Relive the inspiring words of Zafar Masud as he delivers a gripping talk at the Pakistan Literature Festival London. Drawing from his upcoming book, ‘Leased Breath – Musings of an Air Crash Survivor’, Mr. Masud shares his powerful insights on resilience and leadership.
I was part of a distinguished panel on economy titled “Root causes of the economic crisis” very ably moderated by @NadirCheema.
Attached are excerpts from my remarks at the session in video and notes below:
Zafar Masud’s Remarks
- At the outset on this debate, we need to figure out the core problem. While the popular notion that ‘we’re confronted with a current account challenge’ is perhaps correct, but it’s the symptom; not the cause of our problem.
- CAD is our Achilles heel, but it is driven primarily by fiscal policy, which essentially propels consumption-led growth.
- The balance of payment crises of 2013, 2018, and 2022 were driven by higher budget deficits. The real problem is our fiscal policy and the mounting government debt.
- As the solution to all our problems in our formidable years was the “CTRL ALT DEL button”, and this is perhaps the time to press that button, and review our fiscal policy afresh.
- We need to resolve to overcome the challenges of low tax collection, rising pension bills, bailouts of loss-making State Owned Enterprises (SOEs), and untargeted subsidies.
- While the resumption of the IMF program is critical for addressing our immediate financial needs, their standard prescriptions may only address our short-term challenges.
- What we need is a radical transformation in the way the economy is structured, the way policy is formulated and implemented, and the redistribution of wealth in a more equitable manner. That is the only way forward to escape from the boom & bust cycles that have plagued our economy over the last many decades.
- We need broader reforms beyond the IMF prescriptions. We need a roadmap for enhancing wealth and prosperity for the 240 million citizens, to bring us back at par with neighbors India and Bangladesh.
- Today, the per capita GDP in Pakistan is 25% lower than in India and around 22% lower than in Bangladesh. India’s per capita GDP surpassed Pakistan in 2012 and Bangladesh overtook us in 2018. The gap has increased every single year.
- India faced a balance of payment crisis with less than 2 weeks of import cover in 1991 when Dr Manmohan Singh implemented his reforms agenda including signing a new IMF loan agreement. The reforms program implemented by Mr. Singh was more ambitious and forward-looking than managing the short-term crisis.
Dr. Singh’s reforms included:
- abolishing the license raj (which covered everything from the opening of business, conducting trade, ownership of land etc),
- liberalizing the trade regime (abolishing license regime, reducing import duties, WTO & free trade agreements),
- liberalizing the investment regime (tax concessions, foreign ownership rights, IT and pharma sectors prioritized for FDI),
- Crowded in private investments in public sector projects (ports, roads, telecom and energy). Commercialization of infrastructure.
- India completed their last IMF program in 1993, under the leadership of Manmohan Singh. Since then India has prospered with sustained high growth rates, no balance of payment crisis, and sustainable public debts.
Bangladesh success story:
- Bangladesh’s growth has outpaced Pakistan over the last decade, with exports growing 38% to $ 52 billion in FY22.
- Bangladesh has returned to the IMF in 2022 but between 2015 to 2020 did not take any IMF loans. The 2022 commodity super cycle has also impacted Bangladesh with the return to the IMF.
- The success of their economic policies can be attributed to the success in scale-up of investments and achieving economies of scale in the garments sector – their primary source of exports.
- Consistent policies since the 1980s and targeted incentives by the government have helped the Garments industry to modernize, scale up manufacturing base, and move towards higher value added goods.
- Social outcomes have also improved dramatically with women participation in labor force rising to 33% (compared to 22% in Pakistan).
- Population growth rate has slowed down to 1.1% (2% Pakistan).
- Average life expectancy has improved to 72 years (compared to 66 in Pakistan).
- Mobile payments and microfinance revolution of the 1990s has been another game changer. 50% of population owns a bank account, compared to only 30% in Pakistan.