# *Detailed SUMMARY of the Article "Economic Dilemma," by Rashid Amjad, Dawn, February 2nd, 2025*: The article critically examines Pakistan's economic stability and the dilemma faced by the finance minister in balancing stability and growth. While the government claims to have achieved economic stability, critics question its reliance on high-interest commercial loans to build foreign reserves. The urgency to restart growth is underscored by rising poverty, a struggling middle class, and increasing joblessness among youth. The government's ambitious "Uraan Pakistan" initiative aims for rapid economic transformation, but without external support, its feasibility is uncertain. The finance minister is taking precautionary measures, including accumulating reserves and planning to raise the tax-to-GDP ratio to 13.5%, though achieving this in a stagnant economy is challenging. The IMF plays a crucial role in determining when Pakistan can shift from stabilization to growth. A historical reference to 2021-22 shows how rapid growth led to a depletion of reserves due to unchecked imports. The current government hopes that declining inflation and lower interest rates will revive private-sector-led growth, but this has yet to materialize. Challenges such as sluggish manufacturing, potential wheat shortages, and continued subsidies hinder structural reforms. The article emphasizes that while the government focuses on short-term fixes, deeper structural issues remain unaddressed, making sustainable growth a distant goal. # *Easy/Short SUMMARY*: The article discusses Pakistan’s economic challenges, questioning whether the government's claim of stability is genuine. Critics highlight the reliance on high-interest loans to build reserves. Rising poverty, a struggling middle class, and youth unemployment demand urgent growth, but the finance minister is cautious. The government's "Uraan Pakistan" vision for rapid economic progress lacks strong backing. Tax reforms are planned, but raising revenue in a weak economy is difficult. The IMF’s approval is crucial before growth policies can be implemented. Previous rapid growth in 2021-22 led to economic setbacks, highlighting the risks of premature expansion. Current efforts to revive growth through lower interest rates have not yet succeeded, and fundamental economic reforms remain unaddressed. # *SOLUTIONS of The Problem*: ## **Balanced Economic Growth Strategy** The government should adopt a balanced approach, ensuring economic growth without destabilizing foreign reserves or increasing reliance on high-interest loans. ## **Structural Reforms in Taxation** Instead of burdening already taxed sectors, broadening the tax base by including untaxed and under-taxed segments can help achieve a higher tax-to-GDP ratio. ## **Encouraging Sustainable Industrial Growth** Subsidies should be restructured to benefit industries that promote long-term economic sustainability rather than short-term gains. ## **Reducing Dependence on External Borrowing** Policies should focus on generating domestic revenues through increased exports, investment-friendly reforms, and reducing unnecessary imports. ## **Strengthening the Agricultural Sector** Investment in agriculture, improved irrigation systems, and minimizing reliance on weather conditions can prevent food shortages like the predicted wheat crisis. ## **Enhancing Business Confidence** Providing policy consistency, reducing bureaucratic hurdles, and fostering a business-friendly environment will encourage private-sector investment. ## **Targeted Social Programs** Introducing welfare programs focused on poverty reduction and job creation can help mitigate the impact of economic stagnation on vulnerable populations. ## **Reforming the Energy Sector** Eliminating inefficiencies in energy distribution and reducing losses can lower costs for businesses, stimulating industrial growth. ## **Foreign Investment Facilitation** Creating clear policies, reducing red tape, and ensuring political stability can attract foreign investors, leading to sustainable economic growth. ## **IMF Negotiation Strategy** The government should negotiate flexible IMF conditions that allow for gradual growth measures rather than strict stabilization policies that suppress economic momentum. # *IMPORTANT Facts and Figures Given in the Article*: - Pakistan’s finance minister is hesitant to restart growth until economic stability is fully ensured. - The government plans to increase the tax-to-GDP ratio from 9% to 13.5%, but achieving this in a stagnant economy is difficult. - Past economic mismanagement in 2021-22 led to rapid growth, a sharp fall in reserves, and economic instability. - The government hopes inflation reduction and interest rate cuts will encourage private-sector-led growth, but this has not materialized yet. - Key economic challenges include a sluggish industrial sector, potential wheat shortages, and continued reliance on external loans. # *MCQs from the Article*: ### 1. *What economic concern do critics raise about Pakistan's stability claims?* A. Over-reliance on domestic investments B. Low levels of foreign exchange reserves *C. Dependence on high-interest commercial loans* D. A rapidly growing industrial sector ### 2. *Why does the finance minister hesitate to revive growth immediately?* A. Fear of losing IMF support B. To avoid an economic downturn *C. To ensure long-term stability before growth* D. Due to a lack of government interest ### 3. *What is the government's target tax-to-GDP ratio?* A. 9% B. 11% C. 12.5% *D. 13.5%* ### 4. *What is a major obstacle to economic growth, according to the article?* A. An increase in remittances *B. Structural economic weaknesses and lack of reform* C. Rapid industrial expansion D. The absence of a youth workforce ### 5. *What was a key issue in Pakistan’s 2021-22 economic revival attempt?* A. Lack of foreign investment B. Increase in government subsidies *C. Rapid economic growth led to foreign reserve depletion* D. A sudden decline in remittances # *VOCABULARY*: 1. **Dilemma** (noun) (دُو دِلّی): A difficult situation or choice between unfavorable options. 2. **Stability** (noun) (استحکام): The state of being steady and unchanging. 3. **Reignite** (verb) (دوبارہ شروع کرنا): To restart or revive something. 4. **Precautionary** (adjective) (احتیاطی): Taken in advance to prevent harm or danger. 5. **Tutored** (verb) (رہنمائی کرنا): Guided or instructed by an expert. 6. **Momentum** (noun) (رفتار): The force or speed of progress. 7. **Stagnant** (adjective) (ٹھہرا ہوا): Showing little or no activity or progress. 8. **Clamour** (verb) (شور مچانا): To demand something loudly. 9. **Bolster** (verb) (مضبوط کرنا): To strengthen or support. 10. **Surplus** (noun) (زائد): More than what is needed or used. 11. **Subsidized** (adjective) (سبسڈی والا): Supported financially by the government. 12. **Tutelage** (noun) (سرپرستی): Instruction or guidance provided by someone knowledgeable. 13. **Sustainability** (noun) (پائیداری): The ability to be maintained over time. 14. **Depletion** (noun) (کمی): The reduction of something valuable, such as resources. 15. **Bureaucratic Hurdles** (noun) (دفتری رکاوٹیں): Complicated administrative procedures that slow progress. 📢 *Attention Please!* We appreciate your commitment to acquiring knowledge through our summaries. 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This firm stand, however, was questioned by some critics who asked why he was further building reserves based on high-interest commercial loans. Is this a sign that the economic stability the government claims it has achieved in a short period is simply a mirage? There is a large element of truth in this. Governments previously have been quick to announce that the economy has stabilised and then fallen on their faces when hit by an internal or external shock. But this debate raises two questions. First, when can one really claim that the economy has stabilised enough to reignite growth? Second, how long can the finance minister wait to restart growth, despite his current stance? Let us address the second question first. Not long. A political government that has come to power on shaky grounds must show results, especially given the sharp rise in poverty post-Covid-19, an angry middle class whose numbers are fast dwindling, and a youth bulge facing joblessness. Then there are rosy promises being made by the government every day, the most recent of which is Uraan Pakistan with its ambitious target of rapidly raising per capita income and converting Pakistan into an economic power in the next 10 years. With no tail wind, can Uraan Pakistan take off? So, how long must the finance minister resist the temptation to rekindle growth? He must be aware of the growing pressure and is taking all precautionary steps by building up foreign exchange reserves so that, if push comes to shove, he has enough to at least gradually press on the accelerator. We have not even begun to introduce structural changes. But before he can even contemplate this step, he must raise revenues. At Davos, he claimed he would raise the tax-to-GDP ratio from just over nine per cent to near 13.5pc over the next year or two (without precisely defining when). If having FBR officials drive about in new cars (and luckily not fly in helicopters) can achieve this, it would indeed be worth the cost. But he must also be aware that raising the tax-to-GDP ratio in a stagnant economy reeling from a very high bout of inflation is far more difficult than in a growing economy. Turning to the first question: when will we know the economy has stabilised enough to move towards reviving growth? Briefly, when the IMF allows us to do so. Lest we forget, we are under a three-year IMF programme that was signed just four months ago. The long answer is more complex. Let us examine the last time we tried to revive the economy in 2021-22 after Covid-19 left the economy at a standstill. The premise was that we had reserves of near $20 billion and the target growth rate set in the budget was modest at 4.5pc. But then the heavens opened. The economy grew that year by over 6pc and foreign exchange reserves fell to half. The then experienced finance secretary, Waqar Masood, warned against this rapid rise in imports (mainly of raw materials), but the State Bank, which should have known better, after drastically reducing interest rates, maintained a deafening silence. The change in government did not help. The rest, as they say, is history. What the current government hopes is to learn from this experience under IMF tutelage. It believes its newfound stability and the sharp decline in inflation, which has allowed the huge fall in interest rates, will bolster business confidence and trigger a private sector-led growth revival on the back of much-awaited foreign investment. This has not happened so far. Large-scale ma­­nufacturing remains in the doldrums, the weather gods have des­erted us and we may face a wheat shortage crisis. The business sec­­-tor as always, never satisfied, clamours for further rapid reduction in interest rates. But the real dilemma the economy faces is more fundamental. The process of bringing about basic structural changes in the economy has not even begun. So far, we have been only scratching the surface. On raising revenues, all we have done is to increase taxes on the already taxed. Industry still enjoys subsidised inputs. Losses in energy distribution continue. Our current account surplus is being driven by remittances with imports shooting up. And our traditional lenders (China, Saudi Arabia) are reluctant to lend more. In the meantime, let the finance minister build up foreign exchange reserves in case he is forced to push down on the growth accelerator. For the economy to turn around on its own momentum on a sustainable growth path could be a very long wait! The writer is a professor of economics at the Lahore School of Economics and former vice-chancellor of the Pakistan Institute of Development Economics. Published in Dawn, February 2nd, 2025