August 14, 2022

Finance & Economy

Let's Talk About Investment

A Charter of Economy

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Speaking at a pre-budget event on Tuesday, Prime Minister Shehbaz Sharif reiterated his call for a Charter of Economy, urging all stakeholders to collaborate on formulating a framework for achieving economic growth. Shehbaz had first floated the same proposal as opposition leader four years back at the very start of the PTI government’s tenure, but those calls fell on deaf ears. But this time, as the Leader of the House, and presumptively having the support of most political parties in the parliament, his words carry significantly more weight.

While the PM’s broad focus is on enhancing exports with a focus on information technology, increasing agriculture yields and improving budgeting and debt management, the ‘how’ is open for discussion and negotiation with stakeholders, including business owners and other political parties. This is important because it would help the government craft and work on a short-term plan that is acceptable to all, thus letting it avoid distractions such as protests over the state of the economy, since the groups most likely to lead such agitation would have already signed on to the reforms.

At the same event, Finance Minister Miftah Ismail also noted that many of the changes in the upcoming budget would be focused on balancing the books, which would require cutting some spending. But he also offered a blunt acknowledgment that his audience, which included some members of the ultra-rich elite, would have to pay — or suffer — their fair share by noting that finance ministers in the past would “meet with people like you and make tycoons richer”.

If successfully negotiated, a similar, longer-term plan could ensure that economic goals are not missed due to the fragility of the government of the day — whether the incumbents or any future governments — because the broader framework within which planners are operating will remain the same, with only some tweaking to adapt to new challenges. This would also bind governments to a framework where they cannot sabotage the economy for their own political benefit, as the previous government attempted with its energy price cuts, and almost every government has done by cancelling or underfunding development projects approved by their predecessors.

Although there would obviously be hiccups along the way, the stability alone that such a policy would bring will be a welcome change from the sort of governance all of us have gotten used to in the past several decades. Such stability is also attractive to foreign investors since they will know that their investments are relatively secure thanks to policy consistency, even when governments change.

And while detractors may rightly believe that such a policy could hamstring future governments that want to bring in wide-ranging social reforms, the truth is that such actions, while necessary, cost money that the government does not have. Deficit spending on popular social programmes is unsustainable, but if some growth can be achieved, it would also be coupled with more money available in the budget, which, over time, could then be sustainably invested in social projects.

Published in The Express Tribune, June 9th, 2022.

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