After the IMF, let the sky fall

Following the IMF’s rejection of Pakistan’s budget 2023/24, it is crucial for the country to plan for the next six months and develop homegrown economic solutions.

However, it is important to note the IMF’s rejection is merely a formality to avoid completing 9th Review and shift the blame onto Pakistan. Despite this setback, it presents an enormous opportunity for Pakistan to break free from disastrous economic conditions of the IMF.

It is concerning that no economist, except for Finance Minister Ishaq Dar, has realised the harmful effects of the IMF on Pakistan’s economic health. Dar’s diagnosis is spot on: a), rupee devaluation does not automatically lead to export growth for countries like Pakistan, where export industries are rent-seekers and highly overprotected; b) the autonomy of the State Bank was a bad decision, resulting in government borrowing from commercial banks above the base rate; and c) raising the policy rate to 21 percent is not a solution to check inflation, as commonly held by IMF prescriptions – the same prescriptions that were rejected in Africa by the 1990s.

With the IMF out of the picture for at least the next six months, it is important for the ensuing caretaker government to encourage Ishaq Dar’s Plan B thinking instead of following the same path as adopted by Miftah Ismael or advocated by pro-IMF thinkers, journalists and economists.

Ishaq Dar should be encouraged to eliminate SBP’s autonomy by June 30 to make it easy for the caretaker government to influence the irrational interest rate, reversing it to at least 15 percent. The autonomy of the State Bank was not in line with western model where state banks act as stimulants or breakers depending on economic conditions and fiscal policy of the government of the day. However, it was to ensure that Pakistan loses sovereignty over the bank and gets dictation from the IMF managers. It was a bad decision and done with bad intent by the PTI government.

Pakistan’s business community should be encouraged and facilitated to invest in B2B models in energy, IT, infrastructure and real estate. This can be achieved through a one-window operation and discouraging monopolies by a few rent-seeking blue-eyed business groups. Here is billions of dollars’ potential investment lying untapped.

The coastal belt of Pakistan has the potential to become a tourist destination and a real estate magnet for Gulf countries. It can create at least 10 new Dubai like cities. However, the government needs to get rid of: a) the land mafia, which has extended its reach beyond Karachi to Balochistan and: b) red tap to harmonise ways of doing business in Pakistan.

Tax net should be extended to sectors such as real estate, high-end agriculture, retail and big cities like Karachi, Lahore, Peshwara and Quetta, where the state receives peanuts in taxes. For example, the provincial government of Sindh receives only Rs2.5 billion from Karachi, compared to Mumbai’s 250 billion rupees (at the conversion rate) from real estate properties.

Tobacco and provincial taxes are still at their lowest, so caretakers should expand the tax net, which Pakistan loses to the tune of Rs2,000 billion.

The “stay” culture of courts for business, real estate and corporate disputes should be eliminated, and special corporate courts should follow the UAE dispute resolution mechanism for speed and disposal of such cases. Defence Minister Khawaja Asif was right Rs2,000 billion were stuck in the stay order culture of courts.

Ishaq Dar should continue to be engaged by caretakers for advice as he is Pakistan’s “Imam Uddin” and a courageous man to tell the nation to be bold, not scared of neo-colonial institutions like the IMF. Now, compare him to foreign returned economic theorists or university professors who blackmail public opinion by warning default every minute of the day. They follow the defunct “Washington Consensus” theories of the IMF as the only solution and growth model for Pakistan’s challenges.

Old school technocrats like Shoukat Tareen and Hafiz Sheikh should not be allowed to take over the finance ministry anymore.

Lastly, the caretaker government should be handed over a reform agenda to take all necessary but politically costly decisions for economic reforms. It is no rocket science to understand where they can easily raise an extra Rs5,000 billion to balance the gap between the expenses and revenue.

Agriculture, wholesale, real estate construction and transportation account for 60pc of Pakistan’s GDP, and these industries have low tax burdens.

It’s time to veer off the beaten path of routinely turning to the IMF and pave the way for Pakistan’s economy to have a brighter future by implementing unconventional solutions and learning from the Chinese and Gulf models. Put an end to the begging game and help Pakistan become a viable nation.

However, this 240 million-person nation can only be run effectively if those in charge are mentally or emotionally capable of handling the size of the problems at hand.

Jan Achakzai is a geopolitical analyst, a Balochistan politician and a former media and strategic communications advisor to GOB. He tweets @jan_Achakzai