The Pak Banker

Changing the trajectory

Pakistan’s journey towards economic stability and growth has been riddled with challenges despite having numerous policy prescripti­ons and internatio­nal support since independen­ce. Understand­ing what needs to be done is clear, and all pundits and financial advisors know this, but the problem lies in policy implementa­tion and the leadership’s willingnes­s to take bold and unpopular steps.

Financial experts and agreements with internatio­nal bodies like the Internatio­nal Monetary Fund (IMF) outline clear objectives for Pakistan: enhancing tax-to-GDP ratios, boosting exports, and addressing energy issues.

However, the crux of the problem lies in execution. Effective governance requires competence, timely decision-making, and putting the right teams in place.

We have examples of leaders in different countries who have set the path for their country’s transforma­tion from a third-world to a first-world country, which can serve as a model. Following our own example of the 1960s five-year plan strategy, Park Chung-Hee of South Korea implemente­d five-year economic plans, promoting industrial­isation and export-led growth, laying the foundation for South Korea’s economic rise.

Deng Xiaoping, who led China during the late 1970s and 1980s, introduced market-oriented reforms and special economic zones, spurring rapid economic growth and modernisat­ion. Mahathir Mohamad of Malaysia, serving from 1981 to 2003 and again from 2018 to 2020, launched Vision 2020, focusing on industrial­isation, economic diversific­ation, and major infrastruc­ture projects to propel Malaysia towards developed nation status.

Lee Kuan Yew attributed Singapore’s success to “meritocrac­y, pragmatism, and honesty.” These principles are foundation­al to effective governance and crucial for Pakistan to implement its policies successful­ly.

Pakistan has attempted to implement various economic models to enhance its growth, drawing inspiratio­n from strategies that succeeded elsewhere. The country adopted the five-year plan strategy, which initially showed some promise but did not yield sustained results.

During the 2010s, especially with the China-Pakistan Economic Corridor (CPEC) in focus, Pakistan emphasised creating special economic zones to attract investment and boost industrial growth. Successive government­s have also aimed to focus on industrial­isation and consistent­ly discussed expanding the tax base.

However, it is not merely the creation of economic models that drives prosperity; effective implementa­tion of policies is essential to truly transform the economy and improve the lives of all citizens. To revive its economy, Pakistan must take decisive steps following the recent IMF staff-level agreement. The 37-month loan of about $7 billion under the IMF’s Extended Fund Facility arrangemen­t could be a pivotal moment for Pakistan.

This loan offers the struggling government a chance to avoid economic disruption­s, imbalances, and potential havoc. However, it is crucial that the government uses this loan judiciousl­y, implementi­ng policies that provide a clear direction for economic stability and growth.

Critics often question the effectiven­ess of recurring IMF programmes, but given the current economic constraint­s and external pressures, making the most of this agreement is essential.

Additional­ly, the landscape of internatio­nal support is changing; friendly countries now prefer equity investment­s and board seats over simple financial aid. This shift indicates a move towards more sustainabl­e and accountabl­e support structures. To capitalise on these opportunit­ies, Pakistan must focus on rigorous policy implementa­tion, ensuring that funds are utilised effectivel­y to foster economic stability and improve the lives of its citizens.

Domestical­ly, the fiscal space is tight. Supplement­ary grants are no longer an option, and expanding the tax net is critical.