IMF not a permanent solution

Dr. Hassnain Javed

November 30, 2018




In the recent times it is observed by some of our national economists, policy makers, government official that Pakistan would be unable to survive if it does not seek the International Monetary Fund’s help. Although, it is no less than a delusion keeping in view the economic standing of our nation.

These thinkers were of the opinion that Pakistan’s financial ranking will catch by re-entering an IMF programme. Indeed, the situation is altogether reversed, it can be improved, if we show the will for better management of our economic and financial affairs. Without, knocking at IMF Pakistan still possess the capabilities to generate more funds. If we view the historical episodes for Pakistan’s IMF programme they are harsh, rather than a sigh of relief for the masses at large. They had at many instances badly affected our economic potential. The major ills attached with this programme is the devaluation of currency, rapid increase in energy and electricity charges, liberalization of imports and increase in interest rates.

With the devaluation of currency there is a gradual increase in the foreign loan servicing in the rupees which further translates into inflation and it ultimately routes to higher prices without any gains. Likewise, there is a trade deficit as the raw material of imports for manufacturing becomes costly that further routes into making export goods expensive. For instance, in the last programme there is an increase in raw cotton import prices which has badly crushed the Pakistani textile sector.

Moreover, with every passing year Pakistan is experiencing an increase in gas and electricity rates that have already make life difficult to live for the general public at large. Furthermore, liberalization of imports has also exhausted our economic overlook and industrial productivity. Despite the heavy trade deficit experienced in the past 70 years of economic history the newly launched mini-budget still did not focus on shrinking the level of imports. Thus, further liberalisation via re-launching the IMF programme will be no less than a nightmare. In addition, Pakistani economy is in need of low interest rates rather than high. The existing 8 percent lending rate by the State Bank has affected the industry and if interest rate further increases it would be a clear indication that only few firms would survive.

Besides this, it is a time consuming and slow process to recover the stolen money but yet there is hope to have few billion dollars in Pakistani reserves in the upcoming years. In addition, very few state-owned enterprises have been privatized which requires another immediate action. The remaining government share holdings in the organizations should be sold off to raise few billion dollars within a short interval. It will be added as a positive boost to our current stock exchange which has been badly affected with overall prevailing economic situation.

Pakistan as a nation needs permanent solutions to all the problems rather than finding a temporary prescription from IMF. Our economy needs to focus on improving the level of exports and to narrow down imports. As discussed in my previous articles as well, we need to work on tax policy reforms which are promising and encouraging for our industrial sector and provide them with a sigh of relief. Likewise, the banking sector needs to have technology up gradation in a way that it can exactly compete with the Hawala system prevailing in our roots. Moreover, Pakistan has great potential, it only needs facilitation.

Thus, we as a nation have to forget whether IMF is a friend or either foe. The main agenda on the table is to decide the options. We have to closely cross check what we require and what the other party is demanding from us in return of financial assistance. We have to rightly weigh the costs and benefits. The likely costs suffered by having another IMF bailout, will translate into a slowdown of the economy rather than acceleration. The IMF recipes and their limited ingredients have hardly performed well in any of the countries where assistance was provided in the past.

Pakistan has no other option but to borrow money to run its economic endeavors successfully but for that it is not necessary to knock IMF only we can seek assistance from our friendly alliance countries like KSA and China. As we all are well aware that IMF will not fix our current account deficit, neither is it going to improve our exports nor will it provide relief to our capital markets.

Moreover, with high domestic liquidity at hand raising interest rates is also not the viable option. Therefore, IMF could be taken into consideration when our friendly alliance countries have not extended hands to rescue us in the hour of need. If we as a nation unite and show improvement in the next one year then more friends will join hands and would be ready to invest in our country. If we manage to tackle our problems with our own resources and not IMF then in the near future our economy will be viewed as an epic tale of an astounding economic turnaround. We have to prove our all capabilities with conviction and by religiously practicing the policies and reforms.

A new system dynamics for agricultural reforms

Dr. Hassnain Javed

November 08, 2018




Agricultural sector is contributing heavily to the Pakistan economy. Despite that, it is still suffering from chronic issues which needs not only immediate attention by the government but also requires a new system dynamic to address the infection points.

Pakistan was once considered to be water-surplus country but now it is classified as water-deficit country. Like many other developing countries Pakistan population is accelerating at increasing rate and expected to rise 250 Million by 2025 which will eventually drop down the per capita availability of water. Moreover, the controversial in constructing dams and climatic change is another danger for the sector. According to Asian Development Bank (ADB) it is projected that by 2025 Pakistan will undergo major dip in the food production with a shortage of 70 million tons of food.

Besides this, long duration load shedding is again one of the serious threats to the agricultural sector. The resource optimization is not achieved due to power shortages and inability to operationalize the tube wells. Although tube wells are primary source for irrigating the land as its alternative diesel is an expensive option for the poor farmers. Likewise, agricultural extension is considered to be the driving force for improving the agricultural productivity levels. Unfortunately, Pakistan lacks technology transfer and majority of the operations are executed with aid of traditional extension services to cater the demand which is less efficient and unable to produce the desired yield as compared to modern agricultural equipment.

On the other hand, the most important issue is absence of land reforms. In Pakistan 65 percent of land holding is under the possession of five ruling families. Moreover, approximately about two percent of the household has a complete hold on the 45 percent of the land area. Due to absence of land reforms the subsidies and other farmer based incentives given by the government are primarily enjoyed by the feudal landlords whereas the small land holding farmers are at disadvantage which results in rising poverty and declining GDP growth rates.

In addition, there is absence of channelized distribution network for quality seed. As poor quality seeds and fertilizers has adverse impact on plant germination and the overall vigor. Furthermore, there is monopoly of good quality certified fertilizer companies which leads to higher prices and non-affordability for small farm holdings that further translate into low productivity. Besides the government strict restriction on the usage of adulterated or either expired insecticides still it has continuous trend of using it. And it leads to prolonged environmental and health hazards. Another dilemma of our society is the non-utilization of cultivable waste land which accounts for greater percentage of the total agricultural land in Pakistan. With the increasing population rates per capita availability of cultivatable land is shrinking. Thus, it requires an immediate action by the government.

With this entire alarming situation of Pakistan agricultural sector which is considerably the backbone of our structure requires immediate action. The policy makers need to address the situation by subsidizing the agro-tech education and its relevant machinery in Pakistan. There is always emphasis on producing the professional doctors, lawyers and government officers but very insignificant efforts placed to produce professional framers.

Having a quick glance at global leading economies for example Australia is a major agricultural producer as well as exporter which have employed more than 325,300 individuals in the respective sector. Moreover, agriculture and its closely related sectors earn $155 billion a year for a 12% share of GDP. In addition, Australian farmers and grazers own 135,997 farms which cover 61 percent of Australia’s land mass. Likewise, in Canada growing number of women are choosing farming careers as it offers diversity and comparatively good profit margins. Besides this, agriculture is a vital industry in China as well it has employed more than 300 million farmers. It ranks first in producing worldwide farm output and the agricultural development and reforms well complemented in China’s history of speedy growth and managing the world’s largest population.

Therefore, Pakistan also needs to attract its young population towards opting for agriculture as a favorable option not the last one. In my view, career in agriculture should be most demanding job in the whole world as it is the one that aids in feeding the world. It is not only important in providing basic nutrients to human body but also plays a key role in landscape restatement. In reality, very few actually know the worth of agriculture sector. If it remains unaddressed then time is no far when Pakistan will have to seek food aid. Thus, it need to offer trainings, symposiums, research centers, agriculture technology houses, degrees and much more to strengthen our backbone and materialize the benefits which are yet untapped.