Prominent UK scholar suggests declining influence and credibility of Pakistan's elite

The scholar emphasizes that the elite must undergo transformation to establish shared foundations because there is no immediate solution.

In Islamabad, Stefan Dercon, a visiting professor of Economic Policy at Oxford University in the UK, has pointed out that even Pakistan’s elite is experiencing a decline in influence and credibility. He stressed that for the economy to thrive and reduce reliance on foreign dollar inflows, the elite must undergo a transformation.

Dercon stated, “The elite will need to adapt and find common ground, as there is no quick solution. This can be achieved through political negotiations involving the military, politicians, bureaucrats, intellectuals, and journalists. There are no shortcuts.” Dercon, a former economic adviser to the Department for International Development (DfID), made these remarks during a conference organized by the World Bank (WB) in collaboration with the Pakistan Institute of Development Economics (PIDE) on a Saturday.

He noted that Pakistan’s elite’s focus on maintaining the status quo only serves to maintain stability, but there are voices advocating that this approach will not yield any solutions. He characterized the status quo as essentially a zero-sum game.

Dercon illustrated his point with a cricket match analogy where selectors were choosing players for the team, but the game was not producing the desired outcomes. He emphasized that neither the IMF’s next bailout package nor aid from other bilateral donors would provide a solution. Pakistan’s economy was facing significant challenges, and there were no saviors on the horizon. “The solution lies in establishing common ground,” he emphasized.

Dercon also highlighted that Bangladesh had successfully navigated difficult situations by proactively seeking assistance from the IMF before a crisis erupted. He concluded by saying that now is the time for Pakistan’s economy to break free from constraints and thrive like other major economies.

In response to a question, he mentioned that the catalysts for change would ultimately determine the nature of change, but he couldn’t predict whether it would resemble the Arab Spring or if the elites would opt for a smoother transition in Pakistan. Mathew Verghis, the Regional Director for South Asia Equitable Growth, Finance, and Institutions at the World Bank, indicated that Pakistan’s current economic model was unsustainable, marked by growing macroeconomic imbalances and a continued reliance on external partners. This trend has led to declining living standards, lagging behind peer countries. Additionally, Pakistan faced a significant new threat in the form of climate change.

Verghis noted that Pakistan had the potential for much higher growth, as other countries had experienced sustained periods of rapid economic growth, often following moments of crisis. Although growth models varied, certain fundamental elements were essential.

He emphasized that Pakistan needed to make substantial policy shifts, fully engage with the global economy, maintain macroeconomic stability, increase savings and investment, allow market forces to allocate resources, and establish a government that was committed, credible, and capable.

Verghis highlighted that political instability and uncertainty were the primary obstacles to investment, leading to weak governance performance indicators. Therefore, a broad-based political commitment was necessary to implement challenging reforms.

Nauman Ishtiaq, a former consultant to the Ministry of Finance, stressed the urgent need to prioritize public investment expenditures effectively to ensure the quality of each penny spent by the national treasury. He proposed reforms to the Public Sector Development Programme (PSDP) and the elimination of parliamentary schemes that funded minor projects.

During the discussion on the power sector, experts unanimously agreed that improving governance was imperative, as the power sector had incurred losses of Rs11 to 14 trillion over the past decade.

Tahir Basharat Cheema emphasized that electricity was a public good, and it was the government’s responsibility to provide it to everyone at affordable rates.