Dr. Hassnain Javed
October 19, 2018
After the forming of the new government we can hear the rising echoes of hike in gas, energy and petrol prices. The subsidies are also shrinking and the cheery on top of all these crises; the International Monetary Fund (IMF) program for Pakistan, is also around the corner. Since 2014, petrol prices have sky-rocketed reaching an astounding figure of $83 a barrel. As also discussed in my previous articles, Pakistan’s economy has attached high hopes with the new government and the ringing bells of economic crises, are a clear indication that the nation will once again, become deprived of the failing hopes and expectations.
As it all signals the traditional knocking by the government to the IMF once again. I believe to keep up the high spirits, government needs to define the rapid action plan for which it is not necessary, to knock at donor agencies doorstep once again. All in all, we don’t need funds from IMF anyway. Indeed we require visiting the IMF program when the economy is an immediate need of USD 18 billion whereas as off now Pakistan only in need of USD 4 billion. For that matter, we can issue bonds, sell stocks in the local currency, issue bonds in the stock exchange — these are means which have hardly been ever used by our government.
Now, as we are about to knock the IMF door once again, it has already started reflecting in the rupee devaluation. Based on historic evidence from third world countries, all who have taken to IMF programs have suffered from highly volatile currency.
Moreover, it will also sweep into the accelerating energy and gas prices. Upon closer inspection, Pakistan has rising import bills and as per my calculation we are currently only left with a mind boggling 15 day cash balance for import cover. Besides this, Pakistan has recently operationalised the metro buses in Lahore, Islamabad and Multan and to keep up with their operations it requires 20 billion annually, whereas 300 billion alone was spent on its construction. It is an indication that the government has to allocate some subsides for this sector as well. But, in reality the bigger challenge for the government is to save the country as a whole and devise policies and framework which can provide cushion for the larger spectrum rather than just providing support to orange lines and metro buses.
I believe the government should design policies in a way that allocate subsidies, but in smaller chunks and in multiple phases, for the upcoming years for all the projects in which hefty economy money has been injected by the previous government.
Likewise, the theory of form/ideas by Plato should be applied in which not only the government is solely providing the subsidies, in fact the authorities should also be held liable, for managing these ventures in a way that it tremendously improves, the daily passenger count. For that purpose, there should be proper passenger travel route plans, to provide them with maximum facilitation and ease of mobility. It will aid in generating revenue that can ultimately make the institution strong enough to cover up their own expenses, rather than becoming dependent on government for subsidies and its operations. If we closely look into the circular debt then its root causes are the subsidies provided by the government. All the former and new government take positive initiatives and launch programs to make Pakistan, a better Pakistan but such projects suffer from a major lag that is dependence.
Actually Pakistan is not suffering from circular debt rather suffering from circular subsidy. It is taking energy at higher prices and selling off at lower prices. This all indicates that we are suffering from absolute economic mismanagement. So far there no plan has been proposed by our state Finance Minister, to address the primary concerns. Thus I am of view that there should be a press conference held on the state of the economy, or either Prime Minister should address the whole nation and narrate with facts and figures, all the economic ills Pakistan is currently suffering from. Moreover PTI needs to streamline the stage of tumour, which could either be treated with high dosage of advanced treatment or could be left to break and fragment. It should be followed by the address of Finance Minister which provides apt and viable solutions after the diagnosis. The high debt burden, subsidies, corrupt institutes and ills of the previous government, are something we are all aware of. We need to take immediate action and form a comprehensive plan.
Economic leaders should propose remedies for eradicating the IMF trap. How will subsides be fought so far there is no policy statement issue on broadening the income tax bracket. By now, if no rapid action is taken then our economy will also suffer from economic meltdowns similar to Venezuela, Argentina and Jordon. It will ultimately lead to economic strike and society gathering for basic necessities rather than political sittings for fair trails and transparency. Similar to other developed economies, our government and economic leaders, have to unite the entire Pakistan under one umbrella to fight with the poisonous bacteria spreading in our society at high speed and work towards the welfare of the country. Collaborative approach and design is most feasible rather than one man beating his head.