Life After The IMF: Pakistan's Path To Self-Reliance

Life After The IMF: Pakistan's Path To Self-Reliance
Unprecedented load shedding caused a countrywide closure of factories and businesses, giving rise to massive unemployment and civil unrest, that started from Faisalabad and Karachi, spreading to the golden triangle of Gujranwala, Sialkot and Gujrat, and eventually sparking a tense situation in Lahore. The Army leadership, along with Supreme Court justices met with the caretaker PM and CMs to embark on a plan of self-reliance on a war footing. “We have no choice but to learn to stand on our own feet,” said the caretaker PM. “We would not have been in this predicament, had the previous governments planned for the situation that the country is facing today,” he added.

The Prime Minister, while addressing the nation, announced the names of his 16-member cabinet including 5 expat Pakistanis and 4 women. He wasted no time in laying out a well thought out plan to include structural reforms needed to transform the decadent governance structure designed to “rule,” to a modern system to “serve.” The focus of the “Pakistan Plan” was to invest heavily in people and bring basic needs to their doorsteps. The PM termed the first four elements “low hanging fruit” that needed immediate attention with a hope of a quick turnaround. These included Civil Service Reforms, to replace the colonial bureaucratic system with a new and forward-looking structure, based on relevance and competence. The current bureaucracy will be divided into specialist groups with every bureaucrat getting a chance to decide the specialist department they wish to be placed in. These departments shall provide a career path to their officers.

Also included was immediate mobilization and organization of an existing countrywide infrastructure of well performing non-profit entities in the field of population control to bring the growth rate to less than 1% within the next three years. Moreover, judicial reforms spearheaded by the Chief Justice, were focused on introducing a system of monitoring the disposal of cases and quality of judgments. A new criterion for judicial appointments, along with streamlining the process of entry to get a license to practice law. The Pakistan Budget will be rewritten to make this document more meaningful, accurate and useful.

The caretaker government put together three teams in place to assist the finance minister, himself a renowned industrialist. The first team consisted of chartered accountants, leading businessmen and bankers. The second, included economists Prof. Shahab Hassan Khan and Dr. Yasar Bengali and others, who have been critical of multilateral agencies, followed by the third team made of economists, including Dr. Kamran Shah, Zubair Younas and Ramiz Pasha, looking at repairing the relationship with IMF. “We have to start work on every idea and possibility,” said the finance minister, addressing the three teams telling them to focus on solutions rather than criticizing each other’s abilities. “We must collaborate, not compete,” he demanded.

In an array of diplomatic flurry, the foreign minister completed his tour of Washington DC, and profusely thanked his counterpart, the US Secretary of State, for his assistance in getting Pakistan a waiver from the Iranian oil embargo, and for his support in the G7 to get bilateral and commercial loans restructured. The foreign minister was now on his way to Tehran with a hope to strike a deal on the supply of oil and gas at concessional rates in local currency, barter and other mutually suitable creative options.

Meanwhile, the Finance Ministry officials were holding closed door meetings with their Chinese counterparts to arrange for roll over of upcoming debt payments. There was news that the ministry is also quietly working with them to restructure the loans to be amortized over a longer period.

In a presser, the finance minister said that Pakistan is blessed with immense resources. “Importing more than what our foreign exchange earnings can pay, and spending more than what we collect in taxes is not a luxury that we can afford any longer.” As a gesture of solidarity after an across the board 25% reduction of federal and provincial governments’ budgets, the armed forces voluntarily announced a 20% cut to the defense budget followed by a similar commitment by the Supreme Court.

The finance minister was quick to announce a complete restructuring of FBR while also withdrawing its powers to deal with existing taxpayers paying Rs 1 million or more in income or corporate taxes to the exchequer. These taxpayers will fall into self-assessment criterion as long as they paid 10% more than the previous years tax. A new professional and sleek department is being formed to provide service to these taxpayers. The scope of existing FBR was reduced solely to find and enlist new taxpayers, 2 million in the current year, and to apprehend people unwilling to pay their due share of taxes. Tough punishments have been introduced for FBR officials who are found harassing taxpayers or else found in rent seeking.

Due to the turmoil in the markets, the rupee shot to over 600 per USD. Imports and exports were largely frozen in the absence of the uncertainty about the availability of foreign exchange in the country’s kitty. In the meantime, the remittances continued to pour in and have, in-fact, increased by 20% YoY. Surprisingly, in a season of discontent, a ray of hope is that Pakistan’s reserves are likely to increase. The pressure on the rupee is bound to ease in the coming days and it is expected to bounce back to a more equitable parity against the USD. In the meantime, the government announced a special package for import of raw material for life saving drugs as well as critical machinery needed to keep power plants in operation.

The finance ministry also announced to withdraw all subsidies forthwith and pledged to let the markets work freely, while requesting the interior minister to strictly crackdown on smugglers and hoarders who are disrupting markets to cause shortages and inflation of food items. At the same time, allocation of BISP was increased by Rs 300 billion to focus towards assisting those who have been most affected by the meltdown.

The country’s indigenous ability to generate power stood at 40% of the requirement. All hydropower, Thar Coal, nuclear, wind and solar plants were put on high alert to ensure smooth operations. The Prime Minister made an appeal to the public to switch off unnecessary lights and appliances and conserve as much energy as possible. The energy ministry started working overtime with the Chinese engineers to expand the generation capacity of Thar Coal and coastal wind turbines to reduce the country's reliance on imported fuel. Chinese support was also sought in the mining sector to exploit the vast mineral resources of the country - copper, gold and iron - to substitute the need for import of these elements.

Separately, the minister of energy called a meeting of all stake holders of power distribution companies and agreed to immediately break-up the large DISCOs into units to coincide with tehsils and towns, keeping in view the number of consumers in the areas. The minister called for immediate outsourcing of these smaller units to the private sector through a transparent bidding process, with a view to overcome the circular debt problem, enhance efficiency and create competition.

An inner government source revealed that the cabinet secretary has been directed to work upon a proposal to recommend elevation of current districts to the level of provinces, thereby paving the way for 123 provinces in the country. It was learnt that the cabinet shall announce holding of elections in these new provinces within 90 days. This, apparently, will resolve the issue of creating more provinces in the country and will also act as a replacement of holding local government elections. The source claimed that the cabinet feels this as being the best way to devolve power to the lowest level and take the government closer to service delivery, while also paving way for grooming of future leadership of the country.

The interior minister held a press conference to share sweeping reforms to implement the police reforms of LGO 2001 that were introduced to override the 1861 Police Act. To ensure that police is the protector of life and liberty of citizens and to ensure human rights are not abused, every provincial police force will be run by a safety commission formed of citizens of the province.

Chinese agriculture experts landed in provincial capitals to assist in agriculture practices, inputs and implements. The ministry of agriculture facilitated establishment of G2B and B2B contacts directly with Pakistani agriculture organizations and prominent agriculturalists. The focus is on increasing yields so the country becomes self-reliant in wheat, cotton, vegetables, vegetable oils, tea, pulses, dairy and livestock. The agriculture minister expected to see positive results starting from the next crop season. Increase in agriculture output is also likely to generate substantial employment for millions of people who headed towards their villages, leaving towns as a result of the declining economic situation of the country.

The prime minister announced a huge package of investment in education and skills sector, while requesting teachers to teach with a view to invigorate the cognitive thinking of students. “The ability to question is the best way for a child to learn and explore.” On skills development, a comprehensive partnership has been signed with Chinese skills development experts as well as GIZ of Germany and City & Guilds of UK. The goal is to impart skills training on 1 million Pakistanis in the first year, increasing to 10 million a year in 5 years.

In March 2023, all of the above seems pretty utopian.

Concurrently, the PM announced a massive infrastructure development plan to generate employment including building of 6 new cities - Pind Dadan Khan, Gawadar, Khairpur, New Lahore, New Karachi, New Peshawar, 30 new industrial estates, and 500,000 affordable homes for families with income of minimum wage or less. The banks have been directed to participate in the national rebuilding and device products that assist in achieving these goals, while tax incentives have been offered to attract banks to volunteer participation. The creation of 2 million jobs from these initiatives will absorb the unemployment caused by the economic meltdown and closure of loss-making state-owned enterprises. Separately, RFPs were published seeking proposals for outright sale, JVs or outsourcing of these SOEs.

The news from ministry of health was that they planned to introduce 1,000 mobile health units spread all over the country to act as immediate replacement of the run down and inoperative basic health units. Additionally, there is a plan for converting all district hospitals to teaching institutions on the basis of public private partnership. The health insurance scheme was also reinstated and will be introduced all over Pakistan.

The railway ministry was also shaken and works have begun to overhaul the railway system in the country. The 9,000 kms of railway lines, shrunken from 12,000 kms in 1961, will be put on a path of rebuilding and expansion. Major focus will be on getting the freight trains back on tracks to shift load from roads to trains.

In March 2023, all of the above seems pretty utopian. However, this may be the time to embark on the above plan now. Anything short of the above will land the country in a tailspin that will cause immense pain. There will be no excuses when we know exactly what to do and how. The alternate is to continue to do “more of the same” and expect different results. That, indeed, will be “insanity.”

The author is governance and economics expert, and former advisor to the Prime Minister and to the Chief Minister of Punjab.