Pakistan’s fundamental problem is to have sustainable growth. We have seen in the past that there are periods when we have had growth at 5 to 6 or even 7 percent and then all of a sudden we start facing problems of growth decelerating and affecting the economy.
The same happened in the past five years; the initial growth was financed through taking out foreign debts, and since that was not sustainable we had the slowdown. What the current government needs to do is think of how to put the economy on the right path. They have the right intentions. But the question is are they looking at the right areas where they are going to give some kind of incentives.
What the current government needs to do is think of how to put the economy on the right path.
This seems questionable right now. In Pakistan, agriculture is about one-fifth of the total national output and the services sector, which should have been about 30-40 percent in a country like Pakistan, is almost 60 percent of the total size of the economy.
This creates a mismatch and because of this we have high unemployment in the economy. The focus in this finance bill should have been on areas which create more jobs, but that focus is missing. When we look at the finance bill, we see there are incentives for the stock market.
This is good since it can create positive sentiments among the investors and any positive movement in the stock market creates overall positive environment in the country. But are we addressing the real economic issues that Pakistan is facing? My answer is no. One of the fundamental issues in Pakistan is the high cost of doing business.
They should have focused on reducing taxes which would help promote industrial growth. And they should have done much more – directly – for the agricultural sector. Reducing the income tax rates for the banks to lend to agriculture and housing sectors is not the best way to get results.
They would have been better off by setting the interest rate for the agricultural sector in the single digits. The kind of interest rates that the exporters are paying in the various refinancing schemes run by the State Bank of Pakistan, those kinds of incentives should have also been given to the agri-sector.
The same happened in the past five years; the initial growth was financed through taking out foreign debts, and since that was not sustainable we had the slowdown.
They need to focus on agriculture. When you focus on agriculture you get quick results. Because the crop comes in a matter of just six months or so. So, you focus today and you get a result in next one year. In addition, about 30 to 40 percent of the country’s labour force is employed in the agricultural sector.
In the industrial sector, what the PTI govt did in the past five months is that they have reduced the cost for the export-oriented sector which is the right step but similar kind of incentive should have been given to the industrial sector too. Industries which are not exporting are still paying higher tariffs on electricity and gas.
This means the cost of production has not been lowered and this will make them more uncompetitive. The problem with Pakistan right now is that we are not competing within our borders. We are competing with countries like China. My idea was that the finance minister would announce a five-year roadmap in this mini-budget to put the economy on a sustainable path.
That is altogether missing from the new finance bill. No direction was given. We do not know what will happen to Pakistan after two years or after three years or even after three months. So here we stand. This is a major flaw in the budget speech.
Shahbaz Rana is the financial correspondent at The Express Tribune. He has over 10 years’ experience in covering the economic policy-making for various media outlets, including The Express Tribune, Dunya News TV, and The Nation. He holds a degree in international relations from the National University of Modern Languages Islamabad.
The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.