In an effort to spur long-term economic recovery and provide stimulus packages to the private sector, Interim Prime Minister Anwaarul Haq Kakar has approved the formation of a cabinet committee for economic restoration, which would report directly to him in ISLAMABAD.
According to reports, the PM has given his approval for the Ministry of Finance to formally notify an 11-member committee charged with resolving Pakistan’s economic woes.
Dr. Waqar Masood Khan, the Prime Minister’s Adviser on Finance, was the most recent high-profile appointment to the cabinet committee. The fact that Khan’s name was reportedly not suggested by the finance ministry raised concerns. They raised concerns over Khan’s selection as PM adviser on finances.
They explained that was why he hadn’t yet moved into the Q-block, where the Ministry of Finance is located. The cabinet committee has been established “to develop a plan for economic revival within two weeks,” and Finance Minister Dr. Shamshad Akhtar will preside over the group.
For a roadmap to economic revival, check out the IMF agreement.
Pakistan has agreed to adhere to a stringent fiscal and monetary framework as part of its short-term IMF programme. The administration has also committed to a market-based currency rate policy and has pledged to end all subsidy programmes.
This leaves little room for a caretaker ministry, whose constitutional existence ends on November 9, to propose amendments to the agreed upon framework. In response to the caretaker prime minister’s decision to establish cabinet committees on Friday, the Pakistan Peoples Party (PPP) criticised the establishment of the committee to enact laws and investigate if parliament had the authority to make any particular law.
The loss of economic productivity, elite capture, and consumption-fueled policies have put Pakistan’s economy in a grave crisis from which it may take years to recover.
The rate of inflation has exploded. Electricity rates have been on the rise as successive administrations have begun to transfer the expense of inefficiency on to their constituents. A further contributing factor is the depreciation of the rupee against the dollar.
The economic revival cabinet committee’s agreed terms of reference (ToRs) call for them to conduct a baseline analysis of the macroeconomic condition and identify difficulties before making policy recommendations.
Markets surge when an IMF loan is announced.
There have been many studies and proposals to fix the economy’s long-standing problems, but the true difficulty is in actually putting them into action. The committee’s job is to examine methods of maintaining budgetary restraint and provide recommendations for improvement.
Interest payments of Rs5.83 trillion contributed to Pakistan’s record-breaking federal budget deficit of Rs6.7 trillion in the previous fiscal year. In a severe situation when authorities are paying interest on loans by accepting new loans, the federal government’s net income was Rs1.6 trillion less than the cost of borrowing.
Short-term measures aimed at reviving the economy and the private sector will be proposed by the cabinet committee. The feasibility of encouraging private investment by standardising and rationalising incentives will be investigated.
The success of industries like the textile and automotive industries can be attributed in large part to state subsidies and patronage. The government ended its IMF-mandated electricity subsidy programme in February of this year. The committee will also determine the extent of competition and establish a climate conducive to business.
Heavy taxation, unstable economic policies, a high cost of doing business, and elite capture of the economy have all contributed to a decline in Pakistan’s private sector’s competitiveness. The members of the committee will be Planning Commission Deputy Chairman Dr. Jehanzeb Khan, Minister of Planning Sami Saeed, Minister of Commerce, Industries, and Production Ejaz Gohar, Minister of Communication, Maritime Affairs, and Railways Shahid Ashraf Tarar, Minister of Petroleum and Power Mohammad Ali, Minister of Law and Justice Ahmad Irfan Aslam, Minister of Information Technology and Telecommunication Umar Saif, and Minister of Planning Sami Saeed.
Vice Admiral (Ret.) Iftikhar Ahmad Rao, Adviser to the Prime Minister on Maritime Affairs, Adviser to the Prime Minister on Establishment Ahad Cheema, and Adviser to the Prime Minister on Finance Dr. Waqar Masood Khan round out the group. Methods “to facilitate export growth, its diversification, and value addition” will be explored by the committee. The elimination of these roadblocks will hasten the influx of foreign investment.
To attract FDI, the country’s civil and military leaders have established the Special Investment Facilitation Council. To what extent the new committee improves matters remains to be seen. About a quarter less foreign direct investment, or less than $1.5 billion, flowed into Pakistan in the most recent fiscal year compared to the year before.
A strategy for rapid rollout of comprehensive energy sector reforms will be proposed by the Akhtar-led group. The Prime Minister has also established an energy-specific cabinet committee charged with making policy recommendations in this area. The committee for economic revival will discuss potential policies to boost economic growth, wages, and employment in the medium term.
Pakistan’s economic growth model is debt-driven, and multiple studies have shown that growth rates higher than 3.8% cause problems with the country’s budget and trade balance. The previous administration set a goal of 3.5% growth for the current fiscal year, although IMF and central bank predictions are closer to 2%-3%.
