Increase in manpower export can help remove financial difficulties

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Ihtasham ul Haque

Now that Pakistan’s foreign exchange reserves have considerably improved and there is no immediate danger of default, well-wishers within the ruling PML-N are approaching the prime minister to increase the dwindling manpower export to the Gulf Cooperation Council (GCC) countries.
The total reserves being maintained by the central bank and the commercial banks today stand at close to $23 billion, which are not considered sufficient to meet any serious financial eventuality. Prime Minister Nawaz Sharif, in this backdrop, is understood to have been advised to use his personal good offices in the GCC to enhance foreign remittances, currently hovering between $15 billion and $16 billion annually.
The declining foreign exchange earnings are fast becoming a matter of serious concern both in the official and unofficial quarters, with well-wishers desperately requesting the prime minister and the chief minister Punjab to find out new resource mobilization with a view to meeting the increasing expenditures of the state.
Top authorities were reportedly alarmed when informed that India was on an economic war path and was trying to grab Pakistan’s manpower export share in the GCC. In this regard, the Indian prime minister’s recent visit to GCC region is an eye-opener for undermining Pakistan’s manpower export.
Insiders said that the prime minister was told that as a first step, he should get the country’s manpower export ban lifted from Kuwait. Last week Interior Minister Chaudhry Nisar Ali khan revoked visa abolition agreement with Kuwait in the backdrop of difficulties being faced by government officials and diplomat during their travel to that country.
The move has further complicated the matter and now the prime minister is expected to shortly send a high level delegation to Kuwait to resolve the issue by requesting the Kuwaiti authorities not to press for seeking visa for those Pakistani officials who hold blue passports. The issue was also echoed last week in Senate with senators asking the government to raise the issue.
The delegation when visits the tiny rich GCC state, is likely to take up the issue of increasing Pakistani manpower by negotiating how best the existing ban could be lifted. Chief Minister Punjab Shahbaz Sharif had reportedly been convinced by important PML-N legislators to “double” home remittances by effectively taking up the issue at a higher level in the GCC region. The CM took the issue with the prime minister who agreed to use all his personal influence to get the job done.
Over the years Pakistan’s exports had been declining due to number of reasons including what many exporters say “over-valued Pak Rupee” against a dollar. This has, no doubt, resulted in the decline of foreign exchange earnings. The country has also been losing its fair share of exports because of the failure in diversification of products and the value addition.
Under these circumstances, the government has left with not many options but to seriously concentrate on enhancing Pakistani manpower export particularly in GCC region. Concerned officials say that 80 per cent Pakistani manpower export is in GCC while 20 per cent is the West and the North America.
In another development the European Union (EU) has called upon the government to curb human smuggling failing which the 27 nation bloc would be constrained to withdraw the GSP (general system of preferences) plus status. This status was given to Pakistan two years ago to help boost the country’s exports that helped increase over $1 billion additional exports to the EU member states.
However, a senior western diplomat is believed to have communicated to the government to halt human smuggling which at times created problems relating to terrorism in some of the various EU counties. “The diplomat told me in a recent diplomatic function that GSP status could be withdrawn if the government did not take enough steps to stop the increasing human smuggling”, said a senior PML leader.
Meanwhile, the questions about the sustainable growth continue to be asked and even the central bank in its latest monetary policy announcement has given its cautious stance on couple of important issues. On the surface, the bank says, things are well; but lurking beneath it all risks of a serious nature. The report did not mince words to say that a continuing slowdown in China and the Middle East coupled with uncertainties relating to the EU and Brexit complications could hamper growth. The biggest risk is an unexpected rise in oil prices and the continuous dependence of the economy on foreign inflows.
Such apprehensions were also expressed by IMF in its twelfth and final review of the Pakistani economy under three years $6.67 billion Extended Fund Facility (EFF) programme. Interestingly, the IMF has once again given on Thursday a clean bill of health to the economy by saying that the GDP growth is expected to reach five per cent during the current financial year particularly due to the increased construction activity.
Nevertheless, the Fund officials, who are often accused of double speak, urged the government to further strengthen public finances and external buffers, broaden the tax net, improve public financial management, strengthen the monetary policy framework, address the losses in State Owned Enterprise (SOEs), complete the energy sector reforms and accelerate competitiveness-enhancing improvements of the business climate, including the trade regime. IMF believes that continued progress with these reforms will be critical to reinforce the authorities’ achievements under the IMF-supported programme.
Who does know IMF had been extending waivers after waivers to the government to help meet performance criteria throughout the three years emergency assistance to Pakistan. These waivers were said to be given at the behest of the US State Department which had its own political and strategic interests in the region.
But a million dollar question is why would the IMF, being a so-called adherer to the principles of financial discipline, comprise on issues like government’s inability to effectively undertake the much sought after important reforms in the key economic areas especially revenue and energy sectors.
IMF gave waivers on both revenue and energy sector reforms despite facing criticism by the independent economists who always believed that without these reforms the country would never achieve real economic turnaround.
Tax to GDP ratio, which was successfully increased to 11 per cent during the first two years of former President Gen. Pervez Musharraf, is still less than 10 per cent and as such a huge question mark on the performance of the FBR. What had been done by the FBR and the previous PPP regime and now PML (N) government to increase the tax-to-GDP ratio is a fair question being asked by the critics. People did not forget that the World Bank had given $150 million soft loan for the restructuring of the then CBR now FBR in early 2000 but nothing happened to enhance tax-to-GDP ratio which is far less compared to other regional countries.
So was the case with the energy sector reforms due to which circular debt had almost crossed the Rs500-billion mark. The present government, no doubt, removed Rs480 billion circular debt in 2013 but then it again reached to over Rs400 billion. This simply happened because of avoiding taking energy sector reforms and the IFIs particularly the IMF were to be blamed for not getting firm and unnecessary rescuing the government.
In its last year’s annual report the State Bank of Pakistan boldly took up the issue and called upon the government to ensure energy sector reforms without which it believed loadshedding could not be removed nor could any fresh local and foreign investment ensured. Pakistan’s increasing electricity requirements could not be managed during last PPP regime and now PML-N government, though the later continues to claim that loadshedding will end by 2018 when 20,000MW of electricity would have gone into the national grid.

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