Daily Times

Pakistan’s outgoing FY 2020-21 is ending on a high note. The country boasts more than 3.9 percent GDP growth (almost double the official target) and positive numbers from exports, large-scale manufacturing, agriculture, and other sectors. Thus, the pre-budget debate is a prominent topic among economists and financial experts.

When the 2020-21 budget was announced last year total outlay was Rs 7,294 billion, significantly less than in FY 2019-20. Many economists and financial experts were not impressed. However, as the government remained defiant, the final quarter of the current fiscal year justified many critical decisions and provided answers to many questions.

The reduction in Public Sector Development Programmes from Rs 1,613 billion to Rs 1,324 billion trigged much criticism. The government was seen as breaking its promise to boost public-sector development. As an economist, however, I could see where we were headed in terms of securing larger-scale stability. To achieve this, the government had to disrupt the existing financial system. And we saw stability in the form of rupee-to-dollar value, record remittances, record tax revenues, and controlled expenses.

Finance Minister Shaukat Tarin’s biggest challenge will be aligning financial institutions with a dedicated focus on various sectors to the high policy rate. As a result, we must transition to a ‘growth or directional economy’

It is critical to emphasise the difference in performance markers between the PTI and its predecessors. During the last PML-N government, the current account deficit was $19.2 billion, while the PTI enjoyed a surplus of $959 million (January-March 2021). Similarly, the agriculture industry grew by 2.7 percent during FY 2019-20, with record production in major and minor crops after many years.

As the new financial year begins, the government appears to be shifting gears toward a growth-oriented economy and a budget outlook that reflects that. What does this mean for the incoming FY 2021-22 at a time when the political arena is calling for an “awam dost” (public-friendly) budget once more? I would save number predictions for later and instead concentrate on what needs to be done to achieve ‘growth’.

Despite our economic challenges and a hopeful outlook for the future, Pakistan’s real challenge has always been consistency in policy implementation and execution. As the high monetary policy rate of 7 percent is unlikely to change during FY 2021-22, Finance Minister Shaukat Tarin’s biggest challenge will be aligning financial institutions with a dedicated focus on various sectors to the high policy rate. As a result, we must transition to a ‘growth or directional economy’. Successful implementation of a directional economy is critical for Pakistan’s future growth because it will clearly define a methodology and fundamentally alter economic and financial measures to achieve the specific growth goal.

Consider the rise of neoliberalism in China as it transitioned to focus on economic growth in the 1980s and 1990s. What occurred remains unprecedented in any other global economy. Chinese economists achieved a delicate balance between neoliberal development and economic determinism – encapsulating the true spirit of a directional or growth economy. China entered a new era by consciously focusing on de-regularisation and the core principles of a free-market and growth-led economy. Experts also associate neoliberalism with the Margaret Thatcher era of 1979–1990 and Ronald Reagan.

Developing a thorough understanding of a directional economy could be the key success factor that the government is overlooking. What I mean by this is a critical examination of all public institutions, as well as a deliberate shift to a technocratic governance model. It also implies streamlining the government, further reducing government spending, and encouraging the marketisation of social services.

In Pakistan’s case, we can broaden our directional economy practice by combining neoliberalism, authoritarianism, and socialism. This would imply that the government would be forced to privatise loss-making institutions, implement a moderate free-market mechanism, and retain state control over vital national assets. As a result, we can integrate into a global neoliberalism model while not completely surrendering to it. This, however, should not be confused with ‘macroeconomic prudence’. We continue to aim for a broader tax base while allowing financial liberalism in carefully chosen sectors.

Unlike previous governments, including Ishaq Dar’s Rupee Melodrama, the current administration is entirely focused on bringing about fundamental changes in multiplier industries. The significant determinants for growth-led strategy industries include untapped capacity in national and international markets, improved production capabilities, and potential market consumption. These must consist of multiplier industries such as IT, construction and housing, tourism, automobiles, SMEs, blue economy promotion (maritime affairs), and more. The importance of an export-focused strategy for these sectors must also be considered in promoting growth. The specified industries must be boosted by increasing consumption and production.

Today’s growth mindset amongst the leadership must be maintained since it will be pivotal in planning and devising strategies. The leadership must crack the code on discovering novel ways to promote growth across the entire economic fabric – thus a cleverly designed directional or growth economy.

The writer is Special Advisor (Pakistan Institute of Management, Lahore operated under Federal Ministry of Industries and Production, Islamabad) and Foreign Research Associate (Centre of Excellence, China Pakistan Economic Corridor, Islamabad). He can be reached at hassnain.javed@hotmail.com