Finally, the prime minister has reconstituted the Economic Advisory Council (EAC). The body, however, mostly comprises those who have assisted the previous four governments. Hopefully, politicians and institutions involved will allow the EAC team to contribute so that they can ultimately become an integral part of policymaking process. It is expected that EAC members will provide useful guidelines. This time they must be fully prepared and will be quick to present evidence-based plans/recommendations that will support in the policymaking processes to overcome macroeconomic hurdles.
Before any plan is suggested/executed by the newly-appointed EAC, some sort of strategy has to be formulated by it to determine the future direction of the economy.
The PM should ask all the 13 non-government committee members to prepare and provide a detailed plan along with individual presentations on how they intend to address and execute the major fiscal and monetary issues teaming up with SBP, which will assist in reducing the macroeconomic pressure.
For credible representation, all EAC members should be asked to submit their detailed plans to the prime minister.
EAC members have decades of experience of international and domestic markets and most of them were associated with various governments in the past, of which two are former finance ministers and three of them former SBP governors. Due to their vast experience all EAC members should be encouraged to provide their personal inputs in the areas of their expertise to the prime minister.
They surely must be having an alternate plan, as the majority of them have on several occasions appeared in TV talk shows with loads of suggestions/proposals, which is why PM should ask all the EAC members to provide a firm written proposal/plan on the following major issues that need to be addressed on an urgent basis.
1) How to identify and address loopholes and weaknesses to stimulate economic growth especially in the industrial and manufacturing sector?
2) What the government should do to reduce its dependence on foreign and local borrowings?
3) To improve tax collection, what action is required to increase the number of taxpayers to attain a target of 25% of the GDP?
4) What plan do you have to ensure documentation of the economy?
5) How to address and get rid of the issue of ‘black economy’?
6) How is it possible to push up growth and achieve a real economic growth rate of beyond 5 percent on a consistent basis, when bank lending to the private sector has plunged to alarmingly low (below 50%) levels?
7) Banks’ investment in government securities is extremely high that has reached Rs 10.318 trillion or 78.5% which has clogged the liquidity pipe. How can the private sector and economy grow unless bank investments in government securities are substantially reduced? Suggest a durable solution to address the issue.
8) As per the proposed SBP amendment bill, no new government borrowing will be allowed. Please suggest what needs to be done to arrange emergency funding other than open market operations (OMOs), which can only be utilized for emergency purposes in small amounts. If OMOs are capped at Rs 2 trillion, what fiscal measures will be required to arrange funding?
9) Circular debt (Rs 2.4 trillion) is an unending ongoing decade old problem. How to deal with this challenge?
10) Unfunded debt (unhedged) has reached an alarming level of Rs 3.668 trillion. What fiscal measures should be taken to reduce and hedge the risk unfunded debt?
11) In the last 10 years, the value of rupee has halved, which has eroded people’s purchasing power. But we were unable to increase exports, as overall performance remains pretty ordinary. Please come up with a firm plan to push exports to new highs and beyond USD 40 billion.
12) Appreciation of Pak rupee has resulted in improving GDP growth number in dollar terms, debt to GDP ratio, tax to GDP ratio and per capita income. This is a temporary phenomenon. Suggest a better way through a firm proposal to counter all such risks in an effective and meaningful manner.
(The writer is former Country Treasurer of Chase Manhattan Bank)
Copyright Business Recorder, 2021