P
akistan has entered the year 2024 in a transitional phase where a caretaker government is at the helm of affairs. Unfortunately, elections could not be held within the 90-day period stipulated in Article 224(2) of the constitution. The Election Commission of Pakistan invoked Article 51(5) and the Elections Act, 2017, citing delisting of constituencies following the cabinet’s approval of the census results in August 2023 as a reason for the delay. Following intervention by the Supreme Court of Pakistan, the schedule has been announced and the nation is anticipating voting on February 8, less than a month from now. Post-elections one hopes for a stable government in March 2024.
Considering several political parties are already expressing concerns about the fairness of electoral process and the lack of a level playing field, doubts persists whether the post-election scenario can be counted upon to usher in political harmony, economic stability, improved law and order and a robust foreign policy.
Multifaceted challenges currently face the country. With the break of dawn on February 9, the people of Pakistan will finally know which leadership is to take up the reins of the government and sort out issues like inflation, economic revival, provision of education and healthcare and eradication of unemployment.
A review of the second tranche of $3 billion standby arrangement having been completed, Pakistan awaits approval of the executive board of the International Monetary Fund for disbursement of the third tranche. The country is struggling to boost its foreign exchange reserves to manage the balance of payments and repayments of outstanding external loans.
This predicament will continue to pose a daunting challenge for the new government and obstruct delivery of immediate relief to citizens reeling under high inflation.
The new government will face a multitude of challenges, including political and judicial matters. It will also need to negotiate with the IMF to conclude the ongoing SBA and seek a new extended fund facility. The IMF may be reluctant to extend support without a firm commitment to undertake structural reforms. Meanwhile, concerns persist about Pakistan’s ability to meet its fiscal targets for establishing a medium-term fiscal framework to handle the budgetary process.
The incoming government faces a dual challenge: negotiating with the IMF and concurrently engaging with bilateral partners, such as China, Saudi Arabia, United Arab Emirates, Qatar, European Union and the United States. Establishing stronger relations with these allies and attracting foreign direct investment will be crucial.
The government will have to balance its economic diplomacy to ensure both short-term financial stability and long-term sustainable growth. As we navigate these intricate negotiations, a thoughtful reconsideration of our national priorities is paramount to align with the evolving dynamics of global economic partnerships.
Structural reforms are critical to eliminate financially unsustainable entities and reallocating resources towards more productive ventures. Simultaneously, formulating a comprehensive investment strategy, catering to both domestic and foreign investors’ needs, is imperative.
Our policymakers need to formulate a detailed five-year plan to address the inconsistencies in the legal framework that vitiate the business environment. They need to provide appropriate incentives, nurture a skilled workforce, improve the infrastructure and honour the social contract with the citizens.
In 2024, policy measures will only be effective if we strive to contain fiscal slippages through implementation of robust measures. This includes broadening the tax base, reducing wasteful spending and limiting power and gas subsidies. Currently, the revenue generation measures are not aligned with our economic profile.
With a population of over 241 million, Pakistan’s anticipated revenue collection for the ongoing financial year, as per budget estimates, is 9.9 percent of the GDP. The Supplementary Finance Bill set the target at 10.8 percent. At this rate, Pakistan may not attain the desired economic boost and immediate relief for the masses.
Thus, 2024 is pivotal for discarding outdated practices and embracing a new vision of prosperity. Initiating fiscal reforms to improve the socioeconomic environment, alleviate productivity constraints, stimulate investment and development activities by fostering a dynamic private sector will be decisive.
Facilitating economic activities, promoting investment and addressing unemployment requires relaxation of laws governing business formation and cross-border trade; reducing processing times; and harmonising tax payment processes. Improving product market access and embracing information and communication technologies, as recommended by the IMF in its Country Report on July 18, are crucial steps to improve the economic conditions.
Fostering a culture of transparency and accountability in daily operations is paramount. The caretaker government has approved an action plan for restructuring the Federal Board of Revenue (FBR) aimed at to improveing FBR’s internal governance system by separate separating board for Ccustoms and segregating tax policy from operations.
The focus is on empowering the apex revenue authority to adeptly combat smuggling, boost revenue growth, and curtail tax exemptions through an efficient digital administration system. Unfortunately, as in the past, there has been no public debate is available for on modernising and streamlining our the tax system by taking input from stakeholders.
Everything is happening within closed doors meetings with and there is no transparency. Pakistan urgently needs to improve all the laws related to financial crimes and, improve enhance its capacity to counter corruption, /anti-money laundering and financing of terrorism.
While the IMF and other lending institutions have been advocate advocating for a thorough review of our the anti-corruption laws, emphasising inclusion of independent experts with international experience and representation from civil society organisations. , there remains the need to bring clarity in our legislation. Currently, lack of a comprehensive definition of “corruption” poses is a challenge.
Historically, we have relied on Ssection 3 of the Prevention of Corruption Act, 1947, which addresses cognizable offencses outlined in Ssections 161, 162, 163, 164, 165 and, or 165A of the Pakistan Penal Code, 1861, covering various forms of gratification. To align with international standards and ensure robust anti-corruption measures, engaging with independent experts and civil society is crucial to refine and strengthen our legislation against corrupt practices.
The lack of clarity in the An unclear definition of “corruption” was highlighted gained prominence when the IMF raised its concerns during the a review of the US$6 billion Eextended Ffund Ffacility programme. The Responding to this, the alliance government of Pakistan Democratic Movement government then took some steps by amendeding the National Accountability Ordinance through National Accountability (Second Amendment) Act, 2022. The amendment, proposed in Ssection 9 of the NAB Ordinance, 1999, substituted the definition of gratification with slight changes by and including included the term “corrupt practices.”.
Another significant consideration in 2024 is our dedication to counter climate change. The country incurred losses exceeding US$30 billion due to devastating floods, still posing a persistent threat. While Pakistan has committed to finalising its National Adaptation Plan by the end of 2024 as agreed with IMF, a proactive approach is necessary. It involves expediting crucial “no regret” measures and, prioritising policies that enhance resilience. This includes bolstering social spending, implementing improved flood safety projects post-2022 floods, and reshaping the agriculture-food system. These steps, mentioned underscored in the IMF cCountry rReport No. 23/260, issued on July 18, 2023, requires prompt persuasion to meet the ongoing climate change challenges.
We have squandered considerable time. and The year 2024 represents a crucial juncture to rectify our errors and address the prevailing challenges. There is a pressing need to improve alleviate the masses’ plight access to basic needs. There is also a critical call to reassess our the foreign policy. The passive stance in addressing concerns from bilateral and multilateral partners, including friendly states, is inflicting substantial damage to our economy. Adopting a proactive foreign policy will can be instrumental in tackling the economic challenges. However, the path to prosperity necessitates a concurrent focus on overcoming our fiscal woes.
Dr. Ikramul Haq, an advocate of the Supreme Court and writer, is an adjunct faculty at Lahore University of Management Sciences (LUMS).
Abdul Rauf Shakoori is a corporate lawyer based in the USA.
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