The economists, journalists and bureaucrats of Pakistan are extremely vocal about there being no other way but to seek International Monetary Fund’s assistance, which is a misconception.
They are of the view that the financial health of Pakistan can only be improved by agreeing to the IMF’s programme. That’s not true. Notwithstanding, a salubrious financial stature can only be achieved by managing the affairs in the right way. Pakistan is capable of generating resources and capital without seeking help from IMF. Moreover, financial help from IMF and its conditions, always puts Pakistan’s economy in deep doldrums.
The main conditions of IMF include currency devaluation, liberalization of imports, a sharp hike in gas and electricity rates and an increase in interest rates.
In the first place, the devaluation of currency, enhances foreign debt servicing in the rupee, hike in prices for all commodities and high level inflation is a common phenomenon. Moreover, the raw material for our imports also becomes expensive ultimately resulting expensive exports and brings trade deficit.
Pursuing this further, liberalization of imports has destroyed our economy and our local industry, which makes one wonder that why imports were not cut down in the recent mini-budget? There is a dismal balance of trade seen in the country’s 70-year history, it has $ 20 billion from overseas Pakistanis, $ 50 billion exports and has a $ 31 billion deficit as a gift from the previous governments. If $ 20 billion per year from overseas Pakistanis was not contributed, Pakistan would have to cease its foreign obligations.
Furthermore, the prices of gas and electricity are already soaring in Pakistan, to further add a hike will make the public’s life miserable and difficult. Not only this, an IMF loan will yield high interest rates and Pakistan is already in a dire need of low interest rates to sustain its flagging economy. The current lending rate of State Bank is above 8 percent which is proving disastrous for the industry of Pakistan.
However, there is a dire need to search for permanent solutions for sustainable economic growth and to avoid taking loans from IMF any further. In this regard, increasing exports and decreasing imports must be applied to the dwindling economic system of Pakistan. Moreover, decreasing tax from textile sector and bringing innovative programmes in this crucial sector can add sustainability in the system by bringing significant exports to foreign markets.
An IMF loan will yield high interest rates and Pakistan is already in a dire need of low interest rates to sustain its flagging economy
There is also a significant need to improve banking system specifically its inward remittance mechanism. The incompetence of banks has given importance to Hawala channels to improve their stature by delivering the trust on time. If Hawala channels can deliver home remittances in 24 hours than why can not banks adopt the said precedent? The strict surveillance and process of penalty on banks for delay in delivery can yield desirable results. This process can earn $20 billion for the declining economy.
According to an estimate billions of dollars are wasted in food and fruit export every year. A mechanism must be drawn to cut tax from foreign companies having expertise in food and fruit processing, packaging and shipment to set their operations in SEZs to harness fruit and food crops. This will enhance the export potential from $20 to $30 billion every year.
Also, the IT industry of Pakistan has a significant potential for growth from its present $5 billion exports annually. Therefore, it must be recognized as a potential source for increasing capital. The IT industry of Pakistan needs to be facilitated and helped so the dynamic and young entrepreneurs can enter businesses which will be ultimately beneficial for economic sustainability. The IT exports can significantly raise and grow exports to $20 billion annually which can help achieve the deficit in capital.
Last but not the least, state owned assets like KAPCO, PTCL, KE and banks were only privatized partially, and the remaining shares on the government’s side must be sold on an urgent basis. These have the potential to yield $6-7 billion in the period of one year. It will provide a little relief to the stock market, which is standing on its last legs.
The writer is a Quetta based columnist and an Independent researcher. He can be reached at Asadhussainma@yahoo.com
Published in Daily Times, October 24th 2018.