Report of the Panel of Economists: Interim Report on Economic Stabilisation with a Human Face (Book Reviews)

In September 2008, as the newly elected government struggled to restore macroeconomic stability, the Planning Commission of Pakistan constituted an advisory Panel of eminent economists to “come up with both short and medium term policy actions to address the economic challenges facing Pakistan, especially in the context of the global economic downturn”.1 The Panel was further advised by the Prime Minister to “suggest a short-term policy package to restore macro-economic stability which is efficient and equitable”2.

The Panel had less than six weeks to come up with its initial recommendations. The government was at the same time in deep negotiations with the IMF for a rescue package as the balance of payments situation became more precarious by

The Interim Report of the Panel was to serve a two-fold purpose. First, to be drawn upon as required by the economic team headed by the Minister of Finance in their negotiations with the IMF. Second, to the extent the Panel supported the need for stabilisation measures, it would strengthen the government’s hand in building-up public support for stabilisation measures to be adopted.

The Panel came up with its Interim Report in end-October 2008 and proposed adoption of, “stabilisation measures that preserve economic growth to the possible extent and specific steps that would protect the poor and vulnerable groups”. The Report was presented and discussed in a full extended Cabinet meeting presided over by the Prime Minister. At the same Cabinet meeting, the Finance Minister presented the main elements of the proposed IMF Stand-By Agreement. Both the Panel’s Interim Report and the draft IMF Agreement were adopted by the Cabinet. The latter was formally signed in November 2010 after approval by the IMF Board of Directors.

The Interim Report of the Panel in this context must be viewed as an important indeed ‘historical’ report. For the first time the country’s leading economic experts, in an independent advisory role, had put together a ‘home-grown’ stabilisation package which was given serious consideration by the government and deliberated at the highest echelons i.e. by the Cabinet.3

[1]ibid Preface, p. (iii).

[2]”The Panel was set-up by Mr Salman Faruqui, Deputy Chairman Planning Commission and included as members: Dr Hafiz A. Pasha, (Chairman), Dr Rashid Amjad (Convener), Dr Naved Hamid, Dr Aisha Ghaus Pasha, Dr Akmal Hussain, Dr Akhtar Hassan Khan, Dr Ijaz Nabi, Dr Naseer Ali Khan, Mr Riaz Riazuddin, Dr Rehana Siddiqui, Dr Ali Cheema, Dr Asad Sayeed, Prof. Muhammad Tousif Akhter, Mr Sakib Sherani and Dr Qazi Masood Ahmed. The following were co-opted as members: Dr Azam Chaudhry, Dr Ather Maqsood, Syed Kalim Hyder Bukhari, Mr Muhammad Sabir and Mr Savail Hussain.

[3]The Panel also separately presented its report to the President of Pakistan before the Cabinet meeting.

The Panel’s Interim Report was divided into two parts. Part I presented a short term stabilisation programme covering the next one and half years between 2008-10. Part II, dealing with growth recovery and development priorities, presented the main elements of a medium-term development strategy. Since the final report of the Panel (submitted much later) dealt in detail with the proposed development strategy, in this review we basically analyse Part I of the report i.e. the short-term stabilisation package covering: (i) macro framework; (ii) main policy measures proposed; (iii) expected economic impact on key macro economic variables.4 We then also conduct a brief ex-post evaluation based on actual economic outcomes.

It should be said up front that the Panel saw the stabilisation programme as one which would basically be V-shaped in its economic impact. “The guiding principle is a short sharp reduction in growth in the short-term and a quick rebound back to a higher trend growth rate”.5 This scenario as it turned out proved to be more than optimistic though, in all fairness as 2009-10 drew to an end, there were signs of economic optimism as the economy responded favourably to the stabilisation measures adopted.