LAHORE: Economic and development experts see a slight improvement in the country’s economy and predict modest growth in the next fiscal year (2023-24), starting from July 1st of this year.

They also emphasise the need for a coordinated national strategy to pursue trade agreements that allow Pakistani exporters to produce and export higher-value goods.

These views were expressed on the first day of the two-day Lahore School of Economics (LSE’s) 16th international conference on “Managing Pakistan’s Economy” held on Tuesday.

The conference featured a series of presentations on macroeconomic management, structural reform, and economic rights. The goal of the conference is not only to discuss the economic issues faced by Pakistan, but also to lay the foundations for long-term sustainable economic growth.

Dr Shahid Chaudhry, LSE rector, stated during the event that the current economic challenges faced by Pakistan are largely due to the effects of Covid in 2019-20 and the Ukraine war that began in 2022.

“The Pakistani economy is now stabilizing, and after experiencing almost no growth in 2022-23, it is expected to resume modest growth in 2023-24,” he believed.

Dr Moazzam Mahmood of the LSE projected that the Pakistani economy would start an upward growth trajectory in the next fiscal year. According to him, the reasons for this include the recovery of the current account from deep deficits, although better targeting of import controls is needed, the expected recovery of the country from supply shocks to agriculture and industry in FY 2023-24, the implementation of stringent monetary and fiscal policies in FY 2023, and the government’s Medium-Term Economic Framework aiming to reduce inflation and stabilize the economy. Based on this, he stated that GDP growth is projected to be 3.61% in the next year.

Dr Rashid Amjad and Almazia Shahzad analyzed the post-2019 shifts towards a market-driven exchange rate. They found that while the exchange rate may have been overvalued in the past, this has recently been reversed, which should make exports more competitive. The paper advised managing Pakistan’s market-determined exchange rate regime by building up and maintaining adequate reserves.

Dr Azam Chaudhry estimated capital flight from Pakistan using data from the balance of payments and the level of trade misinvoicing in Pakistan. Dr Azam concluded that over the past 10 years, capital flight has reached significant levels, amounting to almost 5 billion dollars in recent years. He also demonstrated that capital flight is highly sensitive to economic conditions, which means that sustained economic growth will tempt capital to return.

Dr Nida Jamil examined the impact of China lowering tariffs on Pakistani products, allowing them greater access to the Chinese market under the Pakistan-China Free Trade Agreement (FTA) signed in 2006. She emphasized the need for a coordinated strategy in pursuing trade agreements that enable Pakistani exporters to produce and export higher-value goods.

Syed Shabbar Zaidi discussed the oversized role of federally collected tax revenues in Pakistan’s total tax pool and how the large transfers of revenues resulting from the 18th Amendment to the provinces have hindered their capacity to generate revenues on their own.

Dr Matthew McCartney of the Chartered Cities Institute provided an overview of two relatively successful periods of economic and political stabilisation in Pakistan, 2000–2001 and 2013–2106, and asked what lessons can be learned and implemented in 2023. Dr Matthew proposed reforms in delimited economic areas: special economic zones (SEZs) and independent ‘Pockets of Efficiency’ an independent central bank, revenue collection authority, and telecoms regulatory.

Dr Moazam Mahmood, Azam Chaudhry, and Shamyla Chaudhry highlighted how fiscal deficits can drive trade deficits. They were of the view that a significant amount of debt is the result of foreign debt incurred as a result of recurring current account deficits. Naeem Sheikh and Arshad Hassan discussed the causes and ramifications of low tax revenue mobilization and tax compliance in Pakistan, saying that the largest impact on compliance would result from the real-time exchange and analysis of taxpayer/trader data among the FBR, provincial tax authorities and withholding agents.

Dr Theresa Chaudhry and Hamna Ahmad discussed the potential for IT exports and also discussed government policies to promote IT exports, while Dr. Naved Hamid, Ali Chaudhry, and Murtaza Syed discussed how monetary policy could have reduced the impact of the current economic crises and lessons, that can be drawn for monetary policy in the future. The authors proposed to improve the coverage and frequency of domestic demand indicators (especially quarterly GDP) and maintain a healthy degree of caution around fiscal projections (especially during times of political stress and around elections).

Published in Dawn, May 3rd, 2023