ON the face of it at least, the new short- to long-term plan announced by Finance Minister Shaukat Tarin for the development of 14 key sectors of the economy including agriculture, construction, tourism, IT and micro and small enterprises for putting the country back on the road to inclusive and sustainable economic growth lacks what it boasts: a planning-based strategy.
From the details published in newspapers, the plan seems to be a collection of certain targets that the government wants to achieve in the next two to three years ahead of the next general elections. How? Although Mr Tarin claimed that the achievement of these targets would ‘set the stage for long-term inclusive, sustainable growth and rid us of the boom-and-bust cycles’, he did not elaborate on the road map he has developed for realising the goal.
For starters, the strategy seeks to boost economic growth to 6pc in the medium term without putting pressure on the country’s balance of payments, and by keeping inflationary expectations subdued. But it does not elaborate on how it plans to do so. The current account deficit is already billed to breach the central bank’s estimates of 2pc-3pc of GDP this year as imports are set to surge further to support the nascent economic recovery of recent months. Resultantly, the currency is already under pressure with the rupee weakening from 152.28 a dollar in May to around 166, fuelling inflation. Then, it seeks to double the current investment-to-GDP ratio to 24pc. That is a tall order. Although negative interest rates and the availability of cheap long-term financing has encouraged investors to invest in capacity expansion and new projects in the last one year, the trend may reverse as soon as the State Bank ditches its accommodating monetary policy stance to focus on price stabilisation. Likewise, the plans to increase tax collection by 1.5pc-2pc of GDP a year and boost annual exports to $40bn-50bn — even though doable — appear ambitious at this time.
Pakistan is at a critical juncture. The economic slowdown induced by IMF-mandated stabilisation policies and Covid-19 have left deep scars on the economy and the people. There is no doubt that the economy is turning the corner. Yet the recovery is fragile at best, with uncertainties — such as the potential insecurity spillover from Afghanistan, currency volatility, inflation, current account deficit and uncertain ties with the IMF – putting pressure on the business environment. It would be silly to expect piecemeal policies to tackle the issues and uncertainties facing the economy and people today. Instead of coming up with half-cooked strategies every few years, Pakistan’s political leadership and policymakers should focus on a comprehensive economic framework with short- to long-term targets for addressing structural problems in the economy as well as formulate policies to build the resilience of private businesses to enable them survive without the government’s assistance.
Published in Dawn, August 30th, 2021