A Tragically Ignored Economic Plan

 A Tragically Ignored Economic Plan 

The government is unconcerned about the high risks to economic security and default. The trade deficit, external debts, foreign exchange rate, and forex reserves are all sources of concern for national and economic security.

Pakistan is currently experiencing an economic crisis. Concerns about national and economic security are raised by the trade deficit, external debt, foreign exchange rate, and foreign exchange reserves.

Pakistan must carefully navigate the situation. At the moment, Pakistan's foreign exchange reserves amount to approximately $4.5 billion, which is insufficient for even one month's worth of imports. Relief has come from receiving pledges totaling $10 billion, which is more than the $8 billion that was intended for flood recovery. Even if only a portion of that aid were to arrive this year, it would increase foreign reserves, though the specifics are still being worked out.

In the meantime, Pakistan's total external debt and liabilities amount to $126.9 billion US and are anticipated to rise as a result of new loans and rollover refinancing. Although import restrictions have reduced the trade deficit, the external deficit will begin to rise once more once the government lifts the ban in accordance with IMF conditions.

On transactions involving foreign currencies, there is a difference of more than 10% between the open market rate and the interbank dollar-rupee exchange rate. Foreign remittances also decreased by 11.1% in the first five months of FY-2023, according to the State Bank of Pakistan.

An immediate plan of action is required in this circumstance. Other than resuming the IMF program, rollover financing, debt rescheduling, and additional loans, Pakistan has no other options in the short term. While these short-term measures won't solve the problem forever, they will give you some breathing room.

Pakistan needs dollars, or foreign currency, to pay off our short-term debt, pay for imports, and strengthen its currency.

Reduce the trade deficit and encourage more foreign direct investment (FDI) and external remittances, both of which necessitate consistent long-term policies and political stability, are the sustainable means of increasing foreign exchange earnings. Investment-friendly policies, an enabling environment, and ease of doing business are necessary for attracting FDI.

Similarly, either increasing export receipts or decreasing import payments can reduce the trade deficit. The gap between imports and exports is getting wider over time. The textile sector accounts for 59% of our exports, followed by the agro-based food sector, which accounts for 17%, and other manufacturing products, which accounts for 14%. Our exports consist of low-value-added intermediate products and raw materials, as evidenced by the fact that the top two groups account for 76% of the total export receipts.

Raw cotton, combed cotton, cotton yarn, cotton cloth, knitwear, and ready-made clothing are all members of the textile category. Pakistan is only a part of the Global Value Chain (GVC) in the manufacturing of textiles, which are produced at the lower end of the GVC.

The current economic turmoil and the anticipated global recession in 2023 call for a national agreement on economic security in light of the significance of economic security as a pillar of national security. Regardless of political affiliation, this necessitates political commitment and agreement on a minimum long-term reform agenda that ensures continuity.

However, the design of the concept and the product, branding, research and development, and marketing are all aspects of GVCs that extend beyond the production process. Pakistan, on the other hand, lacks in both the high-value components of GVCs and value addition.

Raw agricultural commodities, particularly rice, make up half of the food category, making it the second most popular export category. Additionally, the food group must diversify from commodity exports to value-added products, requiring government support to construct the necessary infrastructure for standardization, grading, food processing, branding, packaging, research and development, and innovations.

Pakistan must reduce its trade deficit by limiting unnecessary imports, in addition to promoting exports and diversifying its exports. Petroleum currently accounts for 27% of imports, followed by the agricultural and chemical group, which accounts for 15%, the machinery group, which accounts for 14%, and the food group, which accounts for 11%. Due to the export-based industry's reliance on these inputs, we are unable to reduce imports of the machinery and chemical groups.

We also require imports of food and agricultural products to guarantee food security. But domestic production can take its place. The petroleum group that accounts for the majority of total imports is crucial to industry, transportation, and the production of energy. A long-term transitioning plan that shifts the energy mix toward alternative and sustainable sources of energy is necessary for managing petroleum group imports.

A national consensus is required for these long-term reforms and structural changes to be implemented in order to implement strategies to increase productivity, value addition, research, and innovation over the next 20 years. This ensures that economic policies and a reform agenda will remain consistent.

The current economic turmoil and the anticipated global recession in 2023 call for a national agreement on economic security in light of the significance of economic security as a pillar of national security. Regardless of political affiliation, this necessitates political commitment and agreement on a minimum long-term reform agenda that ensures continuity.

In the National Security Policy 2022, Pakistan's vision for national security includes economic stability. By considering economic security to be an essential component of the vision for national security, the policy provides a solid foundation for it.