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Pakistan’s Economic Crisis and the Way out of It: It is Now or Never

Below is a redacted summary of the author’s subcontracted advisory report submitted for a major consulting group associated with a global financial body dealing with Pakistan.

Ismail Y Syed

Year 2022 has already been challenging enough following the Covid19 pandemic, possibly the worst in Pakistan’s 75 year history, a country hit by the worst ever avoidable climate disaster – the 2022 Pakistan floods. As if this was not enough, the economy is teetering on collapse with the foreign exchange reserves being so low, that it has only enough to cover for few weeks of vital imports. So how did Pakistan get to this? This question itself is wholly a separate topic already congested by many commentators and development economists but this is not the topic for discussion now. What this piece aims to provide here is how Pakistan can come out of the economic mess, what immediate short term steps and long term steps need to be taken in order to move forward without having to rely on periodic rentier curse of IMF bailouts or other international loans rescheduling.

This piece will focus on the immediate and long term solution towards not only clearing the economic bottlenecks but how it can eventually help the country to progress forward as an emerging economy and avoid or at least minimise the possibility of falling into similar trap in the future. The author aims to provide brief and concise no nonsense approach in dealing with current economic crisis and rather more so challenge the failed status quo where others have preferred to overlook.

So what are the steps that need to be taken? These can be termed as follows, explained in each paragraph denoted by a letter:

A) Emergency land reforms: abolishment of zamindar/jagir landlord feudalism. Pakistan must carry out land reforms on an emergency basis—ie dismantle vast swathes of lands owned and passed down through the hereditary landlord system commonly termed as zamindari nizam/jagirdari system, a type of feudalism that existed in the Indian subcontinent owing to the colonial legacy of the British Raj which still continues to date, albeit evolved with some changes but still remains far below 20th century land reforms that took place in neighbouring India post independence. Such dismantling is to be done through land repossession gratis by the state (possibly by enacting legislation or using emergency constitutional powers by treating such land reforms as a matter of national emergency after providing the landowner with a capped limit allowance eg 20-25 acres) and redistribute the acquired lands to peasants/farmers for farming (who could be retrained for modern sustainable farming/and or training to develop export-driven profit-making farming if needed be). The landowners/jagirdars/zamindars whose lands to be forcefully repossessed gratis by the state, can be compensated for the provable maintenance and up-keeping of the vast land estates up to the cost of median level for the most recent period eg up to 3 years prior to the date of forceful repossession/nationalisation (as to be assessed by the state). Additionally parts of the state-acquired lands can also be used towards establishing free trade zones and export processing zones etc. All of the above emergency land reforms and subsequent utilisation can fetch, in both tangible and non tangible value if not in cash value, at least up to PKR 25 trillion (around USD 100 billion as per exchange rate at the time of writing) in medium to long term.

B) Emergency reform of Pakistan’s military affiliated entities and military perks:

Place military-run business-commercial empires including construction and housing all under Pakistan’s Ministry of Finance and Federal Board of Revenue (FBR) with parliamentary or judicial oversight and:

C: Reform fiscal policy & taxation and tax evasion deterrence: by making it both effective smart revenue-driven in line with other countries. This means:

D: Immediate business competitive environment:

E: Monetary policy:

Pakistan must reform monetary policy on rupee, banking sector and more so State Bank of Pakistan (SBP), the country’s reserve bank. Among them:

F: Exports sector.

Pakistan must flourish in what it can do great in terms of manufacturing eg textiles, agriculture (though Pakistan also has nascent defence export industry—which the author doesn’t condone) etc.

G: Rule of Law (“ROL”). To make above work, Pakistan must work towards establishing robust world-class legal system. This is must for attracting FDIs and FPIs. Pakistan already has a well developed English common law system (alongside Sharia law and Islamic commercial law system). This means:

H: Political stability and rooting out corruption. This complements above ROL and robust legal system (see above G). This means:

I: Pakistan’s soft power overseas and overseas Pakistani diaspora

Pakistan needs to be projected not only before the world through its soft power but also among its overseas Pakistani diaspora. Soft power isn’t just about using PR agencies to promote Pakistan’s image (though it helps but that alone without making structural changes would be futile). Soft power can be projected through:

J: Removing military from all spheres of state governance (alongside above point B).

To sum up, some points (ie A-E including parts of point J), not least carrying out emergency land reforms by dismantling colonial era inherited zamindar-based feudalism, along with radical overhaul of military perks and bringing military-affiliated business empire under civilian control with parliamentary accountability, and making market-friendly competitive business environment—combined with smart taxation system including implementing global income based taxation—all of these are achievable in the short term (1-3 yrs) by taking immediate emergency steps as a “national security” measure (which may require emergency legislations/constitutional amendments/and or ordinances/executive orders). The other remaining steps (ie points F-J), not least judiciary/rule of law, political stability through federalism and full democratisation, and Pak-foreign/Pak-diaspora relations, all are to be achieved in the long run (within 4 – 8 yrs). For the sake of political stability and market confidence, military once and for all be must be removed from having any role in managing state’s affairs and be brought under full civilian supremacy. Centralisation and colonial-style pervasive military influence along with land feudalism have been the source of curse for Pakistan since its inception. If India and Bangladesh can move on, surely Pakistan can. It’s not too late. But it is now or never.


The writer is a research scholar based in London and is a former London-based banker at HSBC with experience in observing South Asia and Middle East markets closely. AFP file photo used for illustration.

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