Fixing the economy | By Dr Atiq-ur-Rehman


Fixing the economy

THE economic problems of any country are of two types, firstly those for which the required resources are available within the country or can be obtained using local currency, secondly those problems for which resources are required from abroad or foreign currency is needed to solve this problem.

The first type of problems is not really a real economic problem. They exist only because of a misunderstanding of the economic system.

The financial autonomy of an independent country is strong enough to deal with these issues.

Autonomous countries have the authority to print currency, but this option is not used because textbook economics teaches that currency printing causes inflation.

It is true that irresponsible printing of currency causes inflation, but there are many occasions when currency printing can be done successfully without increasing inflation.

During the Covid Crisis, many countries around the world used large amounts of printed currency, and inflation did not rise at that time.

In particular, if you have untapped resources available in an economy that can be utilized, and it is not possible to use them just because you do not have the money, currency can be created to utilize them without inflation.

In Pakistan, for example, there are many suitable sites for storing rainwater and there are engineers building dams.

There should be no financial problems in starting such projects. In such schemes, if government creates money, it will in fact lead to the expansion of the total usable national resources, and will not cause inflation.

Printing currency can cause inflation when aggregate demand increases, but if the newly created currency is used for the supply side, then inflation should be expected to decrease due to supply expansion.

So, there is no problem in providing resources for water storage projects, renewable energy projects, agricultural projects etc. for which you do not need imports, or the share of imports is much less than the total cost. , And the high inflation rate from these projects is also unimaginable, as these projects lead to an increase in aggregate supply.

On the other hand, the economic problems that need dollars to solve, then the dollar can not be created within the country.

It must be someone. Local production will be obtained in exchange for export or will be obtained by requesting IMF.

The solution to this problem is to promote local production. Local production will also increase exports and reduce the demand for imports.

So, my suggestion is that the government should first get rid of this so-called SBP sovereignty bill, and bring the interest rate to at least the level that is in India or Bangladesh.

If this is not possible at the moment, then interest rates on long-term loans should be reduced by negotiating with banks, so that savings of at least Rs 1000 billion are possible.

Out of this savings, Rs.1.5 billion rupees should be allocated for each district of Pakistan from which small dams should be constructed for storing rain water at a cost of less than Rs.10 million.

The dam will be able to store rainwater, which can be used for agriculture and restore groundwater levels. Rs 100 billion should be used to subsidize bioenergy in the country.

There is agriculture and livestock in every corner of the country, these resources should be used for biogas.

Hotels and vegetable markets must be required to install their own biogas plants. The government should provide training and subsidy for domestic biogas plant.

Biogas is an armor that takes weeks, not months, to produce. This will reduce the import pressure on energy and provide environmentally friendly energy. 200 billion should be allocated for the official purchase of agricultural produce.

If the price decreases due to increase in a single crop, then the government should buy the said crop to protect the farmers, or subsidize its production.

The remaining amount should be allocated for agricultural production. Emphasis should be placed on the production of canola, soybean and other edible oils.

Self-sufficiency in edible oil alone could save 4 4 billion annually, or Rs. 800 billion, and at the same time create thousands of jobs.

In addition, efforts should be made to increase all other types of agricultural production. Self-sufficiency in edible oil alone will not require recourse to the IMF.

Emphasis should be placed on the development of energy crops such as Jatropha, or other commodities from which biodiesel can be made.

Farmers should be made aware of the standards and procedures required for exports. Dairy products are produced in reasonable quantities in Pakistan, but its share in exports is negligible.

Producers of dairy and other agricultural commodities should be trained in the basics of international trade in order to increase exports.

Currency depreciation and debt are just painkillers that can provide temporary relief. The permanent cure is to increase production, for this purpose there is no problem of lack of resources, just that the resources should be used for production and not for expenditure.

—Director, Kashmir Institute of Economics, Azad Jammu and Kashmir University.


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