Economic strategy

On August 18, Imran Khan took oath as Pakistan’s 22nd prime

minister. On August 18, an English-language newspaper carried the
following headline: “Pakistan’s debt, liabilities swell 83% to Rs30
trillion.” For the record, in 1971, Pakistan’s debt and liabilities were
a mere Rs30 billion.

The first order of the day for the new government was to raise new
loans just to pay off instalments coming due on old loans. The easy
way out for the government was to go to the IMF and accept all of
IMF’s tough conditionalities. The government instead took the hard
way of persuading ‘Pakistan-friendly countries’ to give out loans in
order for the Pakistani government to dilute IMF’s leverage.

On October 23, Saudi Arabia came forward with a $6 billion

package. According to AKD Daily, “the support package should
truncate near term pressures on external account and should create
enabling environment for the Government of Pakistan to tap other
funding sources…”

On October 24, the benchmark KSE-100 Index of the Pakistan Stock

Exchange gained 1,556 points or a wholesome 4.13 percent. For the
record, this was only the second time in history that the KSE-100
Index went up by more than 1,550 points in a single day.

The good news is that the near-term pressures on the external

account are now beginning to ease. The government’s economic
strategy is three-fold: revitalising economic growth through housing
and agriculture; export incentives to the export sector and non-debt
creating dollar inflows.
The building of five million housing units over a five-year period is
an ambitious target. We have indeed been searching for a ‘growth
driver’ for the past three decades; housing – with some three-dozen
related industries – could be what we have been searching for.

Pakistan’s agriculture sector is a $60 billion industry where farmer

profitability has gone down sharply. The government has already
reduced the tariff for agricultural tubewells from Rs10.35 per unit to
Rs5.35 per unit and there are plans afoot to improve access to
finance for farmers.

Over the past five years, our exports had gone down from a high of
$25 billion a year to $20 billion a year (over the same timeframe
Bangladesh’s exports climbed from $24 billion to $37 billion).
Exporters have long complained about input costs and stuck-up
refunds. The problems are yet to be resolved. The government,
however, is working on the Strategic Trade Policy Framework (STPF)
2018-23 with a $46 billion export target. Minister of State for
Revenue Hammad Azhar has bright ideas on the resolution of the
stuck-up refunds through negotiable instruments but the problem is
yet to be resolved.

Over the past five years, Pakistan’s debt profile has been taken to
an unsustainable level. We need to grow and for that we need to
attract non-debt creating dollar inflows. The International
Organisation for Migration (IOM) had once estimated that around
one-third of total remittances to Pakistan come through banking
channels. The government is working on a plan to attract some $20
billion worth of additional remittances through banking channels. As
far as I am concerned, I have not seen anything substantial on that
yet.

The writer is a columnist based in Islamabad.

Email: farrukh15@hotmail.com. Twitter: @saleemfarrukh