Linkage between economy and sovereignty

The Chief of Army Staff (COAS) General Qamar Javed Bajwa described strong economy as perquisite for sovereignty of the country in a soul searching and thoughts provoking speech at a seminar at National Defense University on the prevailing economic challenges confronting the country. It may be recalled that he had delivered an identical speech on the compounding economic woes of the country at a gathering of business community in Karachi in 2017, which was not liked by the hit-man of economy former finance minister Ishaq Dar. The COAS also highlighted the vital linkage between security and economy and their complimentarily dimensions.

Prominent economists including Dr. Asfaq Hassan Khan and Dr. Salman, who are the proponents of homegrown solutions of overcoming economic crisis, dwelt at length in theirs speeches on ways and means that can be instrumental in effectively tackling the macroeconomic imbalances and removing structural weaknesses which hinders the growth of the economy. In expressed language these economists enumerated the policy tools for reducing the budget deficits; bringing down the fast swelling power sector circular debt; offloading the huge financial burden of hemorrhaging public sector enterprises; improving fiscal management; expanding the tax base; documentation of economy; enhancing institutional capacity; and boosting exports.

Majority of the opinion makers and analysts focus their attention on the corrupt practices, bad governance, and financial indiscipline in the past 10 years and term them the major contributory factors for the disaster of the economy. In fact the foundation of downturn of economy was deliberately laid in the policy of nationalization of private industrial enterprises and banks in the decade of 1970. Prior to implementation of this policy, the industrial sector was growing at 8 percent and agriculture by 7.5. It was a time when South Korea borrowed economic growth model of Pakistan to start its development planning from scratches and now it is an economic joint. The nationalization policy brought down the economic growth rate to 2.2 percent. The confidence of private sector was shattered the and the entrepreneurial initiatives of introducing new technologies to achieve the economies of scale and products innovations were abandoned with the result that the industry of civilian goods is stagnant at second generation technology. On the country other developing countries in the region have moved forward towards the application of fourth and fifth generation technologies and these countries now enjoy significant comparative advantage over Pakistan in exports of value added products in the international market.

Revival of the economy started in 1980 but the downturn started once again from 1989 which continued till 1999. The period of 2000-04 witnessed economic recovery and gradual surge but later the downward slide started which gained momentum during the past 10 years. The most expensive thermal power generation system had been installed in the second PPP government and the last PML-N government. The power purchase agreements with the Independent Power Produces (IPPs) envisaging 40 percent payment for the idle plant capacity and agreed 8 cents per unit tariff for the coal fired thermal power plants have turned out the proverbial “Last straw on camel’s back.” The burden of power sector circular debt has risen to Rs.1.8 trillion but ironically, former president of IPPs Association Nadeem Babar is part of the PTI government, an appointment quite flabbergasting and unjustified.

The tough economic decisions taken by the present government were unavoidable; however, the policy of indefinite exemption of agriculture income tax runs contrary to the principle of social justice. Most of the fiscal measures will hit hard the poor people.

The state enterprises are incurring losses of R.1600 billion annually and their early privitisation is inevitable. In the past the privitisation process lacked transparency. The incumbent advisor on finance Dr. Abdul Hafeez Sheikh was  in-charge of Privitisation Commission when PTCL was privitised in 2006. But the UAE Telecom Company Etisalat still owes $800 million to Pakistan. This amount needs to be retrieved on priority basis. Hopefully, the present government will succeed in steering the country out of economic crisis.

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