Reshuffling of the finance team, again

The government has reshuffled its finance team once again. Dr Waqar Masood Khan has been posted as the new finance secretary while his predecessor, Salman Siddique, has been appointed as the new Federal Board of Revenue (FBR) chairman and FBR chairman Sohail Ahmed has been transferred and posted as the Federal Planning and Development secretary. In less than three years, this government has had three governors of the State Bank of Pakistan, four finance ministers and five finance secretaries. This is an indication of the government’s difficulties in managing the economy. It is possible that in its preoccupation with other political matters, the government is having a hard time in focusing on economic problems. But perhaps the frequent changes in the economic team are not just whimsicality. There are deeper reasons behind it.

When the world dipped into one of the worst financial and economic crises in 2007, Pakistan’s economy was not hit that hard because our banks did not have a lot of exposure to the international banking system. But our happiness was short-lived as we soon found out. In an interdependent world and with an economy firmly rooted in dependence for more than six decades, the global economic trends also affected Pakistan’s economy. Our democratically elected government inherited a flawed economy based on a neo-liberal paradigm. The economy under General (retd) Musharraf and Shaukat Aziz concentrated more on the service sector and consumer-led demand while basic industry and agriculture were ignored. With the real economy relegated to the backburner, the economic bubble was bound to burst sooner or later. When the PPP-led coalition government came into power in 2008, we were forced to go back to the IMF to stave off a possible economic crash. We have seen in the past that the generosity always on display to military regimes by the west has never been offered to civilian governments. This was repeated again. The incumbents did not have largesse like our previous rulers and the effects of the global recession were biting hard. No government goes to the IMF willingly because more often than not, the IMF comes up with its one-size-fits-all economic prescriptions. But putting all the blame on the IMF for the recent RGST controversy is not fair. Pakistan itself went to the IMF with an economic and tax reforms package, to which the IMF agreed. The problems started arising when our government, with its fractured mandate and a shaky coalition, could not even get its allies on board let alone the opposition. On the one hand, the government has failed to negotiate its way through while on the other hand, the political landscape has made getting these reforms off the ground that much more difficult. Due to the disparate array of forces, all the finance ministers and secretaries ran into political obstacles.

There are other inherent problems as well. Our economy has been mismanaged over the years. The only way to get out of our economic troubles is by thinking out of the box. If we want to build a relatively independent economy, we need massive industrialisation. Any country that is not industrialising risks stagnation. In a country like Pakistan, we cannot entirely rely on the private sector for this. The government has to invest in heavy industry itself. If we do not go down this path and get our economic essentials right, we will continue to stumble from crisis to crisis. By now we should be familiar with our shortcomings and reassess the economic model we have been following. Pakistan can only achieve economic, fiscal and political sovereignty – which we always claimed but never actually had – by modernising our economy.

(my editorial in Daily Times)

Comments

I think Pakistan needs more FDIs and FIIs to boost its economy and its Government of Pakistan's responsibility to make a good image of Pakistan globally so as to encourage the more foreign players to economy.
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