The Centre for Strategic Perspectives (CSP) at the Institute of Strategic Studies Islamabad (ISSI), organized a Public Talk on “Stabilizing Pakistan’s Economy.” The Guest Speaker at the event was Mr. Mueen Afzal, Former Secretary General, Ministry of Finance and Economic Affairs, Pakistan.
In her introductory remarks, Dr. Neelum Nigar, Director CSP, emphasized the significance of today’s talk, which delves into a crucial topic. The economy has faced severe macroeconomic imbalances, with the recurring balance of payments crises, shortages of foreign exchange, and above all a lot of fiscal indiscipline. The economy has not been able to take off even with the series of financial stimuli provided by international financial institutions. This underscores the necessity to comprehend the fundamental aspects of the economy, allowing us to present practical policy recommendations.
In his welcome remarks, DG ISSI Ambassador Sohail Mahmood highlighted the significant economic challenges that Pakistan is currently facing, fostered by both internal and external factors, including the impact of global economic slow-down, Covid-19 pandemic, and food and fuel crises in the wake of Russia-Ukraine conflict and situation in the Middle East. He noted that Pakistan is grappling with a dual deficit challenge, involving both fiscal and current accounts, ultimately leading to a debt trap. Furthermore, the economy is confronted with rising inflation, food insecurity, energy crisis, and unemployment, adding to the already formidable set of challenges. These hurdles have hindered the nation’s path to achieving sustainable growth. Ambassador Sohail Mahmood further emphasized that the implementation of necessary corrective measures, including redirection of resources toward social sectors, has been hindered by fiscal constraints, also resulting in a sluggish GDP growth rate. To stabilize the economy, a comprehensive but targeted approach is imperative, entailing sustained long-term growth through structural adjustments within the economic framework.
During his address, Mr. Mueen Afzal shed light on the recent challenges confronting the Pakistani economy. He attributed the country’s economic woes to the misallocation of human resources. Mr. Afzal emphasized that while economic crises are surmountable, they necessitate a rigorous reform process. He highlighted the potential benefits of investments like CPEC, stressing that they must be utilized prudently. Mr. Afzal argued that stabilizing the economy relies on attaining sustainable growth, necessitating a minimum GDP growth rate of around 5 percent. Specifically, he stressed combating poverty and inequality; fiscal discipline; increasing savings and revenues; responsible management of debt; trade diversification; conducive environment for FDI; structural reforms; and, above all, ‘sensible decisions.’ He underscored that the foremost concern presently is the escalating inflation, which impacts both exchange rates and interest rates.
Moreover, Mr. Mueen Afzal addressed the recurring challenge of the balance of payments, advocating for a strategic focus on trade policies and diversification of exports as imperative solutions. A manageable current account balance, he noted, is vital for maintaining a stable rupee, a prerequisite for sustainable growth. In conclusion, he pointed out that Pakistan’s public spending is limited, remaining below 20 percent. This limitation hinders investment in crucial public infrastructure, further worsening inequality within the nation.
Following the presentation, participants engaged in an interactive discussion. The event concluded with a vote of thanks delivered by Ambassador Khalid Mahmood, Chairman of the Board of Governors at ISSI.
