Government urged to keep exchange rate at realistic level

Private Sector Development Task Force of the Planning Commission has urged the government to maintain a realistic exchange rate that put some breaks on domestic consumption while encouraging exports. Chairman of the task force, Shahid Javed Burki says the report has proposed this in a letter written to President Asif Ali Zardari.
It also proposed to set up a federal secretaries policy implementation committee, co-chaired by secretaries of finance and planning. The committee should have secretaries of all economic ministries as members including the Chairmen of Provincial Planning and Development Departments, it added.
According to the letter, copy of which was made available to Business Recorder, the committee should meet every month and issue its agenda and the minutes to Press. The chairman of the committee should be required to appear before the appropriate Senate and National Assembly committees every quarter. "We will keep you, the Prime Minister, Deputy Chairman, Planning Commission, and the Advisor Finance, informed of the progress we are making in our deliberations in the committee," the letter said.
The task force has also presented some proposals to improve the economic situation of the country. The letter emphasised on domestic resource mobilisation and narrowing the savings-investment gap. "We also strongly urge the government to maintain a realistic exchange rate that constraints domestic consumption while encouraging exports. While designing public policy. We believe that the government should place emphasis on achieving a better distribution of income and wealth and to ensure that incremental incomes are more evenly distributed than has been the case in the past," the letter said.
It said that to deal with this problem the government must focus not only on providing adequate resources but also undertaking a number of institutional reforms. A close partnership will be needed between the public and private sectors. The task force would like to make a number of specific suggestions for the considerations of your government. These are as follows:
--- Restore confidence in the country and the economy on the part of both internal and external investors by strongly focused efforts to bring political stability and establish a durable political structure;
--- Reduce inflation to single digit in 2009-10 by the adoption of appropriate fiscal and monetary measures;
--- Combine the efforts to stabilise the economy by improving its efficiency;
--- Raise the tax-to-GDP ratio beyond the unprecedentedly low levels to which it has declined in recent years. This should be done without hurting investment, by constraining consumption, and by protecting the poor;
--- Launch a well focused effort to increase the level of investment. This could be done by the adoption of a number of measures. These include the following:
--- Reduction in the discount rate as the monetary situation improves;
--- Rationalising the tariff structure by encouraging the import of capital goods, keeping in mind the fact that the prices of investment goods have risen faster than those of consumer goods;
--- Accelerated depreciation for investment by companies to improve the educational and skill levels of their workers;
--- Support the efforts by the private sector to form companies dedicated to skill development;
--- Level the playing field for enterprises of different sizes by bringing the small and medium enterprises into the tax net and into the regulatory framework;
--- Facilitate the exit of companies that are not performing (have turned "sick") by establishing a Resolution Trust Corporation and providing it with an appropriate amount of capital;
--- Quicken the implementation of the programme to computerise land records. This would generate a lot of economic activity and deepen the financial and capital markets;
--- Expedite the process of privatisation by putting greater emphasis on the use of domestic capital markets;
--- Strengthen the Security and Exchange Commission of Pakistan and the Competition Commission. The latter should be provided with the funding that is its due under the law that established it; and
--- Develop poverty, nutritional and other "maps" to better focus subsidies to the deserving poor and to the more backward regions of the country. The conceptual framework and technology for doing this has been developed by the World Bank.