Though the relevant quarters suggest the charter is based on practicality and recommend tough decisions to turn the economy around, speakers at a policy dialogue suggested addressing chronic issues in the economy such as energy sector reform, weak tax revenues, privatization of state-owned enterprises, pension reforms, untargeted subsidies, mobilizing domestic resources, making the most of foreign opportunities and most importantly, ensure economic and political stability with concrete adherence across the political divide to ensure continuity of policies.
This was discussed in Islamabad on Tuesday during a policy dialogue on Pakistan's Post-Budget Economic Outlook, organized by Sustainable Development Policy Institute (SDPI) in collaboration with Parliamentary Taskforce on Sustainable Development Goals (SDGs) and the Friedrich Naumann Foundation for Freedom (FNF).
Special Assistant to Prime Minister Romina Khurshid reiterated that the government is keen to support a resilient economic development agenda and strengthen progress on climate change, energy efficiency and transition, gender equality etc.
She urged for strengthening partnerships in South Asia through consortiums as the population in the region is amongst the biggest victims of climate change. She stressed that our economy must undergo reform to be resilient in the face of recent and future climate disasters wreaking havoc in the country.
Developing countries in South Asia, confronted with climate disasters, do not need aid but trade. She added that regional connectivity and cooperation are answers to the developmental challenges of the region.
Rana Ihsan Afzal, the Coordinator to the Prime Minster on Commerce and Industry, maintained that the government had presented a realistic budget, deflecting criticisms that it was an election budget. He noted that it contained proposals that can be carried further [past the upcoming elections].
It focuses on sectors such as agriculture, information technology (IT) and small and medium enterprises (SMEs) with a realistic growth target of 3.5%. He stressed that these targets were set after stakeholder consultation and considering growth drivers.
In the past 16 months, he said that the Pakistan Democratic Movement (PDM) government had shunned populist decisions in favor of reforms such as bringing retail businesses under the tax net and rebasing the electricity and gas tariffs whilst reducing the fiscal deficit compared to the previous year.
He said that a Charter of Economy is the right plan and that PDM parties are already discussing it. He urged collective wisdom and kickstarting reforms, including privatization, managing imports etc.
He stressed the need to look inside, increase revenues, cut expenditures, and manage the macro-factors that are halting much-needed reforms.
SDPI Executive Director Dr Abid Qaiyum Suleri was of the opinion that the current budget was not a populist one and showed the commitment to bring the International Monetary Fund (IMF) program back on track.
He, however, hoped that some budget numbers would be revised as coalition partners and provinces have expressed reservations.
He further said that though faced with many challenges, the financing of the budget deficit will be made possible through both domestic and external sources, for example, from friendly countries such as the rollover of $2 billion from Saudi Arabia, $1 billion from UAE, new financing of $2.4 billion from IMF, and $1.5 million from other financing and commercial banks tripling their lending to the government.
However, he stressed that these inflows depend on political stability in the country.
He proposed a third solution for Pakistan's economic woes in the form of the Charter of Economy, which SDPI, as well as Prime Minister Shehbaz Sharif and Former President Asif Ali Zardari, both have been strongly advocating.
FNF Pakistan Country Director Bridget Lamm stressed that Pakistan is facing a crucial time and is confronted with complex economic challenges.
The spending projected in the budget, she feared, would not be sustainable without large borrowings.
She highlighted that political and economic instability had triggered international companies to close their activities in Pakistan as many are struggling with production.
Lamm highlighted that Pakistan had availed GSP Plus better than other South Asian countries but had failed to realize its full potential.
She said that the future of GSP Plus relies significantly on stakeholders coming forward with tangible actions on international commitments and political and economic stability in the country to restore the faltering interest of investors.
She said that if concrete plans for economic stability and reforms are not initiated, we will be missing out on economic opportunities and doing an injustice to the youth of the country.
Dr Vaqar Ahmed, Joint Executive Director, SDPI, called for a viable homegrown plan. He appreciated the efforts of Minister of State Dr Aisha Ghaus Pasha and Special Assistant to Prime Minister Romina Khurshid in moving forward and preparing a draft Charter of Economy for consideration by the PDM coalition.
He said that extensive multi-partisan engagement is underway which is good for strong buy-in for the Charter of Economy. He said that provinces would have to come forward and increase tax revenue mobilization efforts. He highlighted that any charter of the economy should also stress strict oversight of government expenditures, cost-cutting measures by merging government ministries and departments, and public procurement transparency.
Ahmed called for revising the debt management strategy and ensuring that future debt only finances the most productive investments and privatizing loss-making state-owned enterprises for which future debt accumulation is expected. He further called for reforms in the energy sector by ensuring no hidden or cross-subsidies; tariffs in the energy sector must cover the full economic cost of generation, transmission, and distribution, and new contracts with provinces and IPPs.
He also suggested some low-hanging reforms such as improving the pensions framework, promoting regional trade, the certainty of interest rates, trade finance rates, and energy tariffs for manufacturing industries. He stressed the need to focus on infrastructure development in economically backward areas, building domestic trade linkages across provinces, promoting local investments in the backward areas, and investing in human security and adaptive social protection.
Another pillar of the charter should be a drastic reduction in the cost of doing business, an easily achievable low-hanging fruit.
He called for an all-parties conference for forward-looking reforms for a progressive economic development narrative, building the commitment of provinces to these reforms.
Ahmed further said that any Charter of Economy should be given cover through proper legislation and follow up through the Council of Common Interests.