Pakistan’s cost-cutting: a band-aid solution to deep economic issues

Prime Minister Shehbaz Sharif’s recent cost-cutting measures have been hailed as a positive signal during these times of financial crisis and may help the coalition government improve its standing with the public and move closer to a deal with the IMF. However, it is unlikely that these measures will address the structural issues that force the country to repeatedly seek IMF assistance. These “band-aid” measures are unlikely to address fiscal problems or the collapsing energy sector, and at best will only cover weaknesses in expenditure management for a few months.

While the government must cut its expenditures, including those related to the excessive luxuries enjoyed by ministers and advisers, it would be foolish to expect such measures to solve the underlying problems that lead to frequent boom-and-bust cycles. Instead, experts suggest the government should focus on extensive tax and tariff reforms, privatization of state-owned enterprises, fixing the power sector, and incentivizing non-debt creating foreign investment. These are long-term measures that require the government to address the real problems facing the economy, rather than relying on cosmetic actions that are unlikely to have a lasting impact.

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Monitoring Desk
Monitoring Desk
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