Dar, diplomacy & economic viability–II

Pakistan is still relying on the traditional methods to generate foreign exchange. The major export items to the USA include textile products such as house linens, knitted sweaters, and clothes. The same is the case with China as well with the export of refined copper, rice, and cotton yarn.

According to the US Census Bureau, Pakistan’s total exports to the USA till July 2022 were recorded as US$3,710.0 million, whereas import for the same period was recorded at US$ 1,994.1 million. Indian exports to the United States for the same period were of US$ 51,715.9 million while its imports reached US$ 27,303.8 million.

Unfortunately, Pakistan’s volume of trade with its neighbouring countries is very low. China is considered an all-weather friend of Pakistan with a population of over 1.42 billion. Despite having good terms with Pakistan, our total exports could not surpass 5 billion in the last 75 years.

Pakistan’s volume of trade with India was recorded at around US$2.42 million in 2022 despite sharing common culture, language, etc. We need to do some soul searching as to why despite having a strategic location, our export industry is shrinking on a daily basis.

The major factor in our economic failure is political instability. Undue interference in the matter of executives and inconsistency in our economic policies, coupled with imprudent foreign policy, is costing us heavily. Apart from India, we have failed to develop good relations with our immediate neighbouring countries Iran and Afghanistan.

Russia can be another strategic partner, but we have serious trust deficit issues with it. With the existing foreign policy, we cannot achieve the desired results even in the case of the Central Asian States—rich in natural resources—notwithstanding having common religious heritage.

Pakistan has suffered a lot economically in the last few years. Among many other maladies, inflation continues to have a huge negative impact. It was partly due to incompetence and/or wrong economic policies of the previous government of Pakistan Tehreek-e-Insaf and partly thereafter as a result of following the same policies by the financial managers of the coalition government of Pakistan Democratic Movement.

As, expected, it led to the unceremonious exit of Miftah Ismail, who in the name of saving Pakistan secured just US$1.17 from the IMF by imposing oppressive taxes of around Rs. 2000 billion. He failed on almost all the “promises” he made.

Dar, diplomacy & economic viability – I

Entry of Muhammad Ishaq Dar, the economic wizard of Pakistan Muslim League (Nawaz)—PML-N—, as fourth-time Federal Finance Minister, who took oath on September 28, 2022, is characterised by daunting challenges of hyperinflation, mammoth losses of around US$ 30 billion due to devastating floods after unprecedented rains, shortage of food items, especially wheat, industrial recession, high interest rate of 15%, depreciating Pakistan Rupee to more than 30% and unpopular decision of levying Petroleum Levy to the extent of Rs 50 per liter as agreed with the IMF—just to mention the most immediate ones.

Pak rupee gained significantly even before his taking oath and there is a mood of jubilation in PML-N camp. Only time will tell how he rescues the economy and provides relief to the masses. It will be unfair to pass any judgement on the basis of his past performance that is highly controversial. At this point of time, objective conditions are quite different.

However, one should give him a chance to unfold his mantras before projecting doomsday scenarios. Actions speak louder than words and it squarely applies to all, hence there should not be malice towards one—if not all!

Ishaq Dar, having rich experience in ministry of finance, also served as commerce minister, thus, one can expect from him not focusing on revenue generation by way of indirect taxes alone. He is expected to successfully pursued the prime minister to play a larger role convincing the improve trade through a paradigm shift in foreign policy.

The Prime Minister in his address before the United Nations rightly emphasised the need for peace and stability through international and regional cooperation. Hopefully, in the coming days, concerted and combined efforts will be made towards better economic diplomacy.

Pakistan must explore new markets and enhance the outreach of its goods and services through representation covering diplomatic blocs such as Organization of Islamic Cooperation, South Asian Association for Regional Cooperation SAARC, and Shanghai Cooperation Organization.

The ministries of finance, foreign affairs, commerce and trade must work closely together to negotiate/renegotiate free trade agreements (FTAs) and avoidance of double taxation agreements with countries where we can have comparative advantages.

It will help boost exporters’ access to different international markets and ensure increase in much-needed foreign exchange. There is a consensus that our continued reliance on reckless borrowing and burdening the businesses/people with excessive taxes/duties are detrimental to growth, internal peace and national security.

(Huzaima Bukhari & Dr. Ikramul Haq, lawyers and partners of Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS), members Advisory Board and Visiting Senior Fellows of Pakistan Institute of Development Economics (PIDE). Abdul Rauf Shakoori is a corporate lawyer based in the USA and an expert in ‘White Collar Crimes and Sanctions Compliance’. They have recently co-authored a book, Pakistan Tackling FATF: Challenges and Solutions)

Copyright Business Recorder, 2022