New Reforms Help Mend Pakistan's Economic Troubles

Article excerpt

MOEEN QURESHI got a rare opportunity to practice what he had long preached - sound developmental economics.

The nearly 30-year veteran of the International Monetary Fund (IMF) and World Bank was appointed prime minister of Pakistan on July 18. He quickly instituted a major package of reforms that has slowly helped the troubled nation emerge from an economic crisis.

Mr. Qureshi recently returned to Washington, after handing over power to Benazir Bhutto, a former prime minister just reelected to office.

Early last summer a political battle between the country's president and prime minister gave birth to political uncertainty and unstable economic conditions.

Foreign-exchange reserves fell, share prices on the stock market dropped, government borrowing increased, and business confidence declined. The trouble only intensified concerns about Pakistan's inability to repay $500 million in loans that became due in September. The political crisis ended in an Army-backed deal that forced both President Ghulam Ishaq Khan and Prime Minister Nawaz Sharif to resign and call for new elections.

Qureshi was chosen to be interim prime minister in part because of his political neutrality, but primarily because it was hoped that his economic expertise, acquired during his years as an international civil servant advising developing countries on appropriate economic measures, might help turn around Pakistan's economy.

Soon after taking office, Qureshi took radical measures to improve Pakistan's economy: He implemented reforms to make the central bank autonomous from political interference; started a campaign to recover unpaid electricity, gas, and telephone bills, amounting to more than 16 billion rupees (US$534 million); and introduced new laws to recover up to 80 billion rupees (US$2.66 billion) in defaulted loans. Revenue laws also were changed to make politically powerful, rich feudal landowners pay income and wealth taxes, ending their previous immunity from such taxes. This helped recover the foreign-exchange reserves at a crucial time for an economy in need of loan repayments. …