AFTER showing signs of resurgence during 20002007, Pakistan`s macroeconomic instability has increased due to mismanagement and inefficiency, resulting in a crisis of confidence for investors and development partners.

Considering the situation that we are in, it is hoped that Mr Ishaq Dar will now be trying his utmost to quickly bring the economy at the centre stage, and take some effective prudent steps, like injecting financial discipline. And the State Bank of Pakistan could reduce borrowing costs.

As the government is saddled with huge debt, restructuring reforms and deregulation are needed to facilitate entrepreneurs and to attract investment. A lot will also depend on the government`s determination to handle the law and order situation, whichcould give much-needed boost to growth.

The government`s austerity plan also needs to be looked into.

Any attempts to portray spending cuts as a form of austerity, without thoughtful considerations, will be dangerous. The government should think of trying out something out-of-the-box, which could be practically implemented, and would give positive results.

Even though the government has invested billions of rupees in the energy sector in the recent past, the direct cash infusion has not helped in solving the energy pro blem. Power outages increase d from 2010 onwards as utility companies could no longer afford to keep electricity flowing to all consumers.

Poor management practices and inefficient power generation have led to accumulated losses for oil refineries, power generation companies and oil marketing companies. The increase in the petroleum prices and the government`s inability to address the root cau-ses of circular debt caused reduction in the operating efficiency of oil refineries in the country.

Deterioration in the power sector has restricted growth, and constant power outages have slashed GDP by almost two per cent per annum.

On the other hand, interest payments on domestic debt have been increasing by more than 20 per cent every year. This is a cause of concern. It is said to have eaten up half of the tax revenue, making the situation even more serious.

This could further aggravate the fiscal problem, since the fiscal deficit is estimated at over eight per cent of GDP for the financial year 2013.

Fiscal prudence is needed, instead of an orgy of spending. The government should concentrate on cutting down non-value adding expenditures, and reducing the fiscal deficit. Seeking funds from the IMF from time to time will not take the economy out of intensive care.

At the moment, the new gov-ernment does not look fully prepared to adequately address economic challenges, mainly higher food and fuel prices that have become a nightmare for the common man.

Extending virtually grants to keep running huge loss-making public sector giants like PIA, Pakistan Railways and Pakistan Steel Mills is not the recommended solution. The government should focus on revenue earning and reducing operational expenses of these entities through strategic business plans, which should include steps such as HR rationalIsation programmes, and focus on separating core and non-core activities. These steps will make these enterprises into vibrant institutions that are capable of availing new opportunities and absorbing external shocks. Route rationalisation by the PIA and Pakistan Railways as could prove beneficial.

Meanwhile, the prevailing economic outlook has been making companies reluctant to borrowmoney for investment. To progress, the government should focus on market-based reforms to revitalise the economy. Buoyant output, low inflation and the government`s social policies can go onto increase real GDP and international trade, and contribute to a reduction in poverty.

When economic inequality, corruption, corporate oligarchy and economic and environmental depredations heat up, they generate pressure for shortterm palliative measures like subsidies, loan waivers, under-pricing of energy and water etc. And this is bound to rise, at the expense of longterm investments in infrastructure, education and public health.

Economic discipline is necessary, but at times it can be relaxed to help stimulate economic growth, if the situation so demands.

Key words that can make Nawaz Sharif`s government successful are: enforcement of good governance, removal of injustice from the society, and economic growth.