The way Dr Hafeez Sheikh was pursuing the IMF ‘s stabilisation programme had led to grim forebodings: a subdued economic growth rate of 1.5 percent coupled with a higher rate of inflation and rising unemployment during the current fiscal year. Under structural benchmark conditions for increasing the power tariff, the recently introduced principle of automaticity caused apprehensions. As Finance Minister Shaukat Tarin has put it, “If the growth rate did not reach at least five percent, the country’s integrity will be at stake in four to five years.”.What Mr Tarin told the National Assembly Standing Committee on Finance on Monday makes sense. According to Mr Tarin, stabilization is no more affordable for Pakistan’s economy that should now shift gear towards higher growth. Unless this is done neither revenue collection would go up, nor job opportunities would be available to people. What is more, the productive capacity of the economy would not improve
Mr Tarin was spot on when he said that higher electricity rates prescribed under the stabilization plan were not sustainable, as these were only promoting corruption. Alternative measures were available to reduce circular debt instead of introducing automaticity in tariff hikes. It was similarly a more realistic policy to bring into the tax net those sections of society which are still outside it. This however will require “a strong skipper”, as Tarin had put it before joining the cabinet
Tarin favours privatization of state entities that the government has been unable to run. He also stresses diversion of more funds for education and health by the provinces. It is however unrealistic to seek one million jobs for Pakistanis in Chinese industry, for two reasons. First, Pakistan has a shortage of trained manpower; and second, the productive capacity of Pakistani labour is far below that of its Chinese counterpart.
Mr Tarin’s emphasis on development spending would endear him to the PTI’s legislators, who would work hard to get him elected a Senator. There is a hard task ahead of the Finance Minister. He has to convince the IMF of the need for more development spending, particularly in the housing sector, in a country facing the third deadly wave of Covid-19.