Privatization of SOEs - prospect exists.

Byline: CAPT. ANWAR SHAH

Having attended IMC 2023 in Karachi from the 10th to the 12th, it is a great event thus taking a cue from the discussion scripting column for consideration of those at helms for good of SOE (State-Owned Enterprise). My tributes to NIMA for an excellent educative event.

The state of Pakistan's economy has been a constant subject of discussion over the past month or so in the print and electronic media and is expected to remain as such in the coming days and weeks. Numerous scholars, several former finance ministers, and many economists, all far more learned than I, have gone on to expound on theories purporting to show what has gone wrong in our country. They have readily broached various patchwork solutions that they believe may be implemented in order to relieve Pakistan's economy of its persistently paralyzing debt and under-productivity.

All arguments and theories always wind back to debt and under-productivity or as they are esoterically known to the more biblically disposed of sentimentalists; greed and sloth, theologized as part of the seven deadly sins. All of Pakistan's problems, it is said, stem from its insatiable appetite for luxury and leisure at the expense of merit and hard work. This 221-million-strong country tends to consume disproportionately more than it can produce; to be precise it can consume USD 44 billion (the gap between imports and exports in 2021) more than it can produce.

Effectively, all past governments going back several decades, have presided over the country's demise by proceeding to borrow money from international lenders, thus kicking the can down the road, with all of those funds eventually ending up subsidizing inefficiencies in Pakistan's economy with no meaningful growth to speak of. Subsidizing inefficiencies in the economy here primarily means that the exchange rate has been kept artificially low, which has allowed the population to obtain an imported lifestyle and level of consumption that is not consistent with what they have managed to produce. In other words, the artificial strength of the Rupee has subsidized imports to the detriment of exports.

This is synonymous with Greece's suffering during the eurozone crisis in 2009, where the debt levels spiraled out of control simply because the Greek economy was not sufficiently productive, with inconsistently high-income levels. The Greeks kept borrowing and borrowing without thinking about how they will finance the ever-increasing debt servicing costs. Eventually, after undertaking painful reforms and going through a long and severe recession which saw a large chunk of their skilled population emigrating, the Greek economy became more competitive due to deflation, with Greek wages falling by around 20%. From a humanitarian point of view, all of this may sound cruel but unfortunately down turns in economic cycles cannot be appeased or wished away. The creditor will always want his pound of flesh and unless countries proactively manage their finances and the economy as a whole, this will always be the end result; the invisible hand at work automatically seeking to correct market imbalances by whatever means necessary.

Work side by side

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