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Pakistan reforms may be painful, but they have to be done

The IMF expects economic adjustments and this should be an opportunity for the Imran Khan government to prove that it is different.

Decades of economic mismanagement and chronic under-investment have pushed Pakistan into economic crisis time and again. The inability of successive governments to maintain fiscal discipline, prop up export base and expand the tax net have taken a toll on the economy and pushed its currency on a downward spiral. The Pakistan rupee is testing fresh lows and touched 150 to a dollar, a level not seen before. It sure is worrying for a country whose import bill outweighs its exports. In April this year, for instance, Pakistan's imports stood at Rs670 billion while exports were at Rs295 billion. The manufacturing sector, for one, has been on a decline for about a decade and is now contributing just 12 per cent to the economy. Pakistan could invest in various sectors, improve the ease of doing business in the country, expand its manufacturing base and shore up domestic consumption for locally produced things. Lower import tariffs have been hurting different domestic sectors and shrinking their contribution to the economy.
The Imran Khan government had come to power on the promise of resuscitating the economy and carrying out reforms that successive governments had largely shied away from. However, his promises have remained rhetoric at best. There is an urgent need to improve public finances, bring down levels of public debt, eliminate exemptions, curtail special treatments and privatise high-employing state-controlled firms such as Pakistan Steel Mills and the Pakistan International Airlines. A stronger economy with a dynamic private sector will benefit the country, and allow the rupee to stabilise. For now, the 22nd loan from the IMF could further pull the rupee down. The IMF expects economic adjustments and this should be an opportunity for the Imran Khan government to prove that it is different. By raising tax revenues, utility prices and imposing discipline on provisional spending, the government can chart a new course for the country. In the short term, the rupee will fall and inflation could rise further. However, painful policy reforms would prove good in the long run and restore stability in the country.