Former finance minister Shaukat Tarin said on Saturday that an agreement on a Charter of Economy – a broad economic roadmap agreed upon by all participants in terms of policymaking – is not possible in the current "toxic" scenario.
“The political environment is very toxic at the moment,” Tarin said during his remarks at the 'National Economy Dialogue – The Way Forward for Pakistan' organised by Corporate Pakistan Group and Nutshell Conferences.
“However, I believe that after a new government is formed through elections, all sides should decide to settle their political differences on a few items,” he said.
"What we need is inclusive and sustainable growth over a long period of time. However, Pakistan has been unable to sustain growth in the last several decades.”
Tarin's remarks come after Prime Minister Shehbaz Sharif, in his address to the nation on Friday night, said that he would reach out to all political parties to map out a Charter of Economy. The charter has been a long-standing demand of Pakistan's business community that feels sustainable economic growth would come through consistent policymaking.
Tarin said a key reason behind Pakistan's constant boom-and-bust economic cycles is the country’s savings rate.
"The savings rate is very low, and can only support 2-3% growth rate at best."
Tarin informed that Pakistan has a wide import-export gap, which puts pressure on the balance of payments as the economy grows.
“We also have a productivity problem, whether it be agriculture or industry.”
He said that in order to resolve these issues, Pakistan needs to increase its banking footprint, which is only 33% of GDP, and then incentivise savings schemes.
“We have to issue new licences to increase the banking footprint on a regional and provincial basis,” he said.
“Thirdly, we also need to bring down inflation because people in high inflation environments tend to spend. We also have to reduce cash circulation in society,” he said.
Tarin said 66% of Pakistan’s exports are made up of textiles, while the country’s shipments abroad also have a very narrow geographic focus, as "64% of our exports go to European Union and the US only".
“The way forward is that we should encourage China, Korea and others to come and populate our Special Economic Zone with export-oriented industries,” he said.
Tarin said that the government would need to push the IT sector and have Special Technology Zones. “We should also consolidate the industry through private equity,” he added.
“We need to concurrently increase traditional exports, by giving incentives for value addition, product expansion and geographic diversification."
Talking about lower yields in the agricultural sector, Tarin said work needs to be done on the entire value chain.
“We should also work on increasing our tax to GDP, which is now around 10%. It should go to around 18% in 6 to 8 years,” he said, adding that the government should also control its fiscal expenditure.
Tarin also advocated the privatisation of State-Owned Enterprises (SOEs).
The finance minister, himself an ex-banker, added that a lack of political will and comprehensive planning has caused boom and bust economic cycles in the economy.
“Political will is the top requirement, and then you must have proper planning,” he said.