Dr Shaikh’s therapy

At a rare media briefing, Dr Hafeez Shaikh, advisor on finance, hinted at Pakistan going back to the IMF for more funds if revenue-generation measures at home fall short of meeting budgetary targets. “You may have to consider… IMF can be a source,” he said.

His statement amounts to an admission that the current $11.3bn loan from the IMF has failed to produce the intended results and that Pakistan needs to borrow more to keep its economy afloat. Improvements in macroeconomic indicators apart, the economy continues to face challenges that threaten to wipe out the gains of the ‘homegrown’ stabilisation programme under way since November 2008.

The advisor identified five challenges: preserving macroeconomic stabilisation; securing foreign assistance and wooing domestic and international investment; overcoming the worst situation and ensuring broad-based growth; managing energy shortages; and prioritising subsidies. What he failed to mention was our chronic dependence on foreign flows due to our spendthrift habits despite a severe financial crunch. Elimination of subsidies alone won’t solve our financial problems as recent experience confirms. It is only adding to the common man’s burden.

The government must cut its non-productive spending and remove inefficiencies in the public sector, which slow down growth. Even the so-called friends of Pakistan, who had pledged substantial assistance a year ago, are reluctant to help because we are not ready to put our house in order. Investors are not injecting funds because of security concerns, energy shortages and the rising cost of doing business. Thus, growth remains elusive.

Dr Shaikh conceded that the government would have to broaden the tax net to increase its revenues, but qualified his words saying that this was something that could not come about overnight. Why should one believe him when he says he would be able to tax the powerful when his predecessors did not or could not despite frequent commitments to the public? He should learn to be patient with the cynics until he actually comes close to accomplishing what he promises.

He also favoured the country moving towards an outward-oriented economy to take advantage of a regional boom taking place in the Middle East, China and the Saarc region. How? He didn’t say. It doesn’t take a financial expert, as he indicated, to conclude that improvement in revenue is not possible overnight. But it does take one to inform people about the plans to kick-start growth and eliminate the country’s dependence on foreign loans, aid and grants. Two months in office should have been sufficient for Dr Shaikh to come up with a list of possible solutions to the country’s economic troubles.