HomeWorldPakistanFive ways Prime Minister Shahbaz Sharif can fix in economy

Five ways Prime Minister Shahbaz Sharif can fix in economy

Political instability in Pakistan rise to unprecedented volatility in economic indicators. — Reuters/File

Political instability during past gave a few days rise to unprecedented volatility in economic indicators.

Within a month of In March, consumer prices jumped 12.2%. On the outside side, current The account deficit widened and the central bank reserves in their current form can hardly cover two months of country’s import payments.

While the reserves in the State Bank of Pakistan (SBP) fell to $11.3 billion by April 1 compared to with $16.2 billion a month earlier. This weakened the overall market feelings and first week of In April, the exchange rate fell to record short of 188 rupees against United States dollar in inter-bank market.

On the fiscal side in time first seven months of current fiscal year, budget the deficit figures were alarming.

A deficit of 1.9 trillion rupees has already been registered. This means that borrowings must be increased to run government affairs for the rest of fiscal year. Without a doubt also that the Federal Council of Revenues (FBR) have shown impressive growth in tax collection, but they will not be able to match in pace of expected rise in Expenses. Already incoming government announced measures on Monday to expand the government bill on administrative, wages and pensions.

Currently central bank It has made right move.

Forecasting overall annual inflation rate of eleven% for current fiscal yearSBP raised policy rate per 250 basis points up to 12.25%. Among other things, results are move slow down down of general economic growth.

Overall GDP growth we will also suffer like some cuts in public investment in the sector is expected to reduce budget deficit.

Before the departure of Prime Minister Shahbaz Sharif on his proposed “Misak-i-Maishat”, a few short term decisions are required reestablish confidence and trust of local and foreign stakeholders, and more the main thing is to stabilize key macroeconomic indicators.

First, the country must go back to the fiscal prudence he promised in International Monetary Fund (IMF) consultations under Article IV and Six review under the Extended Funding Facility of IMF.

This implies the abolition various populist measures are allowed, including non-targeted subsidies in electricity, gas, food. Then several forms of amnesties in real real estate, construction and related sectors will have to end with.

Second, circular debt appeared in several sectors due to government intervention. role of state in these markets, including energy markets, should be reviewed. And generating and distribution companies will have to restore full economic cost from consumers. There is a case for consumers of essential services pay less, but this can only happen if better targeting mechanisms are put in place. in place.

And also the implementation of circular debt Management plan in in power the industry needs to accelerate.

State-owned enterprises (SOEs) in the energy sector have a large share in total losses on government enterprises, so management reforms in these SOEs should be a priority. Rates in both oil, power and gas sectors need introduce true economic cost. This also implies that subsidies in energy sector should strictly be for vital consumers.

Reform of this sector will only take root if overtime regulators – the National Electricity Regulatory Authority and the Oil and Gas Regulatory Authority – are given proper autonomy. Given the interdependencies, it is important to combine all regulators in energy space.

One of ways of protection against energy price shocks is to both increase efforts to save energy and change the pattern of energy consumption over time.

Third, there must be consensus. on what kind of import regime the country requires.

Spurts in economic growth give rise to higher levels of import in turn as a result in unstable trade deficit. All governments are to blame of without putting in place trade taxes and tariffs that support growth and investments in exporting sectors (and encourage new sectors and firms to become exporters of goods and services). Profit in rate policy often offset by other inward-looking policies that encourage anti-export bias.

Fourth, the central bankindependence should allow for monetary policy with positive real interest rates and market established exchange rates. government should refrain from contacting the central bank for loan needs.

SBP will need to ensure implementation of in regulatory and supervisory measures, including strengthening the fight against money laundering and financing of terrorism, which in queue will be support exit from the FATF gray zone list.

Continuation build-up of foreign exchange reserves also important support import needs of growing economy and protect against global price shocks.

Finally, new prime The minister and his economic team should listen carefully to disgruntled investors, including the Chinese.

Delays in solving problems related to ongoing projects within the China-Pakistan Economic Corridor (CPEC) and special economic zones have taken a toll current and future expected phases of KPEC.

Previous government got up on Pakistan Regulatory Modernization Initiative (PRMI) with support from all provincial governments – step which is incoming government should Continue on priority basis. This is expected to significantly reduce red tape, reduce human interface in regulatory body, and reduce height (regulatory) expenses faced established and start-up companies.

Ahmed is an economist. former civil servant. He tweets @vaqarahmed.

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Derrick Santistevan
Derrick Santistevan
Derrick is the Researcher at World Weekly News. He tries to find the latest things going around in our world and share it with our readers.

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