Pakistan’s journey towards economic stability and growth has been riddled with challenges despite having numerous policy prescriptions and international support since independence. Understanding what needs to be done is clear, and all pundits and financial advisors know this, but the problem lies in policy implementation and the leadership’s willingness to take bold and unpopular steps.

Financial experts and agreements with international bodies like the International Monetary Fund (IMF) outline clear objectives for Pakistan: enhancing tax-to-GDP ratios, boosting exports, and addressing energy issues. However, the crux of the problem lies in execution. Effective governance requires competence, timely decision-making, and putting the right teams in place.

We have examples of leaders in different countries who have set the path for their country’s transformation from a third-world to a first-world country, which can serve as a model. Following our own example of the 1960s five-year plan strategy, Park Chung-Hee of South Korea implemented five-year economic plans, promoting industrialisation and export-led growth, laying the foundation for South Korea’s economic rise.

Deng Xiaoping, who led China during the late 1970s and 1980s, introduced market-oriented reforms and special economic zones, spurring rapid economic growth and modernisation. Mahathir Mohamad of Malaysia, serving from 1981 to 2003 and again from 2018 to 2020, launched Vision 2020, focusing on industrialisation, economic diversification, and major infrastructure projects to propel Malaysia towards developed nation status.

The private sector must lead the charge for economic revival, supported by sound governance and sustainable practices

Lee Kuan Yew attributed Singapore’s success to “meritocracy, pragmatism, and honesty.” These principles are foundational to effective governance and crucial for Pakistan to implement its policies successfully.

Pakistan has attempted to implement various economic models to enhance its growth, drawing inspiration from strategies that succeeded elsewhere. The country adopted the five-year plan strategy, which initially showed some promise but did not yield sustained results.

During the 2010s, especially with the China-Pakistan Economic Corridor (CPEC) in focus, Pakistan emphasised creating special economic zones to attract investment and boost industrial growth. Successive governments have also aimed to focus on industrialisation and consistently discussed expanding the tax base.

However, it is not merely the creation of economic models that drives prosperity; effective implementation of policies is essential to truly transform the economy and improve the lives of all citizens.

To revive its economy, Pakistan must take decisive steps following the recent IMF staff-level agreement. The 37-month loan of about $7 billion under the IMF’s Extended Fund Facility arrangement could be a pivotal moment for Pakistan.

This loan offers the struggling government a chance to avoid economic disruptions, imbalances, and potential havoc. However, it is crucial that the government uses this loan judiciously, implementing policies that provide a clear direction for economic stability and growth.

Critics often question the effectiveness of recurring IMF programmes, but given the current economic constraints and external pressures, making the most of this agreement is essential. Additionally, the landscape of international support is changing; friendly countries now prefer equity investments and board seats over simple financial aid. This shift indicates a move towards more sustainable and accountable support structures.

To capitalise on these opportunities, Pakistan must focus on rigorous policy implementation, ensuring that funds are utilised effectively to foster economic stability and improve the lives of its citizens.

Domestically, the fiscal space is tight. Supplementary grants are no longer an option, and expanding the tax net is critical. This means taxing not just the salaried class but also sectors like retail, real estate, and agriculture. Public-private partnerships must replace traditional Public Sector Development Programme-funded projects to create a more dynamic economic environment.

The private sector is vital for Pakistan’s economic revival. It needs to drive innovation and adapt to sustainable business models. Dependence on import-led, subsidy-supported businesses is unsustainable. Instead, the focus should shift towards exports and market diversification.

Pakistan needs to work on the export quality of its products and can explore African and Latin American markets, especially since it enjoys lower production costs for motorbikes, tractors, and other goods. Notable industries Pakistan could emphasise for export include chemicals, textiles, and pharmaceuticals. By enhancing the quality and competitiveness of these sectors, Pakistan can strengthen its economy and achieve sustainable growth.

Financial inclusion and digital transformation are also crucial. With a client base of 36 million, expanding digital banking can significantly enhance economic participation. Digital solutions offer cheaper, faster, and better financial services, making them indispensable for future growth.

Agriculture remains the backbone of Pakistan’s economy. Innovations such as mechanised services and cash flow lending for small farmers can revolutionise this sector. Similarly, collaborations in technology, such as making Pakistan a tech destination, can drive economic diversification.

Sustainability is another priority. With commitments to achieve net-zero emissions, investments in green technologies and sustainable practices are essential. All sectors, including banks, must align with these goals to combat climate change effectively.

Pakistan’s path to economic revival is clear but requires robust leadership and unwavering commitment to policy implementation. The private sector must lead the charge, supported by sound governance and sustainable practices. International partnerships and domestic reforms are the twin pillars on which Pakistan’s future prosperity rests. By maintaining faith in the private sector and fostering collaborative efforts, Pakistan can navigate its challenges and achieve long-term economic stability.

The writer is an economist and currently working as a financial analyst with ExxonMobil

Published in Dawn, The Business and Finance Weekly, July 29th, 2024