Government commercial enterprises are considered as the backbone of the economy and provide employment to the workforce while cultivating the national exchequer. Unfortunately, those institutions of Pakistan, which once provided revenue, are now becoming a burden on the economy and are having to take huge loans to pay salaries to employees.

The Privatization Commission Board has planned to transfer 6 more national institutions to the private sector in its five-year plan. 15 institutions are already on the fall list, including 6 out of the total 21 to be privatized immediately.

These include Postal Life Insurance, Agricultural Development Bank, Utility Stores Corporation, Jam Shuro, Lakhra, Jencowah and Hazara Electrical Power Company.

It is a bitter reality that mismanagement deeply embedded in national institutions, which has led to the growth of an undocumented and illegal economy that runs into billions of dollars annually and huge sums of money that should go to the national exchequer is wasted.

These include some institutions where there may be no element of mismanagement but are running at a loss due to lack of resources, lack of focus or inability to compete with the private sector.

The process of privatization of national enterprises, which has been going on for more than three decades, has seen successful examples of their sale to the private sector generating revenue for the economy, but it also has some downsides.

There are concerns about the unemployment of the top workforce, but there is no concept of unemployment of qualified and hardworking employees in commercial enterprises.

Like the rest of the world, Pakistan also has economic security laws for government and non-government employees, but complete homework should be done before starting the process.

Actually the economy is in doldrums and financial experts termed stringnet steps as the last chance (Lifeline) to take strict measures to restore the economy. Financial experts say that Pakistan does not have time now to delay these steps further.

One would agree with them that Pakistan's economy has now reached a stage where we have to take drastic measures in the interest of the country instead of political compromises.

In recent days, a "Great Debate" of prominent industrialists and businessmen of the country in Karachi and "Leaders in Islamabad Business Summit" in Islamabad, Chairman Senate Yousuf Raza Gilani, Finance Minister Muhammad Aurangzeb, Federal Minister for Planning Ahsan Iqbal, former Governor State Bank Dr. Ishrat Hussain, and economists gave important suggestions on the country's economy, including 22% discount rate of State Bank and reduction in government expenditure, increase in imports, expansion of tax net,  supply of competitive and affordable energy to the industrial sector and privatisation of loss-making government institutions PIA, WAPDA, railways, discos, which are losing 500 billion rupees annually.   Friendly countries are also now preferring to invest in Pakistan instead of financial aid, but for this, better law and order situation and political stability in the country is very important, which is not visible in the current situation.

No investor is willing to set up a new industry at the 24% interest rate of the banks, but in the current situation, the private sector loans of the banks have decreased by 80%, which has affected the economic growth.

We are facing a budget deficit of 8500 billion rupees due to government borrowing at high interest rates.

By reducing the discount rate of the State Bank, we can reduce the budget deficit by 2500 billion rupees.

Apart from this, by documenting the economy, we can get an additional revenue of 3000 billion rupees. There is tax evasion of Rs 2000 billion in real estate, agriculture and retail sectors alone.

The government has to reduce its expenditure and increase its revenue. We have suffered the losses of artificially controlling the value of the rupee, so we have to keep the value of the rupee and the dollar rate in accordance with the market mechanism of supply and demand.

Inflation has reached 17.3 percent which had reached a peak of 38 percent in May 2023 and it has to be gradually brought down to single digit to reduce the State Bank's policy rate.  Although it is very difficult to implement these measures while in the new IMF program, but they can improve the country's economy in the next 2 years.

We have to urgently reform our energy and tax sectors.

The old IPPs contracts should be renewed on competitive bidding keeping in mind the energy demand in the country so that the government does not have to pay unaffordable capacity surcharges in case of non-purchase of power, thereby increasing the revolving debt of Pakistan due to which Pakistan's revolving loans have increased to a record 5500 billion rupees.

 We desperately need to reform the tax system. Agriculture sector, which accounts for 20% of the economy, pays barely 1.5% tax, while traders, who account for 18% of the country's GDP, pay barely 1% tax, the same is true of the real estate sector, while the industrial sector, which  contributes 20 percent to the country's economy, but bears 65 percent of the tax burden. Similarly, the share of the service sector in the GDP is 60% but this sector pays only 28% of taxes, so we have to ensure the collection of taxes from each sector of the country's economy according to its share, for which the government has to establish its writ.

The tax rate of Pakistan's GDP is 9%, which we have to increase to 18% like other countries in the region, which is also included in the terms of the IMF. The lack of investment in Pakistan is due to the highest energy rates in the region, bank interest rates and tax rates that discourage investors.  Due to expensive electricity and gas rates, our exports are becoming uncompetitive, so the government has to remove these three barriers to promote investment.

There is immense potential in Pakistan's agriculture and IT sectors, by promoting which we can immediately increase exports. We have to promote mutual trade and investment with Iran and Gulf countries, especially Saudi Arabia, United Arab Emirates, Kuwait and Qatar.

One is happy that Pakistan has received the last installment of $1.1 billion of the current IMF program which has strengthened our foreign exchange reserves. The government of Pakistan has requested a loan program of 6 to 8 billion dollars from the IMF for a period of 3 years or more, for which the IMF mission will visit Pakistan for a two-week visit. The IMF has emphasized the imposition of tax on pensions and the reduction of pension payment periods. Apart from this, the government will have to take tough decisions to further increase the prices of electricity and gas. In the current situation, Pakistan no longer has time to take ad hoc decisions to revive the country's economy.

This is the last chance for the government to implement the above reforms and take the country on the path of economic prosperity.

Published in The Daily National Courier, May, 07 2024

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