Challenges lie ahead
by
Javed Hafiz |
The latest central bank quarterly report on Pakistani economy points to a number of challenges. For example, inflation rate in the coming year will be around 15.5 per cent while economic growth will be between two to three per cent. This means that more Pakistanis will be pushed below the poverty line this year. Due to increasing global energy prices, food inflation will be further increase. That means more Pakistanis will be afflicted by food insecurity. The Asian Development Bank said recently that while there was sufficient food in Pakistan, its poorer segments did not have money to buy it. Since the rate of economic growth and population growth are roughly the same, there would be no improvement in the per capita income. Slow rate of growth also means more unemployment. When you cannot offer people jobs and adequate wages, they will agitate. We have seen that in Faislabad where the textile industry has been hit by power outages and recent doctors’ strike in Punjab against low salaries.
Pakistani economy has a fairly sound basis. With five times the population since 1947, Pakistan today is self sufficient in wheat and exports rice. Now that is no mean achievement. I went to my village last month and prosperity was quite visible there. I have never seen this much number of cars plying on the rural roads before. This is because the food and cash crops bring much higher returns today than they did ever before. The land owners and farmers are both happy. There is lot of conspicuous consumption in the urban areas. More luxurious houses are being constructed in cities all over Pakistan. Billions of rupees are spent on generators to ensure that the affluent are least affected by load shedding. Each well off family has three to four vehicles. In upper class restaurants, it is difficult to get reservation on weekends.
But is this a happy situation? Not at all. Any healthy economy and society must cater to the needs of its poor who provide the vital labour to its economic engine. It should also broaden its middle class which provides specialised skills, pushes the economy up through consumption and investments and provides the vital social and economic leadership. In the current economic scenario, both middle and poor classes are bound to suffer. The macro economic indicators are not depressing at all. Foreign exchange reserves are at a record high. Exports for this quarter are higher by 20 per cent compared with the same period last year while imports have increased by 12 per cent. Remittances from overseas Pakistanis this year are again at a record high. All this combined has reduced external pressures, to an extent. But what solace do high foreign exchange reserves bring to the common folks who find it difficult to make both ends meet?
Poverty dents the moral fibre of a society and also breeds extremism. Developing countries have seen more extremism that the developed ones, though the later are not totally immune to this phenomenon. The world has developed and successfully tested poverty reduction measures. Micro-financing has worked in many countries in pulling the poor out of deprivation. Similarly, training of poor boys and girls in polytechnics, at government expense, gives them new skills which ensure their entry into the labour market. There is an old saying in Bengali: You can give a hungry man a few takkas to buy fish and eat it but you can also buy him a fishing rod with the same money. In the second instance, he will not come to you begging again. In Pakistan, we are squandering 32 billion rupees yearly to give alms to the poor under Benazir Income Support Programme. The rulers are encouraging the poor to hold begging bowls as it ensures their vote bank. But all this is being done with the tax payer’s money.
So what is the way out and way forward on the economic front. Fiscal measures can be used to extract more taxes from the rich and spending them on the vulnerable segments of society. Agricultural income should be taxed when it crosses a certain amount. Similarly property and services should be taxed more. Documentation of the economy is essential to bring more businesses into the tax net. Additional revenues earned should not be given to the poor as doles, to ensure certain voting patterns, but spent to empower them through business loans or new skills. If an unemployed person is enabled to buy a cow or a rickshaw, he or she can repay the loan in a year and be self-sufficient in coming years. If he could be trained to become say a good electrician or plumber, he would not come to you begging for food. This will make him a useful member of society and enhance his self esteem.
I reckon the present bleak economic scenario will continue for a couple of years. What would happen then? The Afghan situation may improve after withdrawal of foreign troops. This would improve Pakistani security situation and foreign direct investment will return to Pakistan. And hopefully in two years time, we shall get better economy managers. |
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