The federal government has prioritised sectors such as agriculture, small and medium-sized enterprises (SMEs) and information technology (IT) for bank financing to stimulate growth.

Finance Minister Muhammad Aurangzeb has requested the Pakistan Banks’ Association (PBA) to lead a task force comprising representatives from the banking sector, government and relevant stakeholders. The primary objective is to accelerate financing for the priority sectors.

He advised the PBA to devise actionable strategies to overcome the existing challenges and bottlenecks hindering the growth of these vital sectors.

At the same time, the federation seeks reduced reliance on bank financing and is focusing on developing equity and debt markets to fund infrastructure projects through public-private partnerships.

The finance minister aims to accelerate growth by concentrating investments on redefined growth-enabling sectors while exploring financing options apart from banks

“There has been a massive redistribution of wealth from the public to the financial sector due to government borrowings and high-interest rates,” says Yousuf Nazar, the former head of Citigroup’s emerging markets investment and author of The Gathering Storm.

In a related development, a proposal was recently initiated for co-financing federal ‘strategic projects’ by the centre and the provinces, along with integrating provincial projects to create synergy among the provinces.

On previous occasions, sub-federations opposed efforts by the PML-N and PTI governments to seek provincial finances for federal projects. “Any such move,” says a PPP leader, “would require necessary legislation”.

Supporting the finance minister’s initiative, State Bank of Pakistan Governor Jamil Ahmed has reiterated the central bank’s commitment to facilitating an environment that will allow banks to increase lending to priority sectors.

Centralised economic planning is not mentioned in the constitution, which only mentions provincial economic coordination under the National Economic Council

As the interest rate has turned positive by 1.3 per cent — with inflation reading at 20.7pc in March falling below the policy rate of 22pc — financial markets expect the central bank to cut rates. However, the trade deficit has widened simultaneously by 56pc to $2.2 billion.

Unstable security and exchange rates, as well as high inflation, are major concerns for operational Japanese companies in expanding their business in Pakistan, according to the Japan External Trade Organisation.

Moreover, under the National Development Framework (NDF) draft being finalised, the Planning Commission will define “strategic priorities by declaring certain sectors to be growth-enablers, such as infrastructure, and focus only on investment in these sectors while, at the same time, rendering provinces autonomy to define their provincial development priorities”.

Towards that end, a national development outlay may be prepared, comprising the federal Public Sector Development Programme (PSDP) and provincial Annual Development Plans (ADP), which highlight the main sectoral strategies and priorities as well as flagship projects.

However, to quote Barrister Zamir Ghumro, “The federation has no role in central planning with regard to the economy”. Mr Ghumro, a former advocate general of Sindh, points out that centralised economic planning is not mentioned in the constitution. The constitution only mentions provincial economic coordination under the National Economic Council.

During the first quarter of this fiscal year, the provincial current expenditure increased by 57pc while development spending increased by 61pc.

The NDF draft proposes that provinces can find financial support from international donors and through provincial resources to support their development priorities. This stands out in sharp contrast with the government policy to reduce the foreign debt burden.

No doubt, prioritising sectors like agriculture, SMEs, and IT will help stimulate balanced growth if the evolved strategies are sound and effectively implemented.

According to a Food and Agriculture Organisation study, the current understanding is that farmers are individuals who own the land they work on. Landless peasants are excluded from policymaking to increase farm productivity.

To quote agricultural experts, a relatively neglected area that has not so far received the required focus is the human factor — poor knowledge, training, and efficiency of our farm workers, who carry out day-to-day operations on agricultural lands.

Now more than ever, they stress that Pakistan needs a paradigm shift towards improving workforce skills if we want a more productive, competitive and sustainable agriculture sector.

Moreover, the move to step up corporate farming — a progressive step to modernise agriculture — has revived the issue of allotting state lands to landless peasants.

Leaders of the Sindh Hari Tehreek (SHT) have strongly opposed handing over around 1.3 million acres of Sindh’s land for corporate farming earmarked for foreign and domestic investors. Instead, farmlands should be allotted to landless peasants, one resolution at a recent conference organised by the SHT demanded.

While lands used for corporate farming would indeed generate income, water availability is a serious issue in the present conditions, says PPP Sindh President Nisar Ahmed Khuhro. He emphasised that anyone’s share should not be cut.

The SHT conference also demanded that steps be taken to ensure water availability to lower riparian regions and the immediate dismantling of all illegal watercourses laid by influential landowners, ministers, and official advisors.

In its April 2 report, the World Bank warned that Pakistan’s nascent recovery was neither sustainable nor sufficient to address the country’s increasing poverty, currently 40pc. It expects the economy to grow at 1.8pc this fiscal year.

Published in Dawn, The Business and Finance Weekly, April 8th, 2024