KARACHI: Pakistan Bar Council (PBC) has called to secure International Monetary Fund (IMF) support, maintain a narrow exchange rate, stem losses, cut expenditure, and reduce the use of imported fuel for energy to deal with the immediate crisis, and to put the country on a sounder base in the medium to longer term for economic stability.
Also, the business advocacy body has asked politicians to rise above party interests and reach a political consensus to better address the economic challenges, saying the business as usual cannot continue. It’s time for consensus and continuity.
In its paper ‘Minimum Consensus on Key Economic Reforms’, the PBC has come up with key reform agenda to manage the immediate future problems of the country.
It urged the government to buy time for fundamental reforms by re-profiling debt through assistance from sovereign debt advisors, maintain a narrow exchange rate spread between interbank and open market, conserve/ reduce the use of imported fuel for energy, cut public expenditure by adopting austerity measures, and widen the tax base to include untaxed wholesale, retail and real estate sectors.
For medium to longer term impact, it has recommended food security and affordability, provide security of power supplies at a competitive cost, reduce the burden of SOEs’ losses through restructuring and privatization.
The paper also calls for exports enhancement by broadening the export basket and widening its geographical reach, making it easier, cheaper and quicker to do business through deregulation, digitization and civil service reforms, and achieve equitable resource distribution by renegotiating the National Finance Commission (NFC) Award
Focusing on the near-term reforms is not to deny the importance of longer-term initiatives, important amongst which are population control, managing urbanization, quality of education, upskilling people for a knowledge-based economy, improving productivity, encouraging more women into the paid workforce, affordable healthcare, efficient logistics, building climate resilient infrastructure, conservation of water, making internet widely available and affordable, promoting regional trade and empowering local bodies by providing adequate development resources. Foremost, what is required is higher standard of governance and accountability.
Substantial resources are required to address the aforementioned reforms. These can be only be provided by broadening the tax base, reforming the energy sector, reducing the burden of SOE losses and renegotiating the NFC Award.
PBC’s CEO Ehsan Malik said that by focusing on the immediate measures, PBC is not recommending that reforms with longer term payback such as population control, education and healthcare be ignored. Indeed they remain vital. The minimum consensus we advocate will provide the resources to undertake these longer pay back objectives, as also secure the country’s solvency and autonomy.
Explaining questions, the PBC CEO says in this research paper that the minimum reforms PBC is advocating are vital to raise revenue, stem losses, cut expenditure, gain greater self-sufficiency in food and generate export earnings.
Pakistan’s solvency is threatened by fiscal and current account deficits. “Our recommendations address both. Cognizant of the toxic political environment, we would welcome suggestions from key stakeholders to better address the economic challenges and improve the chances of gaining broader political consensus.”
He said our contacts with political leaders elicited supportive response but some are reluctant to sit across a table with others and publicly acknowledge agreement. We hope that in time, the maturity to agree publicly on what is good for the country and to remain consistently committed to implementing it will develop. In the meantime, we strive to raise its need.
“Only by raising more tax and other revenues and by stemming SOEs losses, circular debt and by reducing public expenditure, can we find adequate resources to invest in education, health and infrastructure.
It is regretful for an agrarian country to import wheat and pulses and not to substitute imported cooking oil with indigenous alternatives. It is also shameful if in this agrarian society, a large percentage of our population suffers from malnutrition and stunting. More important than managing the external account is providing food security and affordability. There is substantial room to improve agriculture productivity, storage and distribution.
Income of large farmers is under-taxed and there is opportunity for provinces to generate up to Rs370billion more to invest in development.
When you have a bloated bureaucracy with an ingrained tendency to control, slimming it down reduces the number of levels required to take decisions. Also having technically competent subject-experts in ministries vs. generalists will improve the speed and quality of decision making. Digitizing the approval process makes the decision making transparent. The government’s Pakistan Regulatory Modernization Initiative is a good start. The Pakistan Single Window Company will cut down the consignment clearance time substantially and through digitization bring over 70 government department’s decisions online. This can be emulated.
In the Minimum Consensus, we propose that SOEs be liberated from the control of ministries, be restructured by private sector experts on a profit/loss sharing basis as prelude to possible privatization. To make this happen, we advocate that these units be removed from the ambit of NAB, PEPRA and Public Recruitment laws/rules. Privatization Commission procedures for privatization need to be reviewed to expedite the process.
There are a number of studies available including our own that project the additional tax potential at Rs 2trn or more. However, it is weak political will, coupled by lack of capacity that fails to realize it. The latter can be developed. We hope that political leaders can, in the interest of the country, find the resolve to mobilize tax collection for investment in social development.
The Minimum Consensus recommends renegotiation of the NFC Award as it presently leaves the federal government heavily indebted and the provincial governments with little incentive to realize the full tax potential.
A primary reason is lack of political will. There are vote banks and party interests that get in the way. The current toxic political environment does not promote discussion.
With substantially reduced geo-strategic importance, bailouts are not forthcoming. The only way to deal with the challenges is for political parties to unite on at least a minimum set of key reforms. With rising unemployment and inflation, there is a real risk of street violence if steps are not taken quickly to address the fault lines.
Copyright Business Recorder, 2023