On national television, in an interview with Dr. Maria Zulfiqar Khan, Mr. Zafar Masud (President & CEO – BOP) highlighted the SME revival program launched under the visionary leadership of CM Punjab Maryam Nawaz Sharif. Structured, planned, and impactful—this initiative aims to drive economic growth. Additionally, a relief program for solar energy is also in the pipeline.
The discussion centers on Pakistan’s economic challenges and potential solutions. Specific topics include brain drain, privatization of state-owned enterprises (SOEs), uneven taxation, circular debt in the energy sector, and support for SMEs, particularly women-owned businesses. The conversation highlights the need for structural reforms, stakeholder alignment, and targeted subsidies to address these interconnected issues. A significant portion focuses on the role of banks, particularly the Bank of Punjab, in facilitating economic growth and financial inclusion.
See Also: Transforming the Lives of SMEs
Mr. Zafar Masud highlights the SME revival program in an interview with Dr. Maria Zulfiqar Khan on PTV Newsline
Pakistan’s Economic Crossroads: A Conversation with Zafar Masud
Newsline with Dr. Maria Zulfiqar Khan featured a compelling discussion with Zafar Masud, President and CEO of the Bank of Punjab, on Pakistan’s persistent economic challenges and the potential pathways to recovery. The conversation, broadcast on PTV, delved into a range of critical issues, highlighting the urgency for systemic reforms and stakeholder collaboration.
Dr. Khan opened the program by acknowledging Pakistan’s multifaceted economic crisis, emphasizing the significant issue of brain drain. she noted the alarming exodus of young, skilled Pakistanis due to rising unemployment, underscoring the need for government intervention. Masud, in response, highlighted the cyclical nature of Pakistan’s economic woes, observing that similar challenges have plagued the nation for the past two decades. He attributed this to a reliance on short-term solutions, such as foreign aid and IMF bailouts (“Mano Salwa”), which have prevented the implementation of necessary structural reforms.
Masud argued that the current economic downturn has forced a societal reckoning, creating a sense of urgency for addressing fundamental issues. He identified several key areas requiring immediate attention: privatization of state-owned enterprises (SOEs), equitable taxation, resolution of the energy sector’s circular debt, and support for Small and Medium Enterprises (SMEs), particularly women-owned businesses.
Privatization of SOEs
The discussion touched upon the resistance often encountered when governments attempt to privatize SOEs. Masud acknowledged concerns about job losses but stressed the importance of stakeholder alignment. He cited the successful crackdown on illegal dollar trade and hundi/hawala as an example of how effective stakeholder engagement can facilitate difficult but necessary reforms. He believes that the current societal understanding of the necessity of SOE privatization has lessened internal resistance.
Uneven Taxation
Dr. Khan highlighted the inequitable tax burden in Pakistan, with the salaried class bearing a disproportionately large share compared to sectors like retail, agriculture, and real estate. Masud explained that approximately 52% of the economy contributes nearly zero to the tax revenue, while the remaining 48% carries the entire burden. He emphasized the need for a more equitable tax system, advocating for taxation as a driver of investment rather than solely a revenue-generating tool.
He pointed out that the current system discourages investment in key sectors by keeping them outside the ambit of taxation, leading to a lack of documentation and hindering access to finance. He further highlighted the negative consequences of this, including the facilitation of money laundering. The recent introduction of an agricultural tax, while a step in the right direction, remains to be seen in its effectiveness.
Efforts are underway to improve tax collection in the retail sector through technological advancements, aiming to collect an additional 250 billion rupees by December 2025. Masud also advocated for simplifying the tax system, eliminating the current tiered system of penalties for non-filers. He praised the recent government move to separate policy-making from tax collection, addressing a long-standing conflict of interest.
Circular Debt in the Energy Sector
The conversation extensively covered Pakistan’s crippling circular debt in the energy sector. Masud explained that the problem has two components: stock and flow. He detailed the government’s plan to address the stock of circular debt by allocating the revenue from the debt service surcharge to its elimination over the next four to six years. This, he stated, will provide immediate relief by reducing interest rates on existing debt.
Regarding the flow of circular debt, Masud highlighted the government’s strategy of increasing energy prices to reduce the gap between generation and selling costs, thereby minimizing wastage. He also emphasized the importance of privatizing distribution companies through concessions to foster competition and improve infrastructure. He stressed the need for modernization of the outdated anti-theft infrastructure.
Masud acknowledged the political challenges in enforcing bill payments but expressed optimism about the government’s commitment to addressing this issue. He used the example of China’s 1981 energy crisis, where prioritizing industrial energy allocation over consumer needs in the short term led to long-term economic growth, as a model for Pakistan to consider.
Support for SMEs, Particularly Women-Owned Businesses — SME revival program
Recognizing the crucial role of SMEs in job creation, Masud discussed the need for targeted support. He acknowledged the complaints of SMEs regarding the dominance of large industries but also emphasized the importance of SME participation in the formal economy through taxation and documentation. He highlighted the success of Punjab’s SME support programs, modeled after India’s Mudra Yojana, which provided significant funding to women entrepreneurs.
He detailed a three-tiered SME revival program offering interest-free loans and energy subsidies to SMEs, with a particular focus on women-owned businesses. Masud emphasized the significant potential for economic growth by increasing women’s participation in the workforce, citing the high participation rate of women in the Memon community as an example. He highlighted the Bank of Punjab’s commitment to women’s financial inclusion, showcasing its awards and loan disbursement figures. He also discussed the State Bank of Pakistan’s initiative to absorb a portion of the risk for banks lending to SMEs, further encouraging lending in this sector.
Masud also mentioned the government’s efforts to create a supportive ecosystem for SMEs, including the SME revival program, the development of an SME perception index and a financial data exchange to improve access to credit. He described initiatives to provide advisory services and training to women entrepreneurs, particularly those in rural areas, using technology and programs like the CM Punjab Livestock Card to promote financial inclusion.
Access to Capital and Loan Security
Masud addressed concerns about access to loans and the perception of favoritism in loan disbursement. He highlighted a shift in government policy, moving from designing loan programs under the SME revival program and handing them to banks to a collaborative approach involving banks in the design process. He cited the success of Punjab’s Green Cab and E-Kisan programs as examples of how this collaborative approach has led to high loan recovery rates and reduced defaults.
In conclusion, the conversation with Zafar Masud provided a comprehensive overview of Pakistan’s economic challenges and the strategies being implemented to address them in the form of SME revival program. The emphasis on structural reforms, stakeholder alignment, targeted subsidies, and the empowerment of women entrepreneurs offers a glimmer of hope for a more sustainable and inclusive economic future for Pakistan.
The program concluded with a promise of future discussions on these vital issues, focusing on practical steps for accessing available support programs.
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