The strategy

It is true that fire-fighting the urgent instead of overcoming the fundamental issues gnawing at the economy takes centre stage in the economic management of Pakistan. Correcting the fundamentals of our economy ought to be the preferred path to shared prosperity. Nothing could be further from the truth.

There’s no point in whinging about it – a transformed mindset that is not bogged down by current noise and does what is needed, essentially shunning day-to-day patch work to repairing the fault-lines is the right way forward. This mindset must include the realisation that external programme support, however necessary in a policymaker’s mind to ride the present, is more like a bandage to stop the bleeding. It still leaves the economy with the need for surgery – essentially the fundamental reform – that is only up to a country to undertake. Simply put, Pakistan has to do its own heavy lifting.

Effective decisions are largely a consequence of decision-makers’ ability to look beyond the obvious. In my article ‘Economic outlook’ (Nov 2), I talked about the following seismic structural reforms: the need to give some space to markets to function, indiscriminate divestment, reconfiguring of an energy market, moving away from skewed investment incentives in real-estate to productive sectors, and productivity shocks in agriculture and withdrawing the government from setting prices. In short, growth has to be underpinned with the creation of a well-regulated market economy – with scaffolding of investment and productivity.

A nudge to creating a market economy will not be enough. An innovative public sector spending model has to be its crowning glory. Governments influence their economies through direct government expenditures. This footprint of the state of Pakistan is in need of radical remodelling. The current direct government expenditure is more than 20 percent of the GDP – a substantive amount indeed. Pakistan’s budgets have to deliver a persuasive narrative for the nation and the world that the government is using taxpayers’ money wisely.

Repairing budget fundamentals on the expenditure side remains a less researched area with an overemphasis on the revenue side. A true pension reform and a development spending revamp of the never-seen-before scale is needed at the minimum, necessitating completion in months and not years. Improving public-sector spending can lay the foundations, to some extent, for Pakistan’s economic game plan to support fiscal sustainability and put in place the infrastructure of the future.

Monetising existing infrastructure assets through long-term leasing, investment funds, listing on stock exchanges and concession agreements with the private sector, followed by using these proceeds to boost developmental spending can give a different flavour of efficiency. This can forever change the way funding is raised without creating any state liability. The focus of developmental spending should be balanced between brick and mortar and projects of research and development, improving productivity and human capital.

Asset recycling has a massive potential of laying new infrastructure without adding to public debt, while improving the existing infrastructure service delivery and making assets commercially oriented. This proposition must repeatedly reverberate in our minds. The scale and scope of general government capital stock is massive. North to south rail links, seaports, airports, transmission grids, gas networks and thousands of kilometres of roads carrying 80 percent of the country’s traffic are worth a substantive amount. Freeing up a portion of this money will build the next wave of assets.

The idea is for a leaner, smarter and efficient government doing good policymaking and economic governance with commercialisation of road, water, rail and power networks as our true guiding principle. A reform of efficiency in infrastructure creation and delivery is a potent tool for countries. It lowers input costs for business by promoting competition in the delivery of essential infrastructure services including energy, transport and communications. Pulling back government from such operations allows resources to be allocated more efficiently by market mechanisms.

The real task for the political class is to begin debating these real topics – how to reduce the government footprint and make Pakistan an innovative and entrepreneurial society. This means allowing entrepreneurs and innovators to make their own way, to accumulate if they are successful, and to continue to invest.

The country has so much untapped potential. While others are relying on digital platforms as the perpetual motion money-making machines, the expertise of mining the earth for raw materials is the oldest and recurring business model in existence. Balochistan is rich in minerals with large deposits of copper, gold, lead, zinc, iron ore, magnetic sands and stones – all exportable commodities. Globally, nations have realised their mineral wealth through the development of a national mineral cadastre comprising land and revenue management, automated processes ensuring transparency, and geological database ensuring instantaneous data to allure investors. Pakistan hasn’t even scratched the surface of mining its natural resources and has rather unfortunately entangled itself with international litigation. Exploration can be the next big frontier.

It is globally appealing to embrace the modern monetary theory: economic parallel to a perpetual motion machine. No matter how much the government spends, the central bank can print the money. In Pakistan, it has been tried for many years and the result has been the same: high deficits, inflation, and boom and bust cycles of growth. Great societies drive forward because they become innovative, entrepreneurial and creative. Government spending is essential, but it won’t make Pakistanis rich; high productivity, innovation and entrepreneurship will.

Policymakers have to be astute with the micros – the nuts and bolts of an economy. Build a country’s own narrative engrained in solving structural discrepancies. Worry about the economy to operate at the optimal level. The complex confluence of factors that has hindered Pakistan’s progress should be debated and solved much beyond the soaring rhetoric about the prices of essentials in other countries. Pakistan is yearning for the people to speak their minds and provide unbiased analysis, as well as specialists who can manage, and accelerate, the process of resurrection.

The writer is former advisor, Ministry of Finance, Government of Pakistan.

Email: khaqanhnajeeb@gmail.com

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