WASHINGTON: “Pakistan has not crossed the tipping point and it’s still possible to rebuild the national economy with competence and courage” concurred former finance minister Miftah Ismail, who is also a professor of economics, public policy, and finance at Princeton University and a senior Pakistani American economist Atif Mian, at a webinar arranged by the Centre for Middle East Policy at Brookings Institution, Washington.
Focus of Discussion
The webinar organizers noted year 2022 saw political turmoil, an economic crisis, and catastrophic flooding in Pakistan. The backbreaking inflation, depreciating currency, and precariously low foreign reserves the country’s specifically complicated the situation.
The discussion focused on the roots of Pakistan’s economic challenges and the future of its economy. The discussants talked about “the long-term roots of these problems, how political instability shapes them, and what economic policy Pakistan should adopt to address its difficulties.”
Has Pakistan crossed the tipping point?
The moderator, Madiha Afzal, put forth the frequently asked question that has Pakistan crossed the tipping point? And is it too late to revive the economy?
While responding to the questions Miftah Ismail hoped that Pakistan can come back from the brink. Though next six to eight months are going to be very difficult with inflation fairly high.
IMF a necessary Evil
But he cautioned that the inflation could be much higher if Pakistan didn’t go back to the IMF program. And that “We have to understand that at this point, doing the IMF program, staying on track” were the right things to do”.
“We will, probably, have back-to-back IMF programs because we will not have enough (foreign exchange) reserves come June. So, we cannot survive without an IMF program,” he said.
He added that Pakistan, would have to “stay with the IMF tutelage or policy paradigm,” and then it could start talking about reforms, like population planning and education, to come out of the quagmire it’s sinking into.
Power Sector a big Drag, Increasing SSN Spending
Miftah suggested reforming the power sector and noted it as “a big drag” on the national economy in pushing the country to the tipping point. Besides the former finance minister recommends improving the gas distribution system and providing more funds to the Benazir Income Support and social protection programs.
Pakistan currently spends less than half pc of its GDP on such programs. It needs which needs to be increased to one or one-and-a-half per cent of GDP. This would help improve education and reduce poverty and will also help eradicate stunting and malnutrition.
Ambitious Growth Target
Pakistan, needs to grow by 8-9pc a year for 20 years to create a substantial middle class. “And we can quadruple our income in those years.”
“It is never too late. That’s just negative thinking, the positive thing is, it’s amazing how small Pakistan’s problems are,” said Prof Atif Mian, endorsing the former finance minister’s optimistic views.
“I will give you an example, what’s the price of a cheap burger in the US, $10? If we could only raise Pakistan’s productivity, so every citizen of Pakistan can just sell one burger to the rest of the world in a year, that’s like $2bn.
You just sell a few burgers, and you can solve all the problems that we are talking about today. “This is how small; we are talking peanuts here for the country.”
the Two Cs
Atif Mian noted the current situation as both the good as well as the depressing news. He said that for peanuts we have made 220 million people suffer like the way they are suffering today.”
Prof Mian said that Pakistan needed two Cs, the competence and courage, to overcome its problems. “Competence, to figure out what to do. And Courage to be able to changing the way things have been done before. But if you do that, people will get angry.”
Those who have made all their money in land and real estate, will not like it when you say “let’s sell burgers to the rest of the world.”
Once that’s done, things could change very quickly and in 20 years, it will be a wholly different story, he said.
Prof Mian, who is an expert on development economics, said that the despondency that the nation suffered from could be removed within an electoral cycle.
“I believe that if a government comes in with these things, within their tenure they can turn things around. In the sense that there will be hope going forward,” he said.