With the government focused on foreign borrowings to repay unsustainable debts and struggling to achieve macroeconomic stability, the issues in economic recovery remain on the back burner.

However, public discourse provides insight into how things can be done differently. It is argued that public policy is focused on tinkering on the margins rather than resolving the real problems generating macroeconomic imbalances and that the government is addressing the symptoms rather than the real cause of the problem.

This view has been voiced by representatives of the distressed manufacturing sector based in Karachi and Lahore and certain analysts. It goes without saying that with the problem properly diagnosed, the solution becomes easier.

“We seem to be content with managing the symptoms rather than curing the cause,” says Pakistan Business Council CEO Ehsan Malik. Short-term measures to reduce the fiscal deficit, he added, were not a sustainable solution.

Credit advanced by banks to the private sector, a Ferguson report says, remains the lowest at 15pc of GDP in Pakistan compared to the regional range of 32-39pc

He was referring to the Rs4.95 hike per unit increase in uniform national electricity tariff on July 14. The latest tariff increase, he argued, would do nothing to fix the real problem in the energy sector. His view is based on past experience.

The denial of regionally competitive electricity tariffs, says Mr Malik, has rendered exports uncompetitive.

Owing to a number of such factors, the total merchandise exports fell 12.71 per cent year-on-year to $27.54 billion in 2022-23 from $31.78bn in the preceding year.

High energy costs, Mr Malik adds, also thwart the growth of energy-intensive sectors such as petrochemicals. And the net result is reliance on imports. (Goods produced abroad and imported into the country make no contribution to GDP and people’s welfare.)

In an unusual move, Habib Bank is setting up a non-financial subsidiary — HBL Zarai — aimed at raising the production capacity of small and medium-sized farmers. The entity will establish and operate storage facilities for surplus agricultural output and provide market intelligence to help growers secure better prices for their crops and cattle.

Both cross-country and time series data suggest that greater inclusiveness in economic policies creates more prosperity and growth, says analyst Dr Muhammad Babar Chohan. And putting people’s well-being on top of the policy agenda, he adds, is the bottom line in defining inclusivity.

As the International Monetary Fund programme is essentially in the nature of fire-fighting, to quote an analyst, it also addresses ‘the symptoms and not the disease.’ Thus long-term structural reform remains the sole responsibility of the country’s policymakers.

The over-arching issue in the reforms agenda, now more frequently raised in public discourse, is that the nation has to start living within its means, and the economy must be put on the path of self-reliance. The Shahbaz Sharif-led government and some independent economists share this view.

The cash-in circulation has hit a record high level of 39pc compared to ratios ranging from 9pc-17pc for India, Bangladesh and Kenya

The curbs on imports, now being relaxed, did help to narrow the country’s trade deficit by 43pc to $27.59bn and the current account deficit by 85pc to $2.6bn in FY23. The current account posted a surplus for four consecutive months ending June. But the curbs on imports stifled economic activities.

Since we will not get enough loans to repay foreign debts, economist Kaiser Bengali says we will basically hand over control of our assets to foreigners, such as the airports and a segment of the Karachi port terminal. He states that we already have a banking sector that is 80pc foreign-owned and a telecom sector that is 100pc foreign-owned, but more is to come.

While there is a strong need to substitute external loans with foreign direct investment (FDI), it is no less important that capital spending is directed to the most productive sectors to reduce foreign dependence.

A growing economy and a comfortable balance of payments position are prerequisites to attracting desired FDI inflows. The net FDI dropped by 25pc to $1.46bn in the last fiscal year and more than 50pc to $114m in June compared to the same month of the preceding year.

The long-term trend in revenue collection is also a source of discomfort. The tax-to-GDP ratio declined from 13.8pc in the 1980s to 8.5pc in FY21 and was recorded at 9.2pc in FY22. The revised budget figure for FY23 was 8.5pc, and for FY24, the budgeted target was set at 8.7pc.

“It is a wild goose chase,” says political economist Dr Pervez Tahir in his article, ‘Forget tax increases, reduce spending’.

The cash-in circulation has hit a record high level at 39pc compared to ratios ranging from 9pc to 17pc in the case of India, Bangladesh and Kenya, according to a report by Ferguson and company.

The authorities are reportedly considering selling government papers directly to individuals, which may allow squeezed private-sector borrowing from banks to grow. But unaffordable high rates of interest will still remain a problem.

Credit advanced by banks to the private sector, Ferguson report says, remains the lowest at 15pc of the GDP in Pakistan compared to the regional range of 32-39pc.

Published in Dawn, The Business and Finance Weekly, July 24th, 2023