Dr. Ikramul Haq & Abdul Rauf Shakoori
Pakistan has entered into 2024 under a transitional phase where the caretaker government remains at the helm of affairs. Unfortunately, elections could not be held within the period of 90 days as stipulated in Article 224(2) of the Constitution of Islamic Republic of Pakistan. The Election Commission of Pakistan (ECP) utilized Article 51(5) and the Elections Act, 2017, citing delisting of constituencies post Cabinet’s approval of the Census in August 2023 as a reason for the delay but due to Supreme Court of Pakistan’s intervention, the schedule has been set, and the nation anticipates voting on February 8, 2024—less than a month now. Post-elections one hopes for a stable government in March 2024.
In the prevailing circumstances, when political parties are expressing concerns about fairness of election process and provision of level playing field, will the post-election scenario bring political harmony, economic stability, improved law and order, and a robust foreign policy? Such doubts question the prospects of addressing multifaceted challenges currently facing the country. With the break of dawn on February 9, 2024, people of Pakistan would finally know which leadership will take up the reins of the government and sort out issues like inflation, economic revival, education, health, unemployment etc.
After completing review of the second tranche of US$3 billion Standby Arrangement (SBA), Pakistan received the approval of Executive Board of International Monetary Fund (IMF) on January 11, 2024 for its disbursement. The country is grappling to boost its foreign exchange reserves to manage the balance of payments and repayments of outstanding external loans. This predicament will keep on posing a daunting challenge for the new government in delivering immediate relief to citizens, affected by skyrocketed inflation and who are expecting from the incoming government, respite from these woes.
The new government will face a multitude of challenges, spanning over political and judicial matters amid negotiations with the IMF to conclude the ongoing SBA, while seeking new extended fund facility. IMF may hesitate to extend support without a firm commitment to undertake structural reforms. Moreover, concerns persist about Pakistan meeting its fiscal targets for establishing a medium-term fiscal framework to handle the budgetary process.
The incoming government also faces a dual challenge: negotiating with IMF and concurrently engaging with bilateral partners such as China, Saudi Arabia, United Arab Emirates, Qatar, European Union, and the United States. Establishing stronger relations with these allies and attracting foreign direct investment is crucial. The government will have to balance its economic diplomacy to ensure both short-term financial stability and long-term sustainable growth. As we navigate these intricate negotiations, a thoughtful reconsideration of our national priorities becomes paramount to align with the evolving dynamics of global economic partnerships.
Structural reforms are critical to eliminate financially unsustainable entities and reallocating resources towards more productive ventures. Simultaneously, formulating a comprehensive investment strategy becomes imperative, catering to both domestic and foreign investors. Our policymakers need to formulate a detailed five-year plan to address legal framework inconsistencies that impede a conducive business environment. Providing incentives, nurturing a skilled workforce, improving infrastructure, and honoring social contract with the citizens.
In 2024, these policy measures will only be effective if we strive to contain fiscal slippages through implementation of robust measures. This includes broadening the tax base, reducing wasteful spending, and restricting power and gas subsidies. Revenue generation measures are not aligned with our economic profile. With population of over 241 million, Pakistan is anticipating revenue collections as per budget estimates at 9.9% of the GDP for the ongoing fiscal year. Earlier, the target was 10.8% set in the February Supplementary Finance Bill. At this rate, Pakistan may not attain the desired economic boost and immediate relief for the masses. Thus, 2024 is pivotal for discarding outdated practices and embracing a vision of prosperity. Initiating fiscal reforms becomes decisive to enhance the socioeconomic environment, alleviate productivity constraints, and stimulate investment and development activities by fostering a dynamic private sector.
Facilitating economic activities, promoting investment, and addressing unemployment necessitate relaxation of business formation and cross-border trading laws, reducing processing times, and harmonizing tax payment processes. Improving product market access and embracing information and communication technologies, as recommended by IMF in the Country Report on July 18, 2023, are crucial steps to improve economic conditions.
Moreover, fostering a culture of transparency and accountability in daily operations is paramount. The caretaker government has approved an action plan for restructuring Federal Board of Revenue (FBR) aimed at improving FBR’s internal governance system by separate board for Customs and segregating tax policy from operations. Focus is on empowering the apex revenue authority to adeptly combat smuggling, boost revenue growth, and curtail tax exemptions through an efficient digital administration system. Unfortunately, as in the past, no public debate is available for modernizing and streamlining our tax system by taking input from stakeholders. Everything is happening within closed-door meetings with no transparency. Pakistan urgently needs to improve all laws related to financial crimes and enhance capacity to counter corruption/anti-money laundering and financing of terrorism.
While IMF and other institutions advocate for a thorough review of our anti-corruption laws, emphasizing inclusion of independent experts with international experience and representation from civil society organizations, there remains the need to bring clarity in our legislation. Currently, lack of a comprehensive definition of “corruption” poses a challenge. Historically, we have relied on section 3 of the Prevention of Corruption Act, 1947, which addresses cognizable offenses outlined in sections 161, 162, 163, 164, 165, or 165A of the Pakistan Penal Code, 1861, covering various forms of gratification. To align with international standards and ensure robust anti-corruption measures, engaging with independent experts and civil society is crucial to refine and strengthen our legislation against corrupt practices.
An unclear definition of “corruption” gained prominence when IMF raised its concerns during the review of US$6 billion extended fund facility programme. Responding to this, the alliance government of Pakistan Democratic Movement took some steps by amending the National Accountability Ordinance through National Accountability (Second Amendment) Act, 2022. The amendment by way of substitution of section 9 of the NAB Ordinance, 1999, was aimed at expanding and amplifying the scope of acts of “corruption” and “corrupt practices”.
Another significant consideration in 2024 is our dedication to counter climate change. The country incurred losses exceeding US$30 billion due to devastating floods, still posing a persistent threat. While Pakistan has committed to finalizing its National Adaptation Plan by the end of 2024 as agreed with IMF, a proactive approach is necessary. It involves expediting crucial “no regret” measures, prioritizing policies that enhance resilience. This includes bolstering social spending, implementing improved flood safety projects post-2022 floods, and reshaping the agri-food system. These steps, underscored in the IMF Country Report No. 23/260, issued on July 18, 2023, requires prompt persuasion to meet the ongoing climate challenges.
We have squandered considerable time, and 2024 represents a crucial juncture to rectify our errors and address prevailing challenges. There is a pressing need to alleviate the masses’ plight, access to basic needs. There is also a critical call to reassess our foreign policy. The passive stance in addressing concerns from bilateral and multilateral partners, including friendly states, is inflicting substantial damage to our economy. Adopting a proactive foreign policy will be instrumental in tackling economic challenges. However, the path to prosperity necessitates a concurrent focus on overcoming our fiscal woes.
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Dr. Ikramul Haq, an advocate of the Supreme Court and writer is an adjunct faculty at Lahore University of Management Sciences (LUMS). Abdul Rauf Shakoori is a corporate lawyer based in the USA.