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Broad strategy helps battle inflation

Broad strategy helps battle inflation

Interview with Mr Aamir Ijaz Khan, Executive Director ICMA Pakistan

PAGE: Kindly tell me something about yourself and your career? 

Aamir Ijaz Khan: By profession, I am a Fellow Cost and Management Accountant and have to my credit around 20 years of diversified experience in the areas of Client Servicing, Project Implementation, Business Repositioning, Financial Management, and Compliance. I am also a SAP, FICO Certified Consultant. Before joining ICMA Pakistan as Executive Director, I was serving as Head of Quality Assurance at M/s. Innovative Private Limited. I had also worked as an Audit MIS Expert (Punjab) in a World Bank-funded project named “Project to Improve Financial Reporting & Auditing” (PIFRA) and as Executive Financial Accountant at Sui Northern Gas Pipelines Limited (SNGPL).

At ICMA Pakistan, I held several positions including Chairman of Lahore Branch Council (LBC) during the period from 2011 to 2013. Being a pioneer member of the Quality Assurance Board of ICMA Pakistan, I remained a vocal participant for the first four years of its inception. I also served ICMA Lahore Toastmasters Club as its Founder President.

Currently, I am a member of the Management Committee of MENSA International – Pakistan Chapter. As a professional trainer and motivational speaker, I have conducted many training sessions and workshops. I have contributed various papers on national and international forums on themes of growth dynamics of Pakistan services sector, Pakistan economy, economic sectors’ strategic dynamics, budgetary measures, etc.

PAGE: How do you see 2024 vis-a-vis 2023 in terms of inflationary pressures in Pakistan?

Aamir Ijaz Khan: The inflation dynamics in Pakistan are intricate as we move from 2023 to 2024. According to the recent publication by the International Monetary Fund (IMF) titled ‘World Economic Outlook 2023 (Navigating Global Divergences),’ there is a forecast indicating a drop in the inflation rate from 29.2 per cent in 2023 to 23.6 per cent in 2024. While these numbers might offer hope, especially for ordinary people and businesses, my view is cautiously practical. I anticipate that the inflation rate could stay above 26 per cent or even rise further unless the government takes proactive steps to tackle specific underlying challenges.

Key factors contributing to my cautious outlook on inflation include the persistently high electricity prices and the imperative need to revitalise domestic food production. The cost of electricity has been a significant driver of inflation, impacting various sectors of the economy. To mitigate inflationary pressures, it is crucial for the government to formulate effective strategies to regulate and reduce electricity prices, providing relief to both consumers and businesses. Another critical aspect is the need for a comprehensive plan to enhance domestic food production. The reliance on expensive imported flour (wheat) and other edible products, averaging around $15 million every month in 2023, contributes significantly to inflation. The government should prioritise policies and initiatives that support local agriculture, ensuring food security and stabilising prices. By fostering self-sufficiency in food production, Pakistan can reduce its dependence on costly imports and create a more resilient economic environment.

Tackling inflation calls for a comprehensive strategy that involves policy actions, careful planning, and efficient implementation. From my perspective, enhancing cooperation among government bodies, stakeholders, and private companies is vital to create and apply lasting solutions. It is crucial to strike a balance between short-term measures for immediate relief and long-term strategies that address the root causes of inflation. While the IMF projections offer a glimpse of optimism, it is imperative for the government to take proactive and decisive actions to ensure that the inflationary pressures are effectively managed in 2024. By focusing on key economic drivers, such as electricity prices and domestic food production, Pakistan can work towards achieving a more stable and resilient economic environment in the upcoming year.

PAGE: Energy prices were rather exorbitant over the course of preceding couple of years. What is your standpoint on energy prices in 2024?

Aamir Ijaz Khan: The trend of energy prices in the last couple of years has created significant challenges for Pakistan’s economy. As we approach 2024, my perspective is one of careful concern, shaped by a detailed analysis of multiple factors influencing the high energy prices. Firstly, the consistent gap between electricity generation and consumption, averaging between 1.5 to 2 per cent over the past 5 to 6 years, underscores the immediate requirement for strategic actions to narrow this gap and improve the overall energy infrastructure. Secondly, examining the economic indicators, the Sensitive Price Indicator (SPI) registered a significant increase of 43.25 per cent in December 2023 compared to the previous year. Thirdly, the surge in gas prices by 498.28 per cent in November 2023, as reported by the Pakistan Bureau of Statistics (PBS), further compounds the challenges in managing energy costs. The average energy price in Pakistan reached Rs. 14,710.28/MWh in December 2023, reflecting a substantial increase from Rs. 10,997.82/MWh in 2019, according to the International Energy Agency (IEA). Finally, the steep rise in petrol prices to an average of Rs. 300/litre in 2023 from Rs. 146.76/litre in December 2021 adds another layer of complexity to the overall energy pricing scenario. To tackle these challenges, it is crucial to adopt a multi-dimensional strategy that combines immediate fixes with a long-term vision. Prioritising efforts to strengthen local energy generation, diminishing dependence on expensive imports, and investigating sustainable, renewable energy sources is key. Collaborative initiatives involving the government, private sector, and international allies are vital for executing innovative solutions, ensuring energy security, and alleviating the financial strain on consumers. I recommend that the government investigates and solves the reasons behind the rise in energy prices. By making it more attractive for companies to invest in energy, using better technology, and creating rules that save energy, Pakistan can have a steadier energy future. It’s important to plan ahead and connect economic growth with having enough energy for the country to be strong in the future.

PAGE: Flow of remittances has not been promising in 2022 and 2023. How do you anticipate in 2024?

Aamir Ijaz Khan: Certainly, the flow of remittances in 2022 and 2023 did not meet the optimistic expectations, with an observed decline from an average monthly inflow of $2.7 billion in 2022 to $2.2 billion in 2023, as reported by the State Bank of Pakistan (SBP). This trend warrants attention and analysis, considering the vital role that remittances play in supporting the national economy. However, my anticipations for 2024 are cautiously optimistic, taking into account several factors. Throughout 2023, we observed a notable shift in the average monthly remittance inflows, prompting a deeper examination into the underlying causes. One significant factor influencing remittances is the number of emigrants. According to data from the Bureau of Emigration & Overseas Employment, there has been a substantial increase in the number of Pakistani emigrants, rising from 625,876 in 2019 to 805,088 in November 2023. This surge in emigrant numbers is a positive indicator for the future flow of remittances. As these individuals establish themselves in their respective host countries, it is plausible to anticipate an increase in the portion of their earnings sent back to Pakistan. The expected increase in remittances is based on the fact that many Pakistanis living abroad regularly send a significant part of their earnings back home. With more people moving abroad, we can expect a bigger impact on the money sent back to Pakistan in the next few years. This follows the usual pattern where remittances increase after more people move abroad, but there’s a delay as they settle down and stabilise financially.

Considering the Pakistani community abroad is strong and adaptable, it is likely they will keep dealing with challenges in the world economy and keep sending money home. I believe they will stay committed to supporting Pakistan economically. However, it is crucial for policymakers and others involved to keep a close eye on global economic changes, political shifts, and any new rules that might affect how much money is sent back home. It is important to take action early to make the most positive impact on our national economy.

PAGE: Some European countries are in dire need of workforce. Countries in the Arab Peninsula also need workforce. What should Pakistan government do to capitalise on such scenario?

Aamir Ijaz Khan: Given the urgent need for workers in some European nations and the Arab Peninsula, Pakistan’s government has an important chance to make smart moves in this situation. My viewpoint highlights a two-part plan: recognising and managing local job dynamics while also using the international demand for skilled workers to Pakistan’s advantage. Firstly, it is crucial for the Pakistani government to thoroughly study and gather information about the country’s need for workers. Understanding which job sectors might face shortages is really important. There is an ongoing issue where talented people leave Pakistan for opportunities abroad, and this needs careful handling. Instead of losing talent, the focus should be on creating a conductive environment where skilled workers are willing to stay. This could be achieved by encouraging innovation and offering good opportunities and incentives. On the global stage, because there is a higher demand for skilled workers in European countries and the Arab Peninsula, Pakistan has a chance to show its value as part of the global workforce. The expected positive economic signs, as mentioned in the IMF’s ‘World Economic Outlook 2023’ report, forecasting a 2.5% real economic growth in 2024 and a drop in unemployment from 8.5 to 8 per cent, suggest a good direction for Pakistan’s economy. However, meeting these goals requires a strong workforce. To capitalise on the global demand for workforce, the government should actively engage in diplomatic efforts to foster collaborations and partnerships with countries experiencing labour shortages. This involves facilitating agreements that ensure the protection and rights of Pakistani workers abroad, promoting professional skill development programmes aligned with international standards, and creating pathways for seamless employment opportunities.

I recommend that government should adopt a strategic and holistic approach. By nurturing domestic talent, mitigating brain drain, and aligning professional skill development initiatives with global demands, Pakistan can position itself as a valuable contributor to the international workforce, thereby enhancing economic growth and strengthening diplomatic ties with countries in need of skilled labour.

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