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EDITORIAL: Ideas about rescuing the economy, especially about ending its dependence on donor bailouts, come a dime a dozen these days. Many of them are pretty similar and make a lot of sense because it doesn’t take much to understand why we have landed in this mess.

For decades, the state simply chose to live beyond its means, caring to neither improve tax collection nor expand the export basket as foreign aid conveniently lubricated its unjustified expenses; and made a lot of politicians and influentials very rich in the process.

Now, typically, that addiction to aid money has reached the point that the economy needs more and more of it just to stay alive.

Hence all the noise, from everybody offering free advice and also from the IMF (International Monetary Fund) as part of its ‘upfront conditions’, about ramping up tax revenue and making new export products and finding new export markets.

Former finance minister Miftah Ismail made an interesting point about it by quantifying the kind of improvement we need very urgently.

Speaking at one of the ‘Reimagining Pakistan’ seminars where he and other disgruntled politicians have been making rather bold statements lately, he said Pakistan must ensure ‘maximum 15 percent tax-to-GDP and 15 percent exports-to-GDP’ in order to avoid further dependence on IMF bailouts. That’s fair enough, because failure to generate adequate revenue is the main reason that we must go begging every few years.

Reforming FBR (Federal Board of Revenue) and enacting legislation that will squeeze taxes out of protected sectors and reconfiguring production to increase exports is going to take a fair bit of time, no doubt.

Meantime, however, it is essential to get the twin deficits, fiscal and current account, out of the red with the means that are more readily available. Of the latter, especially, the breakdown is important. For the last few years, during the course of the war on terror especially, we’ve been ignoring a very important component of the current account.

Remittances help when exports struggle, which is very welcome, but a lot more needs to be done about FDI (Foreign Direct Investment), which secures other benefits, like transfer of skills and technology, along with foreign exchange.

This is not about hot money, which can be attracted even by toggling the interest rate, but tends to leave as fast as it comes when the cycle turns. This is about solid investment, on the pattern of countries like Vietnam, Bangladesh and India, which expanded their reserves just as ours shrank. We know, of course, that we get extremely little FDI because of political instability and an unstable security situation, so we also know what to do to increase it.

Right now likely investors have to hold meetings and sign contracts with Pakistani counterparts in third countries, which is unacceptable.

It would also do the current account a world of good if we keep geographic compulsions in mind as we reset our priorities. Since nobody can wish away their neighbours, we must all learn to live and trade together.

Therefore, Pakistan and India have no choice but to improve the entire region’s political as well as commercial environment. It is their never-ending grudge that paralyses all efforts at regional uplift, like the SAARC initiative.

Now they must learn from the recent Saudi-Iran thaw and lower the temperature in South Asia as well. The whole continent has been struggling to get back on track ever since the Covid lockdowns, so all countries would welcome such progress and back the country that takes the first step.

Without such measures, and working all the time to substantially increase tax and trade revenue, there’s little hope for the economy’s, and therefore the country’s, long-term economic health.

For even now, when the government has bent over backwards and burdened the people with all sorts of taxes and tariffs, nobody can say for sure when the IMF programme will resume.

There is no doubt that we are at the very edge and we will truly need to ‘reimagine Pakistan’ to survive in the 21st century. And if the political elite does not use this time to ready a desperate, urgent action plan, then it has no business running this country.

Copyright Business Recorder, 2023

Comments

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ABZ Mar 20, 2023 08:44am
I don't see any point in RE-IMAGINING Pakistan at all. Pakistan's concept was purely based on Islam and how the heck can one re-imagine Pakistan's context. The kind of re-imagining required is to think back as what was the purpose of Pakistan, rather shattering the basis purpose for which it came into existence. Beside you can't imaging anything when closed doors, semi-closed doors and open-doors are not on one page..... Is this IMPUGNED so called Re-Imagining only applicable to one sect of the society........................ Technically you don't need Re-Imagining but you need RE-IMAGING.....
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KUKhan Mar 20, 2023 08:57am
Reimagining anything in Pakistan doesn't make sense when the usual suspects make long speeches and know that it's because of their antiques that we are gutted. Also, reimagine armed forces being given 45k acres for corporate farming, guess we farmers know nothing about our trade and need professionals from other fields to tell us how it's done.
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Shiteistan Mar 20, 2023 02:55pm
Re-Imagining Pakistan. Very easy. Just keep on dreaming that the corrupt have been eliminated and the land has rivers of milk and honey flowing.
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m m alam Mar 20, 2023 03:07pm
Who will invest in Pakistan? And why ?
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Muhammad Ali Mar 20, 2023 04:08pm
Pakistan has been made a failed state by corrupt politicians, inefficient & selfish bureaucracy. There is no short cut solution to our problems. Only poor public will bear the burnt of wrongdoings of privileged class. Illegal wealth being held by anyone would have to be confiscated. China/Iran/Singapore model needs to be implemented & since nothing of this sort is going to happen so be ready for worst.
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Vaqas Amin Farooqi Mar 20, 2023 04:35pm
We are already in an imaginary world where everyone is intent upon destroying us. We need to start living in a real world. Pakistan is no better than Burma for the entire world. World leaders who were proud to meet our PM little more than a year ago are putting all their efforts to meet any official from Pakistan. It's time for reality check.
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bonce richard Mar 20, 2023 05:07pm
@ABZ, Since 1947 when Pakistan came into existence since today we are still begging for money from others. On the other side, our corrupted army making money in the name of Islam and Kashmir. Our army is more richer than the people of the Islamic Republic of Pakistan.
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bonce richard Mar 20, 2023 05:12pm
@Vaqas Amin Farooqi, We never live in the real world because our army is never like we live in the real world. Every time they interfere in politics and use their influence what is the result now? Take the example of the Indian army they never come into the politics. Mostly our leaders prefer to live in the UK and Dubai.
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bonce richard Mar 20, 2023 05:47pm
@m m alam, When a corrupted and criminal army dominates the country who will come to our country? They go to India Bangladesh and other countries.
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Fatima Mar 21, 2023 11:04am
@Muhammad Ali, Basically follow the Bangladesh model.
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TimeToMovveOn Mar 23, 2023 06:24pm
"Therefore, Pakistan and India have no choice" incorrect. India has a choice, Pakistan does not. BISMTEC and other bilateral trade treaties are working well for India. Just look at the cooperation between India and Bangladesh. It is like India is on a vengeance to improve the Bangladesh economy to spite Pakistan. Every day India and Bangladesh are both focused on people and economic development. If Pakistan wants to trade and enjoy robust economic growth, it should shut up Kashmir issue and start trading. Else Pak stay shackled to history for the next 100 years.
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