In the absence of an IMF program, the government should promptly implement a comprehensive set of measures to stabilize the country’s economy. First, a dollar amnesty scheme should be introduced to encourage Pakistanis to deposit their undocumented dollars in local foreign currency accounts, offering decent interest rates on those balances. Second, restructuring foreign debt by seeking haircuts and extending tenor would help alleviate the burden and create room for sustainable economic development.
Third, a significant reduction in interest rates, possibly by 15%, would reduce the government’s fiscal deficit and stimulate private sector growth. If banks fail to lend at reduced rates, a scheme should be launched to allow the public to directly place treasury bills, enabling government borrowing and addressing liquidity concerns. Furthermore, demonetizing 5000 and 1000 rupees currency notes would combat black money and enhance financial transparency.
The government should also impose restrictions on non-essential imports to reduce the trade deficit and conserve foreign exchange reserves. Efforts to reduce oil and gas imports, even though rationing if necessary, should be undertaken. By using moral compulsion, the government can renegotiate energy agreements with local producers for a five-year period. Taxing real estate at market rates and extending taxation to retail/wholesale traders and the agriculture chain will broaden the tax base and increase revenue.
‘Pakistan should impose restrictions on non-essential imports to reduce trade deficit and conserve foreign exchange reserves’
Additionally, the government should explore private-public partnerships or consider closing down loss-making state-owned enterprises while providing support to affected employees. Lastly, reducing size of the government by eliminating ‘useless’ ministries and regulatory agencies would further streamline operations and reduce expenditure. By implementing these measures, Pakistan can chart a path towards economic stability and sustainable growth.
It is pertinent to mention here that the government has constituted a Special Investment Facilitation Council for the economic revival. During a high-level meeting in Islamabad, the government unveiled an elaborated economic revival plan that envisages capitalizing ‘untapped’ potential in key sectors of agricultural and livestock, minerals and mining, information technology, energy, and defence production, through indigenous development as well as investments from friendly countries.
Establishment of the Special Investment Facilitation Council has been undertaken to act as a single window interface for the potential investors as well as to adopt a unified approach. The setup will shorten hitherto fore cumbersome and lengthy business processes through a cooperative and collaborative ‘whole of the government approach’ with representation of all stakeholders. It is aimed at creating horizontal-vertical synergy between federation and provinces; facilitating timely decision making; avoiding duplication of effort; and ensuring swift project implementation.