Governing the Governable a retreat from pessimism
Pakistan’s economic picture is not as gloomy as being portrayed in the mainstream media, primarily in the times when the world’s largest economies are struggling in coping with the novel coronavirus. Pakistan’s economy is in the phase of stabilization.
According to Economists, the economy has stabilized and in the next years, the GDP growth will witness significant growth. Although the problems inherited by the incumbent Government were numerous; dwindling reserves, wide fiscal and current account deficit. In addition to this, highly politicized institutions like the Federal Board of Revenue (FBR), Pakistan International Airlines (PIA), Pakistan Railways (PR), and Pakistan Post added to the woes of the existing executive. Furthermore, the 18th Amendment abolished the concurrent list and transfer its subjects to the provinces. And with the greater authority, the greater responsibility in terms of revenue generation was also placed upon the federating units. Ironically the provinces failed in both vital areas of generating revenue and devolving powers to local bodies.
The Federal Government in its capacity launched serious reforms like DE politicization, removal of illegal appointees or those appointed through improper channels, introducing digitization or E-Governance, and the formation of Prime Minister Cell for Institutional Reforms headed by veteran economist Dr. Ishrat Hussain.
Reforms in Key Institutions
Federal Board of Revenue (FBR)
The Tax policy board of FBR is separated and inculcated in the Ministry of Finance.
The establishment of the Integrated Transit Trade Management System (ITTMS).
The appointment of skilled individuals from the private sector on a contractual basis.
The close coordination with World Bank in simplifying the tax regime.
Security and Exchange Commission of Pakistan (SECP)
The policy board of the commission has been revamped and will now be chaired by an expert from the private sector instead of Secretary Finance.
Pakistan Railways (PR)
The complete overhaul of the Railway Division is underway
The new and highly skilled Chief Executive Officer (CEO) has been appointed
Pakistan International Airlines (PIA)
The rationalization of Human Resource (HR) by reducing the size and increasing efficiency
Civil Aviation Authority (CAA)
The separation of regulatory functions from operational management of Airports
Every Airport will act as a separate unit and subsidiary of the parent organization
The introduction of the principles of E-Governance in all Government functionaries
The up-gradation of Web Portals into the modern standards
All Websites and Portals should contain basic information readily available to the public
The creation of the International Express Mail System (EMS) in the Post Office
The EMS system ensures smooth parcel service across the globe in 72 hours
The rates of the service are lower than private sector companies
The revenue of Pakistan Post has increased significantly
The electronic system of submission of summaries to the Federal cabinet
Rising Foreign Exchange Reserves
Currently, Pakistan’s foreign exchange reserves stand at 23.2 billion dollars the highest since June 30, 2016. The forex reserves represent the financial health of the state. And the state can fulfill international financial obligations, provide subsidies in times of disaster, etc. One of the foremost demands of International Monetary Fund (IMF) economists is to increase taxes so the country can come out of an endless cycle of taking loans to meet its expenditures. The cabinet attempted to formalize an undocumented economy. But the bottlenecks are deeply entrenched in the society as evident from the traders’ community country-wide lockdown creating immense problems for the common masses.
Roshan Digital Account
The influx of steady remittances from the Pakistani diaspora abroad has played a monumental role in supporting the economy. The remittances are rising and this can be attributed to the popularity of the country’s Prime Minister among Pakistani citizens residing in foreign countries. The Prime Minister enjoys immense popularity in the Pakistani diaspora residing in the United Kingdom (UK), Saudi Arabia (KSA), the United States of America (USA), and the United Arab Emirates (UAE). The opening of the Roshan Digital Account eliminated the intricacies involved and further played the role of catalyst in bolstering forex reserves. The Prime Minister also acknowledges the importance of overseas Pakistanis and keeping this in view recently said on the social media platform, “Alhamdulillah, funds received through Roshan Digital Account have crossed $1bn. I would like to thank our overseas Pakistanis for their overwhelming response”.
Saad Hashemy, executive director at BMA Capital, said this is an extremely positive development and credit goes to the ruling management for swiftly concluding the issuance of the Eurobonds that has led to this rise. “Given strong remittances, there is no downside risk to reserves at least in the short to medium term.”
Loss-making State-Owned Enterprises
But it does not mean all is well the path to complete recovery is not linear there are challenges like the burden of the loss-making Public sector enterprises like Pakistan International Airlines (PIA), Pakistan Steel Mills (PSM), and other power generating public sector entities. The humongous circular debt in the power sector is still the Achilles heel of the economic team.
The new Finance Minister
The new finance Czar has arrived. Shaukat Tarin is a renowned economist. It is not the first time Mr.Tarin is leading the Ministry of Finance and Economic Affairs. The first task on which all the relevant quarters are eyeing is bailout negotiations with the IMF. The other major problem is loss-making State-Owned Enterprises (SOEs).
The complete privatization has not worked in the past prominently in the case of K Electric. On the contrary, the PM cell for institutional reforms is moving towards the mixture of Public and Private models called the Mixed Ownership Model, as Prime Minister Advisor on institutional reforms Dr. Ishrat Husain has said, “the government is moving towards a mixed ownership model which has successfully been employed in several countries to manage large public enterprises”.
Lastly in the words of Wall Street Journal: “Privatization of state-owned dinosaurs isn’t the sole solution, but the sooner Islamabad can stop hemorrhaging 500 billion rupees (nearly 5 billion dollars) annually on budgets, subsidies, and bailouts for failing enterprises, the better.”
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