift until he finds it back.
Published in The Express Tribune, December 21st, 2013.
The Fund already highlighted the myriad of issues that need to be addressed, most notably the dwindling foreign exchange reserves, the increasing inflation and the constant bleeding in state-owned companies. But underneath it all, the fundamental problem facing the economy is the ad hoc approach taken by Pakistan’s economic managers. Finance Minister Ishaq Dar has been given credit for being more forthright and forceful in his job as custodian of the nation’s finances. But he seems to be suffering from the same affliction that has previously stunted the efforts of his predecessors: he seems so overwhelmed by the immediate crisis that he neglects the strategic drift. The short-termism that got us into the mess keeps on being exacerbated. Take, for instance, the government’s attempts to shore up the foreign exchange reserves, which appears to have been accomplished largely by asking textile exporters to bring back their foreign cash hoard. Soon after, the Economic Coordination Committee of the cabinet approved the diversion of natural gas away from power utilities and towards the captive power generation units of the textile companies, violating the one cardinal principle that the present government had sworn to uphold: that the power sector would be prioritised for cheap fuel supply. This is not a coincidence. This is how a promising start on the path to reform is squandered. The finance minister has allowed himself to get so bogged down in everyday firefighting that he seems to have lost sight of his strategic vision. He will find himself adrift until he finds it back.
Published in The Express Tribune, December 21st, 2013.