Is Pakistani Economy Adrift?

Pakistani economy adrift with nobody in full charge: Burki

* Economist says policy makers have no serious priorities, common man sees no sign of relief
* Says period of high growth in Pakistan is over
* Says government should not be held responsible for current wheat shortage Warns government against subsidizing energy

WASHINGTON: No one is in full charge of Pakistan’s economy, while the political elite is preoccupied with the judges’ issue and power-sharing arrangements, according to Pakistani economist and financial planner Shahid Javed Burki. Burki, a former World Bank vice president and finance minister in the Moeen Qureshi caretaker government, told a meeting at the Woodrow Wilson Centre, at which he is a senior scholar, that there is a “disconnect” between the poor, whose prime concern is their next meal, and the elite. The establishment and the citizen are not on the same page, which is making the common man increasingly angry as he sees no sign of any serious attention being paid to his precarious situation. Burki said if the present situation continues, there would be social and political turmoil. He said he found during several months of stay in Pakistan that the policymakers have no serious priorities. Burki said looking back over the last 60 years, Pakistan has not done badly economy-wise, having maintained an annual growth average of 4 percent. The country’s economy has grown 18 times since independence. There has also been a significant decline in poverty, which was 65 percent in 1947 but which has fallen to 33 percent today. Only 20 percent of Pakistan’s income is derived from agriculture, while 53 percent comes from the service sector.

Period of high growth is over:

The worrying aspect of Pakistan’s economy is that it is dependent on external capital, not domestic resources. Neither has Pakistan invested in the development of its vast human resources. Investing in education should be the top priority from now on, Burki stressed. He also warned that the period of high growth for Pakistan is over. Poverty is going to increase and income disparities are set to worsen. Pakistan is also burdened with a huge fiscal deficit, which stands at 7.5 percent to 9 percent of GDP, with trade and balance of payments representing a good part of it. Pakistan, he explained, can only tolerate a deficit of 4.5 percent to 5 percent. He advised the government to cut down public spending but without slowing growth. He pointed out that the Musharraf government had failed to enhance even by one kilowatt Pakistan’s power-generating capacity, which was why the country had been hit today by such severe shortages. He said the rich are protected against power shortages as they have their own generators but the vast majority is in dire straits and it is angry and restless.

Wheat shortage:

Burki said that the government should not be held responsible for the current wheat shortage. He pointed out that the terms of trade worldwide are in favour of agriculture and Pakistan’s policymakers must take advantage of that because Pakistan has a lot of potential, given the right set of public policies. He regretted that Pakistani policymakers know very little about the global economy and as a result, the country is not well integrated into the global economic system. Burki said it is absolutely necessary to have a high rate of savings and investment, while the market should be allowed to determine the allocation of resources, but the private sector should not be “hand-held”, as in the past.

Energy subsidies:

He also warned against providing energy subsidies, nor should the government become the employer of last resort. There should be no open-ended protection to the textile industry and no price controls to cut inflation. Public servants must not be underpaid. Punjab, he predicted, could become the “engine of growth” for the rest of the country, but it must reduce the burden it places on the federal government.

Shaukat Aziz:

He described former prime minister Shaukat Aziz’s economic policies as “misguided” and a result of his failure to understand the strategy of economic planning. He said what Aziz had given Pakistan what could only be described as “casino economics”.

Source: Daily Times