With general elections, scheduled for February 8, 2024, politicians are in full swing, making ambitious pledges to alleviate challenges faced by the public and foster economic growth for businesses. This heightened political activity occurs amid the backdrop of existing economic struggles, with the country grappling to meet its balance of payments requirements. Simultaneously, efforts are underway to enhance foreign exchange reserves, involving strategic negotiations to reschedule loan payments with both multilateral and bilateral partners. The convergence of electoral promises and economic exigencies inject a dynamic element into the unfolding narrative, shaping discussions on the nation’s future trajectory.
Approval of a 9-month US$3 billion Standby Arrangement (SBA) by the International Monetary Fund (IMF) on July 12 2023 helped to rejuvenate economy and contributing to increase in foreign exchange reserves. As reflected in the recent IMF country report 24/17, glimpses of economic recovery are evident.
Our current account balance, which witnessed a decline, reaching a deficit of -17.5% of GDP or US$ 17.5 billion in the fiscal year (FY) 2021-22, is poised for improvement, targeting -5.6% of GDP, equivalent to US$ 5.6 billion in the FY 2023-24. This revised estimate aligns with ongoing results, with the current account deficit at US$ 0.8 billion during the initial six months of FY 23-24, suggesting a potential for further improvement. The Gross External Financing Requirements, initially projected at US$ 28.36 billion for FY 23-24 by the IMF, have been revised to US$ 24.96 billion. Should the current account balance continue its positive trend, it holds the potential to further reduce external financing requirements, thereby positively influencing the overall exchange position.
However, Pakistan is currently facing fiscal constraints to extend much-needed relief for businesses and public at large, which may not be achievable in the immediate future. The problems confronting businesses, such as difficulties in importing goods, navigating external payments, streamlining cost structures, and acquiring crucial inputs at reasonable rates, persist, as the ongoing obstacles require considerable amount of time and efforts for their resolution.
The government’s proclivity towards revenue generation is expected to intensify in the year 2024, possibly resulting in the introduction of new taxes unless alternative and fair avenues for resource mobilisation are explored and harnessed. The overall economic outlook is optimistic in comparison, but multiple challenges persist. The key lies in establishing a stable and sustainable economic framework that fosters the growth and progress of businesses, contributing to overall economic development.
Rigorous implementation of corrective measures and a concerted effort to reduce twin deficits can pave the way for a tolerable level of inflationary pressures to recede, injecting a positive boost into the economic sentiment. Additionally, a gradual decrease in the policy rate, currently at 22%, holds promise for growth opportunities providing businesses with some breathing space.
After elections, the new government would be at its edge in grappling with numerous challenges. Presently, however, it is unclear what strategies political parties intend to adopt to tackle these challenges as they have not yet disclosed their manifestos to the public. Though Pakistan Peoples Party shared a welfare agenda, but it lacks specific details regarding revenue generation measures crucial for successful implementation of their proposed welfare programs. However, the Pakistan Muslim League Nawaz (PMLN), a major political player and a leading contender in local and international surveys, unveiled a comprehensive manifesto on Saturday, January 27, 2024, offering insights into their strategic approach providing a glimpse of the intended solutions and policy directions in the hope of significantly influencing the nation’s trajectory in the foreseeable future.
PMLN tried to present a manifesto as a comprehensive document, not only spotlighting the party’s historical achievements and commitments fulfilled but also outlining a visionary roadmap for the upcoming five years, spanning from 2024 to 2029. This detailed blueprint encompasses a multifaceted strategy to tackle critical issues affecting the nation.
PMLN’s focus extends to bolstering the economy, fostering agricultural growth, revitalizing trade through export initiatives, and ensuring the prosperity of farmers by transforming agricultural processes. Additionally, the manifesto places emphasis on digital growth, aiming to unleash the potential of information technology, along with a commitment to providing affordable and sustainable energy solutions.
The party’s vision extends to encompassing key domains such as security, judicial reforms, climate resilience, education, healthcare, ensuring comfortable and affordable transport, and developing efficient infrastructure. Moreover, PMLN pledges to promote peace across borders, advocate for women’s empowerment, safeguard labour rights, ensure water security, foster the growth of the entertainment industry, and address various other crucial aspects of societal well-being. This holistic approach reflects the party’s dedication at least on paper, to address the diverse needs of the populace and steering the country towards sustainable development and progress.
In their comprehensive 2024 manifesto, the PMLN articulates a robust economic strategy to confront and overcome the prevailing challenges. With a commitment to economic growth, the party pledges to achieve a 4% GDP growth target by the close of 2025, further escalating to 5% by end 2026, and an ambitious pursuit of over 6% in subsequent years. The agricultural sector is a focal point, with a commitment to attaining a 5% growth rate by close of 2029, accompanied by a formidable 7% surge in industrial growth.
Additionally, the manifesto outlines a meticulous plan to maintain inflation within the manageable range of 4% to 6%, coupled with an aspiration to elevate per capita income to US$2000 during their five-year tenure. Fiscal prudence is emphasized through initiatives such as enhancing the tax-to-GDP ratio to 13.5%, curbing expenditures, and engaging in the privatization of state-owned entities. The manifesto ambitiously targets reduction of poverty level from 39.4% (as per the World Bank macro poverty outlook) to an admirable 25%, while simultaneously pledging the creation of 10 million jobs within the stipulated tenure.
Furthermore, the party envisions a substantial increase in overall investment, elevating it from 15% to 18% of the GDP. Specific emphasis is placed on augmenting private sector investment from 10% to 12% and boosting the national savings rate from 17% to an impressive 22% of the GDP. The manifesto also underscores the strategic leverage of the China Pakistan Economic Corridor (CPEC) to unlock its full potential, aligning with the party’s overarching vision for economic prosperity and progress.
While these promises may appear promising on paper, the stark reality is that the country is struggling with meeting its balance of payment requirements, lacking sufficient reserves to pay its debts. Relying on lenders and friendly nations to extend loans for addressing fiscal demands adds a layer of skepticism to the feasibility of these targets. IMF‘s recent report forecasted a modest 2% growth for the financial year 2024, making the attainment of the 4% target seem highly improbable without resorting to number manipulation.
The complexities of achieving economic sustainability and upholding fiscal responsibility take center stage, casting doubts on the feasibility of attaining such ambitious growth goals, especially amid prevailing global and foreign policy challenges. PMLN must be cognizant of the urgent need for IMF support, obliging them to adhere to stringent conditions pertaining to economic reforms. In a world currently divided due to conflicts such as Ukraine and Palestine, our major bilateral partnerships face fractures, with the United States playing a pivotal role. Consequently, public support in navigating these global challenges becomes instrumental in shaping our foreign policy.
Recognizing the repercussions of his past decisions, particularly during the Yemen and Saudi Arabia conflict, Nawaz Sharif understands the gravity of maintaining balanced foreign relations. The fallout from those decisions created mistrust in the ties between the Middle East and Pakistan, and Nawaz Sharif had to bear a heavy political cost. In the present scenario, should PMLN assume governance, it becomes imperative to adeptly engage with key players, including USA, Europe, China, Russia, the Middle East, and the people of Pakistan. The diverse interests of these stakeholders demand a proactive and strategic approach to foreign policy, as any passive stance could result in detrimental consequences.
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Dr. Ikramul Haq, Advocate Supreme Court, specialises in constitutional, corporate, media and cyber laws, ML/CFT, IT, intellectual property, arbitration and international taxation. He holds LLD in tax laws with specialization in transfer pricing. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He served Civil Services of Pakistan from 1984 to 1996. He established Huzaima & Ikram in 1996 and is presently its chief partner as well as partner in Huzaima Ikram & Ijaz.
He studied journalism, English literature and law. He is Chief Editor of Taxation. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).
He has coauthored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
He is author of Commentary on Avoidance of Double Taxation Agreements, Pakistan: From Hash to Heroin, its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. Two books of poetry are Phull Kikkaran De (Punjabi 2023) and Nai Ufaq (Urdu 1979 with Siraj Munir and Shahid Jamal). He regularly writes columns for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.
Twitter: DrIkramulHaq
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Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).
Over his career he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and have also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E–Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study driven scenarios and exams to insure knowledge transfer.
His notable publications are: Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan and Rauf’s Research on Labour Laws and Income Tax and others.
His articles include: Revenue collection: Contemporary targets vs. orthodox approach, It is time to say goodbye to our past, US double standards, Was Due Process Flouted While Convicting Nawaz Sharif?, FATF and unjustly grey listed Pakistan, Corruption is no excuse for Incompetence, Next step for Pakistan, Pakistan’s compliance with FATF mandates, a work in progress, Pakistan’s strategy to address FATF Mandates was Inadequate, Pakistan’s Evolving FATF Compliance, Transparency Curtails Corruption, Pakistan’s Long Road towards FATF Compliance, Pakistan’s Archaic Approach to Addressing FATF Mandates, FATF: Challenges for June deadline, Pakistan: Combating the illicit flow of money, Regulating Crypto: An uphill task for Pakistan. Pakistan’s economy – Chicanery of numbers. Pakistan: Reclaiming its space on FATF whitelist. Sacred Games: Kulbhushan Jadhav Case. National FATF secretariat and Financial Monitoring Unit. The FATF challenge. Pakistan: Crucial FATF hearing. Pakistan: Dissecting FATF Failure, Environmental crimes: An emerging challenge, Countering corrupt practices .
Twitter: Abdul Rauf Shakoori
The recent publication, coauthored with Huzaima Bukhari, is
Pakistan Tackling FATF: Challenges & Solutions
available at: https://www.amazon.com/dp/B08RXH8W46
