Top US Economist Arthur B Laffer counseled Pakistan to refrain from following the International Monetary Fund (IMF) and the World Bank (WB) when it comes to economic growth. Laffer made the remarks during a keynote address on Pakistan Prosperity Forum 2021 organized by PRIME in Islamabad.
Laffer said that there are six ways through which the government of Pakistan can bring economic prosperity to the country. He listed the introduction of low rates with a broad-based taxation system, strong currency, rationalizing government spending, minimizing regulatory requirements, ensuring free trade, and going ahead with privatization to get rid of running state-owned enterprises by doling out national exchequer.
In an interesting turn of events, Arthur B Laffer provided suggestions that strongly oppose the IMF. It must be noted that Pakistan’s advisor to the PM on finance, Shaukat Tarin had said that the country is required to satisfy five conditions set by the IMF in order to revive the $6 billion loan program.
Pakistan needs to increase electricity tariffs and remove tax exemptions as part of the conditions placed by the IMF. Furthermore, the lender has demanded Pakistan increase the monetary policy and adjust the interest rate. Such actions can lead to further devaluation of the rupee.
Laffer on the other hand said that the devaluation of the Pakistani rupee on the advice of multilateral donors leads to increasing inflationary pressures, so the currency should be pegged with the dollar.
A stable currency would lead to predictability in the economic outlook of the country. Secondly, he added that there was a need for free trade as tariff distortions would always create stumbling blocks to promote trade. He said that free trade ensures a win-win situation for all stakeholders. He noted that the low rates and the broadening tax base can help the country to witness economic growth at a faster pace.
Laffer also emphasized the importance of incentivizing people. According to Laffer the government regulations and taxes are hurdles in the path of incentives.
Laffer said, “Don’t let the IMF/WB dictate you because you are not a slave to them”.
