Economic policy – Dr Farrukh Saleem

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Economic policy is four actions that governments take in the economic field: tax, government spending, interest rates and money supply. Our national debt is now growing at the rate of Rs18 billion a day. Our electricity sector now loses nearly Rs2 billion a day. Our State Owned Enterprises (SOEs) collectively end up losing Rs1.8 trillion a year. In the natural gas sector, unaccounted-for-gas now amounts to Rs1 billion a day. In the commodities sector, federal and provincial food departments have accumulated a debt of Rs753 billion. Public procurements by the federal and provincial governments stand at Rs7.5 trillion.

Neither fiscal nor monetary policy has an answer to our woes in the electricity sector. Neither fiscal nor monetary policy has an answer to our woes in the state-owned enterprise sector. Neither fiscal nor monetary policy has an answer to our woes in the natural gas sector. Neither fiscal nor monetary policy has an answer to our woes in the commodities sector. Neither fiscal nor monetary policy has an answer to our woes in public procurements. As far as our problems are concerned, this indeed is the end of economic policy.

We now need to go beyond economic policy. And, beyond economic policy lie structural reforms – wholesale reforms. To be certain, economic policy on its own cannot pull us out of the deep hole that’s getting deeper by the day. The only way out is structural reforms – ’essential undertakings that change the very fabric of our economy’. The only way out is structural reforms – the “institutional and regulatory framework in which businesses and people operate.”

Pakistan’s private sector has the potential to compete but on the condition that it is provided with a levelled cost of doing business – electricity, natural gas, the compliance and the tax burden. Pakistan’s private sector has the potential to increase productivity, attract investment and generate employment. It is the public sector that drags the whole economy down.

In a lot of public-sector cases solutions are really not that difficult. Take the wheat sector, for instance. The private sector provides wheat at the support price of Rs1,400 per 40 kg (it has now been increased to Rs1,800). In comes the public sector – federal and provincial food departments – and the price of wheat-flour doubles to Rs2,800 per 40 kg. The not-so-difficult solution here is to disband federal and provincial food departments, introduce a direct farmer-to-miller arrangement along with targeted input subsidies.

In the power sector, we need a new model all together – a ‘wholesale buyer model’. Sakib Sherani’s proposed measures include privatising DISCOs and “moving from the current state-led, single-buyer to a competitive, multi-player market with the private sector in the lead.”

In the state-owned enterprise sector, a beginning would be the implementation of the Public Sector Companies (Corporate Governance) Rules, 2013. Tamasek, the Singaporean holding company that runs Singapore’s state-owned enterprises, makes $20 billion a year in profit. The most critical difference here is governance – how our government governs and how their government governs.

To be certain, economic policy does not have the cure to the disease that our public sector is infected with. According to Daniel Chirot, professor at the University of Washington, “A unifying thread of modern revolutions is that societies become politically so divided only after a long period in which it is increasingly clear that reforms are necessary, but those in power, oblivious to how dire the situation has become, block the measures that could save the regime.” Reform or regress.

The writer is a columnist based in Islamabad.