|
Prime Minister Yousuf Raza Gilani, while addressing a huge gathering
at Multan, vowed to bring foreign investment and prosperity to the
country, which should give the nation hope that the economy will at
long last start moving in the right direction.
Citing terrorism and sectarianism as major impediments to attracting
foreign investment, he pledged to restore the 1973 Constitution,
restore judiciary and other institutions and ensure press freedom.
He has rightly claimed that the PPP is a symbol of federalism. He
also said that his government had inherited problems like price
hike, etc, which the PPP will address. These are brave words indeed,
becoming of a prime minister determined to set things right, and
bring the country out of the economic doldrums.
However, some leading economists do not entertain such hopes. As the
present is a continuum of the past, we cannot avoid analysing the
pluses and minuses of economic policies of the past nine years, in
order to put things in proper perspective. As a leading analyst has
said, keeping the structure of the economy unchanged was the biggest
disappointment, as a result of which the problems that had plagued
the economy in October 1999 continue to bedevil it, despite some
occasional attempts to bring about structural changes.
Secondly, conspicuous consumption by some, the mushrooming of
palatial "white houses" and flaunting of expensive cars was seen as
a proof that some people had indeed grown very rich, and though the
"trickle-down" effect was also there, it did not reflect true health
of the economy. The new government will, therefore, have to tackle
multiple economic crises in the months and years ahead, foremost
among them will be the high rate of inflation as well the twin
deficits of fiscal and trade accounts.
As we have often pointed out in this space, the credibility of
economic data during the preceding regime was at times called into
question by some economists, and the charge of figure-fudging was
often levelled against the economic managers, though how far the
accusations were correct was not known. This was done to portray the
health of economy that was at variance with the ground reality. A
leading economist has categorised these problems at three levels:
near-term crises relating to the twin deficits of in fiscal and
trade accounts.
Secondly, there are the medium-term crises relating to the
chronically low domestic savings rates, an undiversified source of
foreign direct investment, which largely consists of money sent by
expatriates, and a perennially narrow income tax base. And finally,
there are the long-term crises connected to mounting income
inequalities, a high poverty rate, and a rate of population growth
that is counted among the highest in the world. According to a
prediction made by a leading analyst, the budgetary deficit is
likely to touch higher than six percent during the current fiscal
year - 50 percent higher than the limit deemed safe by the lending
institutions.
It can provide a credible measure of the state of the economy that
during the first nine months of the current fiscal, the trade
deficit was expected to mount to $19 billion, up by 44 percent over
the corresponding period of last year. The hefty deficit has been
largely driven by mounting imports of consumer goods, none of which
can contribute towards increasing the productive capacity of the
economy. Even more worrisome is the State Bank's prediction that
inflation might reach nine percent during the fiscal year ending in
June, which will be almost 33 percent higher than the target of 6.5
percent.
A stable law and order situation is the foremost prerequisite for
attracting foreign investment. The government should therefore start
putting greater emphasis on the carrot than the stick, which anyway
has not so far achieved significant success. The Prime Minister's
remarks that he is determined to root out terrorism and sectarianism
should send a clear message to the forces of divisiveness to work
for sectarian harmony, which will not only help attract greater
foreign investment, but will also revitalise our economy. We wish
Gilani Godspeed.
Ref link:
http://www.brecorder.com/index.php?id=743983&currPageNo=1&query=&search=&term=&supDate= |
