“Pakistan faces a national emergency to resolve the economic crisis”
According to the latest report from the Institute for Policy Reforms (IPR), Pakistan must resolve its serious external debt and current account deficit problems to avoid a Sri Lanka-like default.
The independent, nonpartisan think tank called addressing critical economic recovery and security issues a “national emergency.”
He noted that despite the challenges, governments’ response has been to borrow more loans from the International Monetary Fund (IMF).
He added that pressure from continued borrowing for consumption and debt service was increasing the fragility of the external account.
“It seems that the governments of Pakistan have continued to borrow without worrying about how they will repay,” he added.
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The report notes with concern that governments have not spent public money wisely, pointing to “misplaced priorities”.
Considering that the economic crisis has continued to occur every few years, imposing a “tremendous cost” on citizens, the think tank called on leaders to review the economic policy agenda.
He stressed that to meet the challenges, Pakistan must put its house in order and be prepared to make “difficult and delicate political choices”.
The IPR claimed that the economic troubles were the result of wrong political choices. “The depth of the reforms that our economy needs can only be corrected by strong and committed political leadership, engaged with the people.”
He also pointed to a “continued disconnect” between political and economic policy-making as the cause of today’s problems.
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The think tank called for a holistic, long-term approach instead of resorting to short-term measures and remaining “economically fragile”.
“Cabinet representation of all shades of political opinion could also be a source of strength,” he noted.
The think tank called on governments to set targets for budget and current account deficits and cut costs accordingly. He also asked the authorities not to rely solely on indirect taxes, as indicated during each budget speech.
He suggested urging the IMF to provide debt relief following a solid plan of “economic growth and fixing elite privileges”. The State can opt for rescheduling as an alternative to the first solution.
The IPS also called for increased exports through an item-by-item review of what exports could grow rapidly, possibly through incentives. He also insisted on the elimination of all “imports of non-essential goods”.
He also suggested accessing external debt to finance only projects that ensure GDP and export growth.
Among other suggestions, the IPS called for making the electricity sector financially sustainable, restructuring domestic debt, increasing domestic sources of energy and mineral resources, and ensuring parliamentary scrutiny of all international agreements on economic nature.