While the authorities struggle with structural policy reforms, regulatory and administrative measures have made some incremental gains.

Owing to the rupee’s appreciation against the dollar over five consecutive weeks, the Federation of Pakistan Chambers of Commerce and Industry (FPCCI ) said Pakistan’s external debt had reduced by a staggering Rs400 billion.

The dollar trading at Rs336 on September 4 came down to Rs276 in mid-October. The yield from the crackdown on speculative currency trading and dollar smuggling was close to $900 million.

On the back of a stronger rupee and the current trend of falling international petroleum prices, the government sharply revised the prices of petroleum products on October 15. Petrol prices were reduced by Rs40, diesel by Rs15 and kerosene oil by Rs22 per litre.

The exchange rate and fuel prices are considered major contributors to inflation; analysts, however, point to several other factors, such as low productivity in commodity-producing sectors, high taxation on basic goods, and failure of price control mechanisms that need to be addressed.

All efforts so far to reform government administration have largely ended in failure

The positive developments, as earlier highlighted, have possibly prompted the Pakistan Business Council (PBC) to draw the government’s attention towards under-invoicing in imports and exports, which results in losses of billions of dollars and substantial tax revenues.

In letters to Finance Minister Shamshad Akhtar, the PBC has pointed out that under-invoicing of imports and exports in the case of China, Singapore, Germany and the UK in 2022 involved a discrepancy of $8bn, as obvious from figures recorded in Pakistan and these four trading partners.

To shore up tax revenues and protect domestic industry from inflows of cheaper tax-evaded smuggled goods under the Afghan Transit Trade Agreement, the government recently prohibited imports of smuggling-prone items worth over $3bn.

Simultaneously, a 10 per cent processing fee on all transit products has been imposed to raise the expenses of smuggling back into Pakistan. Smuggled goods worth R5.5bn were also seized by customs during six weeks ending October 14.

On an optimistic note, FPCCI President Irfan Iqbal Sheikh says the process of economic revival has ‘kick-started’ as economic uncertainties are being curbed.

Regulatory and administrative measures can more easily be applied to address a few specific issues on an ad hoc basis, such as those relating to faltering public service delivery and ineffective enforcement of laws.

In the absence of any significant improvement in the fundamentals of the economy, a rigged segment of the market may also be disciplined for a while

Earlier, though at a heavy cost, the Shahbaz Sharif–led coalition government was able to significantly reduce the current account deficit by curbing imports. And with the help of the International Monetary Fund and friendly countries, an immediate debt default was averted. In case of default, the economy would have had more serious consequences.

Owing to the relaxation in imports, the large-scale manufacturing sector (LSM) posted year-on-year growth of 2.52pc in August, reversing the trend for 11 consecutive months of contraction. With 10 out 22 sectors showing growth, some see the LSM recovering from the slump.

Because of dollar demand, the rising trend of the rupee value came to a halt on October 17 after lasting for 28 consecutive sessions. It lost 0.07pc of its value against the greenback from a day earlier to close at 277.03.

Regulatory/administrative measures may create breathing space and, in certain conditions, may marginally ease the process of tackling challenging reforms, provided major stakeholders are on board.

The past experience indicates that such measures alone are no substitute for required deep, long-term structural reforms.

Administrative/regulatory measures work best when institutions are designed to support well-defined prudent strategies, coupled with a realistic plan of action, to achieve the stated national objectives, embedded with common values.

All efforts so far to reform government administration have largely ended in failure. The Special Investment Facility Council is now trying to remove bottlenecks in public service delivery and ensure the speedy execution of development projects. Also, due to financial constraints, the federal development spending dropped to Rs57bn in the first quarter of this fiscal year, representing only 6pc of the annual outlay of Rs900bn.

The insight developed in improving performance through administrative decisions can also be used for bringing about effective and durable institutional reforms.

Published in Dawn, The Business and Finance Weekly, October 23th, 2023