Political stability essential for smooth economy, high growth: DFPA

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ISLAMABAD
The Disposable Food Packaging Association (DFPA) has said that political stability is essential for smooth economy and high growth, as the newly-elected government that comes into office after general elections would be faced not by only stagflation, and a very difficult debt situation, but will have to make a lot of climate-related expenditure so that the country can meaningfully move towards becoming a climate- change-resilient economy.
The DFPA President Ahsan Shahid said that business community is anxious to improve the economic situation in dialogues with the new government because the central thing in dealing with all of these issues is that the economy grows at a meaningfully high rate, and that such growth is inclusive, and green.
Ahsan Shahid said that the outlook of global economic risks is also quite challenging, as pointed out by the recently released ‘Global risks report 2024’ by World Economic Forum, which pointed out in this regard as we enter 2024, results of the Forum’s Global Risks Perception Survey 2023-2024 highlight a predominantly negative outlook for the world over the short term that is expected to worsen over the long term. Surveyed in Sept last, the majority of respondents anticipate some instability and a moderate risk of global catastrophes, while another 27 percent expect greater turbulence and 3 percent expect global catastrophic risks to materialize in the short term. Only 16 percent expect a stable or calm outlook in the next two years. The outlook is markedly more negative over the 10-year timeframe, with 63 percent of respondents expecting a stormy or turbulent outlook and less than 10 percent expecting a calm or stable situation.
For one, the climate change crisis is getting worse, while the climate finance needed to deal with it is yet to be made available.
The DFPA President said that over-board monetary austerity policies in general have deepened the debt distress of developing countries including Pakistan. The new government will need to revisit this policy with the International Monetary Fund, given a significant influence of supply-side factors in determining inflation in the country, and overboard aggregate demand squeeze policies are not only exacerbating the debt crisis.
but also adding to cost-push inflation, in addition to causing unnecessary and significant sacrifice of economic growth for achieving at most some temporary relief from high inflation.
The incoming government after the elections will also have to initiate deep economic reforms, which are non-neoliberal, and counter-cyclical in nature. This is important for both reining-in unnecessarily overboard austerity policy, and also enhancing productivity in the economy, with both likely resulting in boosting economic growth.
In this regard, the government should highlight to the IMF– especially as it moves towards a likely another program with the IMF in April reportedly– their own research, which calls for adopting counter-cyclical reforms, as indicated in April 2023 World Economic Outlook as follows: adequately timed (for example, during economic expansions) and appropriately designed (for example, more expenditure- than revenue-based in advanced economies) fiscal consolidations have a high probability of durably reducing debt ratios. The debt-reducing effects of fiscal adjustments are reinforced when accompanied by growth-enhancing structural reforms and strong institutional frameworks. At the same time, because these conditions and accompanying policies may not always be present, and partly because fiscal consolidation tends to slow GDP growth, consolidations on average have negligible effects on debt ratios.