Rashid A Mughal
PAKISTAN economy has been facing a number of challenges and the one on top is the whole sale corruption since last one decade which has literally landed the state in dire straits.. The rulers not only destroyed the institutions by nepotism, favouritism, ignoring merit and blindly cherry-picking cronies and strangulating the deserving. Unwise and imprudent decisions based more on kick-backs and less on viability threw the country in black hole of debts. The result is before us now. The new Government found itself in a precarious situation because of the mounting debts and financial and fiscal disorder. Though all efforts are being made to turn the tide but it looks a Herculean task to clear the Aegean stables.
According to World Bank’s recent report the Pakistan economy continued to struggle due to debt problems, fiscal and budget deficits, un-employment, escalating poverty, rising rich-poor gap, corruption at its peak and bad governance being order of the day. According to the report, Pakistan is the lowest spending country in the region on extremely important sectors of Health and Education. Pakistan missed the Millennium Development Goals targets on health and education in 2015 and economy continued to under-perform when compared to other countries in the region, the April 2019. WB paper added. Though there has been some improvement in the security environment but there has been little change in the power crisis. Pakistan still lags behind other South Asian countries in the all important health and education sectors. Large exogenous shocks such as skyrocketing oil and food prices and massive devaluation of the Pakistani Rupee VS the Dollar buffeted the economy of Pakistan. These shocks, combined with policy inaction during the political transition to a new government in August 2018, sent the economy reeling.
The government that took charge in August 2018 inherited four major challenges that included slowing economic growth, rising inflation (particularly food inflation), a growing fiscal deficit and the widening of trade and current account deficits. Amongst these, fiscal, trade and current account deficits were largely the outcomes of external shocks of extraordinary proportions accompanied by policy inaction and unprecedented corruption by the two political governments during most of the last ten years. Consequently, the economic performance came under threat. The last five years have seen economic growth slowing to an average of three per cent per annum as compared to the almost seven per cent per annum during the five years from 2000 to 2005, industrial growth stagnating at near zero per cent as against the 12.4 per cent per annum in the same period and agriculture growth at 2.2. per cent per annum – close to the country’s population growth – as compared to the 4.7 per cent per annum during the years from 2000 to 2005..
Most disturbing was the fact that the investment rate continued to decelerate over the last five years and declined to a 50-year low which stood as high as 22.5 per cent in 2000-06. Investment is a key determinant of economic growth. Decline in investment to such a low level is a bad omen for the country’s growth prospects in the medium-term. It is well known that approximately 2.5-3 million people are entering the job market every year and to provide them gainful employment, the economy must grow by seven to eight per cent per annum. Fiscal indiscipline has been the hallmark of the outgoing regime. Never in the history of this country has the nation seen such a fiscally irresponsible government. The fiscal deficit averaged almost seven per cent of GDP over the last five years but later reached as high as 8.5 per cent. The persistence of a large fiscal deficit over the last five years along with sharp depreciation of exchange rate has more than doubled the country’s public debt. The stock of public debt which stood at Rs. 4.8 trillion in June, 2007 and reached over Rs.13 trillion by December, 2012 – an addition of over Rs. 8 trillion in five years is now well over Rs.23 trillion A child was born with Rs. 30,000 debt ten years ago but newborns now inherit debt of Rs. 120,000.
This is the state of economy the new government has inherited a slowing economy, investment plummeting to the lowest in 50 years, rising unemployment and poverty, inflation hurting the poor and fixed income groups due to massive increase in the prices of daily use and large fiscal deficit and unsustainable public debt. It is also confronted with foreign investment drying up “foreign exchange reserves plummeting rapidly to a dangerously low level, looming debt repayment crisis, bleeding PSEs, persisting energy crisis, crumbling infrastructure and a nervous private sector. A financially starved education sector, dwindling state authority and most importantly a crippled state, which has been governed badly in the past due to nepotism and favouritism, will further compound its woes. The present government has, however, claimed success in its efforts to stabilize the economy and has said that the primary balance in the fiscal accounts, which excludes debt service payments from expenditure, are in surplus along with current account. According to Economic Minister of the present government, Pakistan recorded lowest fiscal account deficit in 13 years and current account is in surplus after four years, portfolio investment has returned to the country after three years and the stock market is bullish.
The new elected government, therefore, face a daunting task to meet the above challenges. It will have to take some bitter decisions to pull the country out of this quagmire. It may be difficult but it is not impossible. Some sacrifices at the economic front will have to be taken for the future betterment of the country and its people. So far the policies and measures of the new government have yielded positive results. Though the inflation and Rupee devaluation is hurting the common man but this is where government action is needed to control prices by strict and regular monitoring system to provide relief to the masses. So far the track record of present government leaves much to be desired but at least they have the will to set the things right.
— The writer is former DG (Emigration) and consultant ILO, IOM.
