Nationwide Updates

► Competitiveness and market economy

It is not an attempt to explain the issue in any depth, but it will perhaps be worth taking a closer look at the term “competitiveness’ in the global market. No denial of the fact, that the masters of developing countries are IMF/World Bank and WTO and now the nation sates are not in control of global economy but they are just subject to their violent competitive forces and they have to compete for having capital. Clearly, third World countries are locked into a vicious circle ever since the self administrated debts billed to the World Bank and the IMF. All this was revolving around in the name of ‘improving their competitiveness’ in the global market or “short-term pain for long-term gain”.  (The News)

► Where will money come from to finance the new budget?

Concerns about inadequate resources to plug the budget gap continue to occupy our economic managers during the budget month - June. There have already been two extensions to the date of the budget announcement - from June 7 to June 10 and, more recently, to June 11. While political pundits claim that the one day delay is to ensure that the budget does not coincide with the day of the lawyers' protest march, yet delays coupled with last minute shuttle diplomacy by Prime Minister Gilani seem to be a reflection of the yawning gap in the budget. According to some media reports, the budgetary gap is expected to be around Rs 0.75 trillion with total outlay estimated at Rs 2 trillion and total revenue at Rs 1.25 trillion.  (Business Recorder)

► Difficult macroeconomic environment for the budget

The U.N. World Food Program has warned that according to its estimates nearly half of the country’s 160 million people are at risk of running short of food due to rising grain prices. The poverty impact of the surge in food prices could be high and could wipe out years of gains in poverty reduction in recent years. Another report Global Development Finance 2008 contains horrible projections about the current account deficit of around 7 to 8 percent in the next five years. The situation on the fiscal front could not be different because fiscal deficit is likely to remain well above 5 percent of GDP. Another timely warning from experts of international repute for the Oil-importing countries like Pakistan which are already running substantial current account deficits   (The News)

► Relocating development priorities

Budget for forthcoming fiscal year is to be framed in quite depressing macro-economic environment and in the midst of rising expectations by the people at large who have suffered a lot because of high inflation and other adverse economic reasons. In such a situation, the government is to adopt a few short, medium and long-term fiscal and administrative measures and execute policies that have to be result oriented for the public. In order to get the best results, it is imperative to relocate priorities for economic growth and development that should focus on well-being of people and strengthen economy to withstand internal and external shocks arising because of multiple factors.  (The News)

► State of the economy: a realistic assessment

The government has indicated its intention of broadening the tax base, and rein-in expenditure for macro-economic stability and has also indicated that it intends to diversify its financial base and reduce its dependence on central bank borrowings. The recently released Third Quarterly Report of the State Bank of Pakistan (SBP) for the fiscal year 2007-08 presents on analytic, objective assessment of performance of the economy during July-March FY-08 and highlights the challenges confronting it. It recommends appropriate policies and measures for ensuring socially necessary growth in an inhospitable international milieu.  (The News)

► Slapdash solutions to economic problems 

Some of the gravest economic issues inherited by the elected government include inflation in general and food inflation in particular, rising oil prices, rising poverty, unemployment, energy deficit, current account deficit, and deprivation related issues of rising crime and terror, to name a few. While there is an attempt to solve them sooner rather than later, some of the proposed remedies are more symptomatic instead of a jab at the sources and causes. For example, an IFI’s suggestion to withdraw subsidy on oil prices to favourably affect fiscal deficit might temporarily serve the purpose somewhat.  (Dawn)

► Wheat crisis: a liberal perspective 

IN Pakistan economic liberalism has been behind all economic decisions except in the case of agricultural production.In manufacturing, we have embraced post-quota world and in services - banking, telecom, insurance, wholesale trade etc. In recent years, the economic growth has been propelled by the services, where the free market forces have been allowed to work relatively independently. When the price of any commodity rises, the profit margins of producers rise and in an open economy, it attracts new producers. The entry of new producers increases supply which ultimately brings down the prices and the profit margins.  (Dawn)

► A paradigm shift in agriculture

Along with an unsettled political situation, increasing acts of violence perpetrated by extremist groups operating from the country’s tribal areas and the quick unraveling of the model of economic growth pursued by the administration of President Pervez Musharraf, Pakistan has received another sharp jolt to its economy. This was delivered by an unprecedented increase in commodity prices. While the increase in the price of oil has occurred over a relatively long period of time, that of some agricultural commodities was sudden and unexpected. In 2007, the price of wheat rose 77 and rice 16 per cent.  (Dawn)

► UN summit and global food crisis  

The United Nations (UN) summit on global food crisis held in Rome could not come up with a communique as unfortunately none could be agreed upon. The summit ended up in trading of accusations between the crops for fuel supporters and crops for human food protagonists. Nonetheless, the leaders attending the summit did call for reducing trade barriers and ending commodity export bans. The World Food Programme has estimated that it will require $500 million on top of what has already been pledged to fill the food gap. One would hope that the donor countries would step in and not only ensure that their pledges are translated into actual money but also that the needs of the global poor are met.  (Business Recorder)