July 29, 2002	Monday	Jamadi-ul-Awwal 18,1423

LAST WEEK two very interesting reports were released one by the UNDP and the other by Pakistan-based SPDC. If what the UNDP reports says about Pakistan is read along with SPDC report on social development in Pakistan—growth, inequality and poverty, one gets a clear view of the challenges being faced by this country on the socio-economic front.

The UNDP report using mostly data from 2000, found that 56.8 per cent of Pakistanis over 15 years old are illiterate, that 84.6 per cent of the population earned less than two dollars a day, and an infant mortality rate of 85 per 1,000 live births. The report ranked Pakistan at 138 out of the 173 countries assessed for its annual Human Development Index, which measures life expectancy, adult literacy, education, and income per person. Pakistan held the same ranking in 1999, the year in which the army chief General Pervez Musharraf overthrew the civilian government in a bloodless coup declaring that the 11 years of democracy that preceded his overthrow brought economic ruin to Pakistan and claimed that military regime was necessary to restore economic growth and stability.

However, according to the same UNDP report Pakistan between 1990 and 1999 had climbed three places in the ranking. According to the UNDP index, during this period Pakistan had made headway in tackling under nourishment, but is far behind in reducing infant mortality rates. Pakistan is ranked in the bottom 36 countries grouped under “ low human development” along with Nepal, ranked 142 and Bangladesh ranked 145. The majority of countries in the lowest group are African states. The report had a strong message for authoritarian regimes, disputing the notion that they are better for political stability in poorer countries.

“The desire for stability often leads to notion that non-democratic regimes hold out the prospect of greater public order and faster economic development,” the report’s chief author Sakiko Fukuda-Parr said.

“But the evidence suggests they deliver neither.” The report noted that in the developing world authoritarian leaders argue that there is a trade-off between national stability and personal freedom, claiming that very poor countries need to concentrate on peace and economic prosperity first, and democracy later. Fukuda Parr said the report provides strong evidence to the contrary.

It cites research that newer democracies are more likely to cope with political unrest effectively than authoritarian regimes. The SPDC report on the other hand has this to say on similar subject but from a different angle:

“ The decade of the 1990’s has been too frequently disparaged as a lost decade. Admittedly, the economic growth rate has been at an historic low and poverty has increased rapidly. Both are alarming developments.

However, this decade can also boast several landmark achievements. It is in the 1990’s that historic turnaround occurred on many fronts, which are of significance in terms of the future development of the country. Over half a dozen such ‘first’ can easily be cited.

First, Pakistan made a significant demographic transition, with the population growth rate falling well below 3 per cent. Second, a major achievement on the social front was the 28 point fall in the infant mortality from 116 per 1000 live births in 1990 to 88 in 1999.

Third, despite macroeconomic , difficulties, agriculture continued to post robust growth, and wheat production surplus, which had eluded the country for several decades, was finally attained. Fourth, an important event in the area of public finance was the conversion of the primary budget deficit into surplus. Fifth, another event of fiscal and political significance was the reduction of the defence budget in real terms. Sixth,a major boost was achieved in electricity production. Admittedly, this last development is mired in controversy.

However, it cannot be denied that, given the near empty state of the country’s dams and water reservoirs, the generation of hydroelectricity is severely constrained and it is the thermal power stations that are ensuring power supply to the national grid. And lastly, a major breakthrough was achieved in the availability of telecommunication facilities; Pakistan now compares favourably in this field by international standards.”

Here is another pertinent passage from the same report: “ The most significant aspect of the economic policies pursued under various governments and administrations since 1988 is their continuity. The set of policies has remained the same, except that there has been greater vigour in its implementation since 1999. However,, the results have varied in different period. A examination of key indicators in terms of annual averages over four periods—1978 to 88, 1989 to 99, 1999-2000, 2000-2001—shows that over the decade 1989-99 growth objectives were sacrificed without achieving stabilization objectives. Over 1999-2000 and 2000-2001, however, stabilization objectives were achieved, but at the cost of suppressing growth even further.”

Discussing the debt profile and the matter of historic accumulation of foreign exchange reserves the report said that (quoting the SBP) that the debt restructruing by the Paris Club has caused savings in the range of $2.7 billion to $2.9 billion over 2001-04 and $8.5 billion to $11 billion over the entire period up to 2017. For the current year alone, the restructuring reduces Pakistan’s debt servicing liabilities from $4 billion to $2.7 billion, a saving of $1.3 billion. At the current rupee- dollar parity of Rs60 , the annual savings amounts to Rs78 billion raising the question of how this fiscal space that has become available can be utilized. There are three clear choices:

1. stabilization goals are pursued even more vigorously and the amounts available are utilized to further reduce budget deficit; 2. the example of the 1980s is emulated and the amounts available are devoted to current expenditure needs; or 3. the amounts are devoted to public investment in creating social and economic assets. The case for and against each of the three courses has been previously made.

The first course will exact a higher price from the people, particularly the poor, in terms of unemployment and poverty. The second course will ensure that Pakistan queues up again for relief, come 2017, and sooner if new debt is incurred. The third course is likely to ensure that Pakistan maintains a course of non dependent, self sustaining growth.