IMF: lender of the last resort - II

The primary problem of Pakistan is trade deficit, which for the year 2017/2018 is expected to be around USD 35 billion. Our imports for the year 2017/2018 will be around USD 55 t0 60 billion whereas exports, at the maximum, will not exceed USD 25 billion. Such imbalance is unsustainable. The deficit on a long-term basis is required to be converted into a net positive of USD 10 billion per year if we want any sustainable development in this regard. This is a doable act. This should be the one-point agenda for economic revival and unless we do it, we will be wasting our time in useless discussions that have led us to the present foreign currency crisis-like situation. Economic history clearly shows that there cannot be any sustainable economic development unless there is correction in trade imbalance. Unfortunately, however, Pakistan is one of the few countries where this subject has totally been ignored, apparently by 'design' for short-term motives. We should as a nation be ashamed that smaller countries like Vietnam and Bangladesh have surpassed us in exports and some other economic areas. Pakistan has always acted imprudently in dealing with the matter of trade imbalance.
It has been observed that in the last 70 years of efforts to correct the trade imbalance have been concentrated only in futile attempts to increase exports while there has been very few concerted efforts to reduce the import bill. There is no doubt that exports are miserably low in relation to our potential, and the same have to be gradually increased. Nevertheless, this fundamental corrective measure cannot be undertaken unless 'exportable surplus' is available at competitive cost. In short, we cannot be competitive in exports if we produce goods with this high cost of energy; the lack of investment in intermediary goods, and other disguised factors that increase the cost of exports.
The trade policies of Pakistan in the past have directly, indirectly, principally and wholly been responsible for 'Pre-Mature De-Industrialization' of the country. We have forgotten the slogan 'Make in Pakistan'. Pakistan's primary problem is 'import substitution' and savings that can be made in the outflows of foreign exchange.
One very common example is enough to identify our weaknesses and myopic approach to this issue. There are over one million passengers who travel from North America to Pakistan every year. Now over 90 percent of them use airlines which are not Pakistanis. In other words, we pay in USD. Can we calculate, in simple accounting terms, the amount we spend on these airlines tickets which we effectively buy in USD and which could have been in rupees if the airlines, whether nationalized or un-nationalized, would have been Pakistan-owned. Same is the case with travel for Umra, Ziarat and Hajj. We constantly complain about losses in PIAC,that needs immediate correction, however, do we realize the negative impact on our foreign exchange and other balances on account of undesirable advantages and almost free landing we have allowed to foreigners? Is this viable? This is a very crude example of import of services.
Our primary problem lies in manufacturing sector. Since country's inception, from 1947, Pakistan's economic policies have promoted trade at the cost of industrialization. Whether that policy was right or wrong is a different subject, however, it is now proven after seventy years that industrial foundation of the country has not been properly laid. Now the crisis has reached its peak that can affect the stability of the whole system. This de-industrialization has resulted in (a) trade imbalance; (b) lack of employment opportunities and (c) indirect increase in cost of exports. A very common example of de-industrialization of Pakistan is the manufacturing of stationery pins. In the past, such pins were produced in Pakistan. Now they are imported. Same is the case with quality shoes, etc. Cheap Chinese manufacturing has turned the face of economics of Pakistan in another dimension.
We can write books on the reasons behind trade imbalance in Pakistan; however, we as a country see that our 'stores' are filled with imported consumable items like biscuits, chocolates, fruits, meat, etc. The buyers are around 7 to 8 percent of Pakistanis, who number around 15 million people, have unlimited means (mostly out of undocumented economy) to buy such imported products. If we analyze the details of our import bill for the year then it transpires that we import even agricultural items to the tune of USD 3 billion. The worst part of the subject is that out of total import bill of 2017/2018, only 20 to 25 percent are 'capital items'. The remaining are all 'consumables'. Even if we exclude petroleum products, which account for another 20 to 25 percent, there is a need to have a concerted plan for substituting the remaining 40 percent of imports. If concerted and correct policies are adopted import bill at 2017-18 values can be reduced by USD 15 billion. The question before us is whether or not we take the subject seriously. The primary answer is no? If the answer is 'no' and this subject is not the core agenda item in our upcoming elections then it means that certain elements, who are very resourceful in this country, want a 'status quo' in the system. This may be true for a part of population; however, for a common Pakistani the issue is that increasing unemployment that has arisen on account of this premature de-industrialization can destabilize the socio-political system to non-reparable situation. Accordingly, the question is not the IMF or otherwise. The IMF is our only lender of the last resort. Their prescriptions for economic correction are based on common principles of equity. There is nothing strange or wrong about it. They require documentation, income based taxation and efficient public service. If we do not want to adopt these primary principles then it means that we do not fully appreciate and anticipate the problems we will be facing if we continue with our profligate ways that we have adopted for last seventy years. Now there will be no more aid or a war to balance our trade imbalance. Let us work and earn for our future generations.
(Concluded)