Interview with Mr Zia ul Mustafa Awan, President, ICMA International
PAKISTAN & GULF ECONOMIST had an exclusive conversation with Mr Zia ul Mustafa Awan regarding Federal Budget 2022-23. Excerpts of the conversation are as follows:
Pakistan is facing daunting economic challenges at the moment which require some sagacious policy-making to put the economy on the right track. A new coalition government has assumed power only two months back and it looks committed to meeting these challenges squarely. We have seen some tough and unpopular decisions by the government recently by increasing the petroleum prices as a preemptive measure to seek the IMF loans which, if materialized, would help improve our foreign exchange reserves and catalyze additional external assistance from other international donor agencies.
The key issues that our country is facing are depleting forex reserves, persistent current account deficit, huge trade imbalance, soaring public debt, depreciating value of the Pak Rupee, declining FDI inflows, rising domestic inflation, and revenue shortfall due to narrow tax base. These issues are haunting our economy for a long but unfortunately, we have not been able to find a permanent solution to them. These issues are also restraining our economy to achieve sustained growth. The impact of the pandemic on industrial productivity and the FATF grey-listing over the last few years have also caused real GDP losses to our country during the last two years.
Despite these inherent weaknesses and external risks and challenges, the national economy achieved real GDP growth of 5.97 percent in FY2022 as per the Economic Survey 2021-22 launched by the Finance Minister on 9th June 2022.
The government predicts 5% to 6% GDP growth in the next fiscal year 2023. This is a decent growth rate and to achieve this target the government needs to provide a policy framework that focuses mainly on boosting exports, remittances, tax revenues, and FDI inflows. This would help improve the balance of the payment crisis and achieve sustainable and responsible growth.
The energy crisis also needs to be addressed on a war footing basis. The frequent and long-duration load shedding has not only been disturbing for our people but is also impacting industrial productivity. The soonest we surmount this problem, the better it would be for our economy. The demand for electricity in the country is 28,200 megawatts whereas the power supply is only 21,200 megawatts – thus, there is a power shortfall of around 7,000 megawatts. We are getting 4.635 megawatts of electricity from hydropower, 1,060 from thermal power plants, and 9.677 megawatts from the IPPs. We need to move to renewable energy sources to avoid reliance on imported fuel.
It is good to note that Prime Minister Shehbaz Sharif is fully cognizant of this issue and taking immediate steps to solve the problem of load shedding immediately and bring down the shortfall of energy. It is being reported in the press that the government is contemplating bringing to operation a few closed power plants that have the capacity to produce 7,500 megawatts of electricity. I believe that the private sector also needs to be engaged, especially the large-scale industries and multinational companies, to generate their electricity not only for their operations but also to supply to the national grid to meet the seasonal shortfall. For this purpose, a special package of fiscal and non-fiscal incentives and facilities should be offered to such companies. This would not only provide them an alternate source of income but will also create a healthy competitive environment in the country. Similarly, the consumers should be provided easy access to bank loans to purchase solar panels for their homes to save energy.
The conservation plan announced recently to mitigate the prevailing energy crisis is a welcome step by the government. It is expected that with a 5-day working week, there would be an overall saving of $386 million annually. In Western countries, 4-days or 5 days a week working is generally considered to be a triple dividend policy – helping employees, companies, and the climate. The 5-days week working in Pakistan could only be a success if it does not affect the efficiency of workers and also helps in marked improvement in fuel saving. The austerity measures taken by the Government are also appreciated and hope that these would be implemented in the true letter and spirit and in the broader national interest.
Gas shortage has also assumed an alarming situation in the country. This is mostly required by power plants running on gas and also the manufacturing industries like fertilizer and residential homes. It is reassuring that the new Government is taking urgent steps to resolve the gas shortage crisis. In addition to LNG imports, there is the possibility that the gas supply from newly discovered reservoirs of gas in the Bannu Division of KPK would be used. This area has gas reserves of about one trillion cubic feet and it can certainly help meet the energy shortfall and provide relief to the masses and the industry.
There is no shortcut to achieving rapid and sustained economic growth. The first pre-requisite is to have political stability in the country without which every good policy and initiative would be unproductive. Due to political uncertainty, businessmen and investors are adopting a ‘wait-and-see’ policy. The Government must restore the confidence of the business and the industry and develop an ‘Economic Growth Strategy’ on the pattern of South Korea, Taiwan, and Vietnam. The Prime Minister has appealed to all the political parties and stakeholders to achieve consensus on a ‘Charter of Economy’. ICMA fully supports this proposal and hopes that it would be warmly welcomed by all relevant quarters.
ICMA is willing to play role in providing its professional input and support in developing the Charter. ICMA believes that our growth strategy model should focus on productivity growth that would propel our exports; privatization of State Enterprises that would bring efficiency; increased private sector participation in development projects; eliminating all kinds of market cartels and ending subsidies to the Public Sector Entities and making them a model of good governance and efficient enterprise. A think tank of experts may be formed to advise on ‘out of box’ solutions to come out of the current economic crisis. ICMA would soon be presenting its Policy Recommendations to the Government.
In the end, I would like to congratulate Prime Minister Shehbaz Sharif and his economic team headed by Miftah Ismail, Federal Finance Minister, for presenting a balanced budget. As a finance professional, I believe that it is a good national budget in such an economic crisis-like situation. Many congratulations to the Government and the entire team of the Ministry of Finance, FBR, and others.
Together, we can build Pakistan into an economically strong and prosperous nation.