Government officials say that stabilisation has set the stage for foreign investment to pour into our country, but economists understand we have no economic growth, said former State Bank of Pakistan governor Dr Shamshad Akhtar
“The said stabilisation in our economy is merely stabilisation in the transition of our economic trajectory,” she said, explaining that “this stabilisation is very vulnerable and anything could happen”.
Akhtar was part of a panel on the state of the economy in Pakistan: putting out the fire at the Adab Festival on Sunday. She begun her argument by saying “everybody is an economist in Pakistan without a degree”.
The panel also included economist Kaiser Bengali, investment banker Khurram Schehzad, and Pakistan Business Council CEO Ehsan Malik.
Salim Raza, another former central bank governor, moderated the discussion and set the context for the conversation on the economy, which the panelists concluded is indeed on fire.
Bengali said diagnostics are no longer the country’s focus as its problems are well-known. “Let’s now talk about putting out the fire that we all agree has engulfed us,” he said. He added that Pakistan is very rich in terms of its natural resources and claimed that 100% literacy and single-digit unemployment is not only conceivable but also “achievable within our lifetimes”.
Turning to policy structure, he blamed foreign influence for Pakistan’s economic deterioration. “We should dig a six-foot deep hole and bury the neoliberal ideology,” he said, adding that it was time the country started taking its affairs into its own hands outright rejected Washington’s agenda.
“Let’s give our policymakers a taste of nationalism,” he said. He also recommended a major cut of over Rs1 trillion in non-development expenditure, including non-combat military spending. “Nobody can be a holy cow now,” he said, adding that the country should open up healthy debates to overhaul the failed economic system.
Malik added to this and said industry and agriculture are going down the hill. “We export our raw material to China and then, after adding value to it, the latter captures our foreign markets.”
He said the ratio of the raw material cost to post value-addition profitability of these products is conservatively well over 1:20. “Why can’t we do the value addition ourselves to revive our industry and generate a great deal of jobs?” he asked.
He gave the example of the country’s footwear industry, which took a hit because it imports all of its raw material and pay duties on it, which costs us more than importing a final footwear product. “But there’s hope in this regard since the incumbent government is considering relaxing duties,” he said, adding that it will help revive the shoe industry.
“Our economy is a donkey that can’t pull this weight anymore,” said Malik. Schehzad described the economic policies in a similar way, calling non-development expenditure a big fat body that our legs–economic growth– cannot no longer bear the weight of.
Schehzad said the government, with its focus on taxing the corporations and using a punitive approach rather than incentivizing it, totally ignores how to build a system that can grow tax amount.
The session ended on a unanimous note that with hot money pouring in, inflation rising to 14.2% and growth rate slumping below 2%, the system needs to seriously consider putting out this fire immediately.