EDITORIAL: Structural reforms under sharper focus

EDITORIAL: Federal Finance Minister Muhammad Aurangzeb stressed the government’s focus on structural reforms including taxation, energy sector and privatisation of state owned entities while talking to a delegation representing a global leadership platform titled “Dialog” established about two decades ago and founded by billionaire Peter Thiel — also founder of PayPal and Palantir, a software company involved in data analysis — known for its secrecy with no website, no official press releases and no live streams as the private group is said to thrive on its exclusivity and off-the-record discussions.

Reports also suggest that political leaders have been invited to the forum from all sides of the aisle, as well as intellectuals/decision makers shaping future policy.

Thiel’s recent focus is on Pakistan while ‘Dialog’ is reportedly engaging on economic strategies, reforms (pension and power sector) and international relations including the very successful implementation of the China Pakistan Economic Corridor (CPEC) and of course ties with the United States.

Pakistan recently began re-engagement with the United States under the Trump administration, while previous US administrations had pivoted towards India. However, one would hope that the Pakistani authorities undertook appropriate research on Thiel and those who came to Pakistan representing ‘Dialog’, given our exemplary historical ties with the People’s Republic of China, which accounts for more than 40 billion-dollar investment inflows under CPEC (China Pakistan Economic Corridor) as well as billions of dollars of roll-overs that are staving off the possibility of a default. It is relevant to note that senior US bureaucrats as well as politicians, several European nations as well as India have openly opposed CPEC.

Additionally, Pakistan is proactively engaged with regional powers under the auspices of the Shanghai Cooperation Organisation, Economic Cooperation Organisation and a pending request for membership to BRICS (Brazil, Russia, India, China, and South Africa) – regional organisations that increasingly represent the interests of the other two superpowers other than the US; notably, China and Russia, within the current multipolar context.

The Trump administration is proactively threatening its trading partners to cut-off ties with these two superpowers if they desire to retain trade with the US. The US foreign policy is marked today by deep distrust and a rivalry with both Russia and China, which is continuing to usher massive changes in international security within the global and regional arena.

While one can speculate on the actual objective of the ‘Dialog’ visit to Pakistan yet the claims by Aurangzeb on the ‘Dialog’ platform generate three disturbing observations. First, the ongoing taxation structural reforms continue to rely on indirect taxes whose incidence on the poor is greater than on the rich, which accounts for very high poverty levels of 42 percent.

The enforcement measures are also focused on sales tax on certain sectors, sugar and cement, whose prices in the domestic market have skyrocketed. Energy sector reforms rely on borrowing from commercial banks at lower rates than in the past due to a lower discount rate with the objective of writing off circular debt, but the interest payable will as in the past continue to be passed onto the consumers like before.

Capacity charges continue to rise as demand contracts with the government encouraging solar units. And in the first quarter there has been no privatisation in the fiscal operations data released by the Finance Division, though the First Women’s Bank was as per news reports sold for 14.6 million dollars to a UAE holding company.

PIA is also scheduled for privatisation by the end of this calendar year, but it must be borne in mind that the investment climate within Pakistan remains poor with negative 64.5 million-dollars total foreign investment inflows July-September 2025 as per the October Update and Outlook released by the Finance Division.

There is, therefore, a need to not only take an informed decision with respect to engagement with foreign dignitaries, however rich and successful they maybe, but also to be aware that they are probably well briefed about the true state of the economy.

And any pitch for foreign investment must be in line with the country’s foreign policy aims and long term economic interests. It is hoped that the visit of ‘Dialog’ delegation, which was also hosted by Export Promotion Bureau of Pakistan (EPBP), will help the government unlock country’s investment potential in particular in a meaningful and effective manner.

Copyright Business Recorder, 2025