Energy, exports growth a must for economic revival

The Nation, Pakistan, March 27, 2014
The speakers at a seminar have called for prudent macroeconomic management, practical and solid steps to overcome energy crisis and enhancement in exports for the revival of economy in Pakistan.

They were addressing the Tenth Annual Conference on Management of the Pakistan Economy at organized by the Lahore School of Economics and attended by the distinguished economists, academicians and policymakers from both the national and international platform. The theme of the Conference was “Pakistan in the Global Economy – Opportunities and Challenges”. The first day of the Conference witnessed an interesting discussion on some key macroeconomic issues.

Dr Shahid Amjad Chaudhry, Rector, Lahore School of Economics, inaugurated the Conference by welcoming all the speakers and guests.

Addressing the conference, Dr Rashid Amjad, Director, Graduate Institute of Development Economics, Lahore School of Economics, asserted that in the short run, the binding constraints on economic growth in Pakistan are the external shocks and the poor macroeconomic management to deal with it. However, in the medium run, the lack of exports and Pakistan’s inability to take advantage of globalization is the key reason for poor economic growth.

The first session of the Conference sparked off the discussion on macroeconomic management under constrained balance of payments and an open capital account, with Mohsin Khan from the Rafik Hariri Center for the Middle East, Atlantic Council, Washington, DC examining the design and operation developments that have been incorporated into Pakistan’s monetary policy framework. He argued that the State Bank of Pakistan has often found itself facing the classic dilemma of operating an independent monetary policy in the context of an open capital account, an exchange rate target, and an economic growth objective.

Therefore, adopting an inflation targeting regime would be a more appropriate way to conduct monetary policy. The second session of the Conference shifted the focus to the the exchange rate as a policy instrument with Dr Shakil Faruqi, Professor, Lahore School of Economics presenting a long term comparative view of the foreign liquidity crisis and the economy of Pakistan. Dr Faruqi asserted that breaking the ‘begging’ bowl would require structural transformation which Pakistan embarked upon rather half heartedly two decades ago, but never pursued it through its fruition as other countries did.

Dr Syed Kumail Rizvi carried on the discussion further by analyzing the exchange rate dilemma confronted by the State Bank of Pakistan. Another stance on the exchange rate issues of Pakistan was taken by Mr Sikander Rahim, Former Economist, World Bank, who argued that devaluation of the exchange rate has disadvantages that outweigh any supposed advantages, notably its effects on inflation, income distribution, service on foreign debt and incentives.

The next session was devoted to discussions on Pakistan and the world trading order, with Mr Rashid S. Kaukab, Director, CUTS International Geneva, Switzerland presenting a comprehensive overview of Regional Trade Agreements (RTAs) and Preferential Trade Agreements(PTAs) around the world. In a similar vein, Dr. Manzoor Ahmad, Regional Trade Advisor, USAID Pakistan Trade Project, stressed that Pakistan needs to fully embrace trade with India and Central Asia by opening up more routes and acceding to the TIR convention.

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