The Charter of Economy was first introduced as a concept by Ishaq Dar in 2015 during his tenure as finance minister in PML-N’s previous government. However, neither he, nor his party, have ever floated a draft version for public perusal. Since then, the Charter of Economy has been hailed as both the ‘need of the hour,’ and a ‘foolish’ idea, by various factions of the academic, political and business communities. Whether the Charter should be categorized as the former or the latter, can only be determined in view of precedent, the economic issues facing Pakistan, and the ability of a Charter of economy to address those issues.
Rarely in our nation’s storied history have political parties formed consensus on a shared political goal in the national interest. However, the Charter of Democracy of 2006 stands out as an exception. PML-N and PPP alternated in power between 1988 and 1999, largely because the party in opposition was consistently undercutting the party in power through extra-constitutional means, and at times in collaboration with the country’s military establishment. Eventually, the leadership of the two parties met in London in 2006 to finalize a Charter, with its main aims to respect the mandate of representative governments and keep the military out of politics.
Even though the Charter of Democracy was able to implement only two-thirds of its 36 articles, its impact on restoring the powers of legislature against the executive and the president, devolving powers to the provincial tiers of government, and empowering the Election Commission of Pakistan are significant achievements. On the legislative front, it achieved success in the form of the 18th, 20th, and 25th Amendments, the 7th NFC Award, and the Election Act, 2017. Analysts attribute the Charter of Democracy to the fact that two consecutive elected governments were able to complete full constitutional terms of five years each and transfer power to the next elected government, a marked departure from the 1990s.
Can a Charter of Economy achieve similar results? The economic issues facing Pakistan today are no mystery. These include but are in no way limited to a decline in investment as a percentage of GDP, a continuous increase in the debt-to-GDP ratio over the last decade, decline in per capita earnings, large dependance on imports, depleted foreign exchange reserves, and crises spanning the external accounts, health, education, and employment sectors.
To address these issues, renowned economist Dr Hafiz A. Pasha prepared a draft charter of economy. While it references all the issues highlighted above for plaguing the country, Dr Pasha’s core recommendation – political consensus and good governance – recognizes the interconnection between economic reforms and various aspects of society. In the absence of the collaboration of the entire state, sound economic policies in isolation will not bear fruit.
“There is a dire need for a Charter of the Economy, with a broad-based political consensus and civil society support. It will identify the wide-ranging reforms and policies for raising economic growth, tackling inequality, creating jobs, reducing poverty, improving food security, and promoting human development,” Dr. Pasha states.
The Pakistan Institute of Development Economics (‘PIDE’) also prepared a Charter of Economy, published in July 2022. In addition to political uncertainty, it recognizes the undefined jurisdiction of various arms of the state as the root causes of Pakistan’s economic problems. As a key reform, PIDE recommends separating politics from economics and targeting sustained, accelerated growth driven by investment and productivity. Economic reforms focus on improved governance, deregulation, privatization, digitization, and an overhaul of the trade, tariff, and taxation regime.
PIDE’s Charter of Economy can be compared with the draft published by the Pakistan Business Council (‘PBC’) in November 2020. PBC proposes increasing the standard of living, enhancing food security, promoting jobs, substituting imports, moving towards an export-based economy, formalizing, and deregulating the economy, and transforming NAB and the civil service.
The aforementioned Charters are not policy documents, rather they can set a direction for future policy frameworks. While their proposals might be different, all three drafts have at their core, the need for political consensus as a prerequisite to economic reforms.
A Charter of Economy has taken on renewed importance after Pakistan reached a staff level agreement on a $3 billion Standby Arrangement (SBA). The SBA requires the country to implement tough economic reforms, which will in no way be politically popular. No party or politician will want to take the electoral hit that comes with implementing the suggested reforms. The SBA requires the country to enhance fiscal discipline, which means cutting down on subsidies and austerity measures. The IMF also wants Pakistan to broaden the tax base and improve tax collection. These policies will not sit well with favored sectors, like agriculture, retail, and energy, which make up a large chunk of the support base for the current ruling coalition. In view of this, freedom from fear of political retribution will increase implementation and effectiveness of implementing said reforms.
On the flip side, while a Charter of Economy has many benefits, there are also drawbacks. Like technocrats entrusted to take political decisions, a policy devised by IMF experts without broad level public support is on the face of it anti-democratic. Any political science student can explain the close interconnection of politics and economics. Ordinarily, economic policymaking without public participation and discourse is not politically feasible.
But politics in Pakistan are anything but ordinary. Inherent polarization continues to undermine the effect of change. As the Charter of Democracy shows, long-lasting and institutional reforms can happen if key players shed political aspirations for the nation’s benefit. But any attempt towards consent should be approached with that view. It will not serve the interests of Pakistan if the ruling party or coalition of the day only wishes to sign a Charter to get political buy-in with the opposition in anticipation of taking tough economic decisions.
Unfortunately, it seems that the Charter of Economy will continue to remain a pipe dream due to political divides, which prevent consensus-building. Given Pakistan's history, political parties must accept that their economic plans will be cut short before their mandated five years are up. However, the economy need not be subjected to the transience.
Rarely in our nation’s storied history have political parties formed consensus on a shared political goal in the national interest. However, the Charter of Democracy of 2006 stands out as an exception. PML-N and PPP alternated in power between 1988 and 1999, largely because the party in opposition was consistently undercutting the party in power through extra-constitutional means, and at times in collaboration with the country’s military establishment. Eventually, the leadership of the two parties met in London in 2006 to finalize a Charter, with its main aims to respect the mandate of representative governments and keep the military out of politics.
Even though the Charter of Democracy was able to implement only two-thirds of its 36 articles, its impact on restoring the powers of legislature against the executive and the president, devolving powers to the provincial tiers of government, and empowering the Election Commission of Pakistan are significant achievements. On the legislative front, it achieved success in the form of the 18th, 20th, and 25th Amendments, the 7th NFC Award, and the Election Act, 2017. Analysts attribute the Charter of Democracy to the fact that two consecutive elected governments were able to complete full constitutional terms of five years each and transfer power to the next elected government, a marked departure from the 1990s.
Can a Charter of Economy achieve similar results? The economic issues facing Pakistan today are no mystery. These include but are in no way limited to a decline in investment as a percentage of GDP, a continuous increase in the debt-to-GDP ratio over the last decade, decline in per capita earnings, large dependance on imports, depleted foreign exchange reserves, and crises spanning the external accounts, health, education, and employment sectors.
The economic issues facing Pakistan today are no mystery. These include but are in no way limited to a decline in investment as a percentage of GDP, a continuous increase in the debt-to-GDP ratio over the last decade, decline in per capita earnings, large dependance on imports, depleted foreign exchange reserves, and crises spanning the external accounts, health, education, and employment sectors.
To address these issues, renowned economist Dr Hafiz A. Pasha prepared a draft charter of economy. While it references all the issues highlighted above for plaguing the country, Dr Pasha’s core recommendation – political consensus and good governance – recognizes the interconnection between economic reforms and various aspects of society. In the absence of the collaboration of the entire state, sound economic policies in isolation will not bear fruit.
“There is a dire need for a Charter of the Economy, with a broad-based political consensus and civil society support. It will identify the wide-ranging reforms and policies for raising economic growth, tackling inequality, creating jobs, reducing poverty, improving food security, and promoting human development,” Dr. Pasha states.
The Pakistan Institute of Development Economics (‘PIDE’) also prepared a Charter of Economy, published in July 2022. In addition to political uncertainty, it recognizes the undefined jurisdiction of various arms of the state as the root causes of Pakistan’s economic problems. As a key reform, PIDE recommends separating politics from economics and targeting sustained, accelerated growth driven by investment and productivity. Economic reforms focus on improved governance, deregulation, privatization, digitization, and an overhaul of the trade, tariff, and taxation regime.
PIDE’s Charter of Economy can be compared with the draft published by the Pakistan Business Council (‘PBC’) in November 2020. PBC proposes increasing the standard of living, enhancing food security, promoting jobs, substituting imports, moving towards an export-based economy, formalizing, and deregulating the economy, and transforming NAB and the civil service.
The aforementioned Charters are not policy documents, rather they can set a direction for future policy frameworks. While their proposals might be different, all three drafts have at their core, the need for political consensus as a prerequisite to economic reforms.
But politics in Pakistan are anything but ordinary. Inherent polarization continues to undermine the effect of change.
A Charter of Economy has taken on renewed importance after Pakistan reached a staff level agreement on a $3 billion Standby Arrangement (SBA). The SBA requires the country to implement tough economic reforms, which will in no way be politically popular. No party or politician will want to take the electoral hit that comes with implementing the suggested reforms. The SBA requires the country to enhance fiscal discipline, which means cutting down on subsidies and austerity measures. The IMF also wants Pakistan to broaden the tax base and improve tax collection. These policies will not sit well with favored sectors, like agriculture, retail, and energy, which make up a large chunk of the support base for the current ruling coalition. In view of this, freedom from fear of political retribution will increase implementation and effectiveness of implementing said reforms.
On the flip side, while a Charter of Economy has many benefits, there are also drawbacks. Like technocrats entrusted to take political decisions, a policy devised by IMF experts without broad level public support is on the face of it anti-democratic. Any political science student can explain the close interconnection of politics and economics. Ordinarily, economic policymaking without public participation and discourse is not politically feasible.
But politics in Pakistan are anything but ordinary. Inherent polarization continues to undermine the effect of change. As the Charter of Democracy shows, long-lasting and institutional reforms can happen if key players shed political aspirations for the nation’s benefit. But any attempt towards consent should be approached with that view. It will not serve the interests of Pakistan if the ruling party or coalition of the day only wishes to sign a Charter to get political buy-in with the opposition in anticipation of taking tough economic decisions.
Unfortunately, it seems that the Charter of Economy will continue to remain a pipe dream due to political divides, which prevent consensus-building. Given Pakistan's history, political parties must accept that their economic plans will be cut short before their mandated five years are up. However, the economy need not be subjected to the transience.