Pakistan suffers from many deficits. On one side of the spectrum is illiteracy. 60 million Pakistanis of age 10 and above are utterly illiterate. Making them literate is an essential duty of the state. It has however remained a low-priority of the governments in Pakistan for 67 years. Because of this negligence, Pakistan will fail to achieve any of the EFA Goals by 2015.

On the other side of the spectrum, is the deficit of think-tanks. In this highly complex, fast moving and globalized world, governments which are intrinsically unwieldy, cumbersome and slow moving are found wanting in taking appropriate and timely decisions—decisions which require in-depth analysis and understanding, as well as a realistic grasp of changes and new developments in various fields. This serious deficiency in advanced countries is met by numerous think-tanks which independently collect data, assess situational factors and come up with well-researched policy options. Hundreds of such centres are to be found in USA and the European countries. These institutions provide valuable knowledge and services to the decision-making entities and have been particularly active in the area of international relations.

Think-tanks in Pakistan are few and far between. SDPI in Islamabad, Social Policy and Development Centre in Karachi, Human Rights Commission, IPS, Jinnah Institute, government-funded Institute of Strategy Studies and of Regional Affairs and a few other centres in Islamabad and at some universities are all that Pakistan can boast of. To this count may be added the government-run Planning Commission and some leading, well-organized NGOs.

It is in this context that I welcome the Institute for Policy Reforms; a new think-tank inaugurated on Thursday last in Lahore. It is the brain-child of Humayun Akhtar Khan, a former commerce minister and well known businessman, and Dr. Professor Hafiz A Pasha, a former federal minister and deputy chairman of the planning Commission. A five-member board of management of the institute is backed by a team of advisors which include Dr Atta-ur-Rehman and Supreme Court advocate, Salman Raja. The institute will be an independent and non-partisan entity with the primary purpose of supporting policy making in Pakistan in a broad range of subjects pertaining to economic, development, security, energy governance and international affairs. It aims at finding practical and actionable solutions for the country’s many challenges. The institute is a non-profit company and its operations will be supported by “guarantees from the corporate sector.” It will not accept donor or government support to run its operations and all members of the board will have to take leave from the institute if they take to political activities.

The audience in the Allama Iqbal auditorium savoured a taste of the institute when Dr. Hafiz Pasha presented a review of the government’s half-yearly Macro Economic Performance for the year 2013-14. The salient points of the review would be of interest to the readers. The findings show that GDP growth of five percent in the first quarter of fiscal 2013-14 was encouraging compared to below three percent for the same period in the previous year. But this was short lived. With correction in the second quarter, growth for the six months is expected to be four percent. The basis of growth are the increase of six percent in industrial production in the first quarter with five percent in large-scale manufacturing. Also, private sector investment has increased with twenty six percent more machinery imports and quantum growth in private sector credit. This is affected by low growth in export and major cuts in the PSDP. The latter’s loss in multiplier effect is of particular concern. Construction activity has plateaued, while the cotton crop is expected to not show any growth. Secondly, between May and December, inflation rose sharply as seen in both SPI and CPI. SPI increased by over fourteen percent and CPI by eleven percent. Food items have led the inflation, creating a heavy burden on the poor. Sources of inflation are an increase in GST, the higher power tariff, and loss in the value of the Pak rupee through massive borrowing of almost five hundred billion rupees by December 2013. Thirdly, the review addressed public finance. At two percent of GDP, fiscal deficit has improved by more than a half percentage compared to the previous year. This healthy picture is marred by some concerns: SBP borrowing (printing of money) mostly, has financed the deficit causing inflation and the increase in tax revenues has been modest and below budget. Further, the increase in the contribution of indirect taxes is regressive with its effect on the poor. Also, the release of funds for PSDP projects has been slow. Fourthly, the review revealed that external finance is a grave issue. For the six months, current account deficit has grown by over one and a half billion dollars. A special concern is that the financial account, which is traditionally in surplus, was in deficit by over four hundred million dollars for the six months. FDI and donor capital flows were negative during the period. Overall, the BoP deficit has trebled between December 2012 and 2013. Forex reserves have declined by 2.4 billion USD in the six months under review. The review finds the BoP position to be precarious with forex just equal to three weeks’ import. In the unlikely scenario that all of expected inflows materialize, the reserve cover could equal two months imports at fiscal year-end. IPR projects the forex reserve of between three and a half, and seven billion dollars against the IMF estimate of nine and a half billion.  

The conclusion of the report is that Pakistan is poised on the ‘knife’s edge.’ It could move into a financial crisis even in the presence of a fund progress, given the currently low level of foreign exchange reserves. Alternatively, as visualized by the Finance Minister, reserves could rise rapidly in the remaining months of 2013-14. If this happens, then stabilization would largely have been achieved and the government could push aggressively for economic revival in 2014-15.

In his presidential address, Syed Babar Ali rightly advised that the institute must focus on planning for the future instead of lamenting past short-comings. He said that a road map for implementation should be prepared which includes the winding up of burdensome and unproductive entities. He made a strong plea for civil service reform as the quality of delivery of services has deteriorated over the years.        

We welcome IPR which will hopefully prove to be a valuable addition to Pakistan’s intellectual assets.

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n    The writer is an ex-federal secretary and ambassador, and a freelance political and international relations analyst.