Non-productive sectors eating up remittances: Lenders’ warning at PDF
By Khaleeq Kiani
ISLAMABAD, May 10: International lenders on Wednesday said that Pakistan’s economy had started showing signs of ‘overheating’ and an inequitable distribution of assets was depriving common people from sharing the benefits of higher growth.
They pointed out that the country’s foreign remittances were going into non-productive sectors like stock market and real estate, a trend which they said needed to be arrested.
Speaking at the Pakistan Development Forum (PDF), the lenders asked the government to pay attention to growing inequality, decentralise the decision making and ensure the next elections to be free, fair and transparent.
The PDF is an annual feature ahead of the federal budget. Prime Minister Shaukat Aziz inaugurated the forum whose theme this year is ‘Drivers of growth: unleashing the potential of the private sector’. On conclusion, the lenders traditionally commit assistance for the upcoming budget.
From the government’s side, chief economist Pervez Tahir said Pakistan faced a financing gap of $1.4 billion per annum which was filled through external assistance to provide basic facilities to all under a programme called Millennium Development Goals. The MDG’s total annual requirement stood at Rs3.2 trillion.
Education Minister Javed Ashraf said the quality of education and data was ‘very poor’ in the country and hoped the government would increase the funding for education to four per cent of GDP.
The private sector representatives expressed worries about rising trade deficit, lack of trained workforce, low education standard, looming energy shortage and higher cost of doing business that together hampered Pakistan’s ability to compete in the international market.
World Bank vice-president for South Asia Praful Patel said Pakistan had a history of ‘boom-bust cycles’ and “now is the time to sharpen the watch on the macroeconomic situation”.
He said that in addition to two negative shocks of oil prices and earthquake, there were signs of possible economic ‘overheating’ as imports were swelling at a faster rate than exports. The root causes of the growing external imbalances needed to be addressed to sustain rapid growth not for few years but 10 to 20 years through a coordinated monetary and fiscal policy response to avoid “pain and disruption of a hard landing”.
He said that everyone should be able to benefit from growth and this could be done through rural support programmes, empowering women, reforming the irrigation and developing land markets.
Mr Patel said despite seven years of trade, regulatory and banking reforms, the cost of doing business in Pakistan was still too high and hence second-generation institutional and policy reforms were required as well as investment in the infrastructure.
Islamic Development Bank president Ahmad Mohamed Ali said that unless the fruits of macro-economic growth produced a credible impact on the day-to-day lives of common people it would not translate itself into changing the ground realities at grass roots.
Another challenge, he said, was how the remittances from expatriate nationals could be channelled into productive investments away from speculation in real estate and stock market.
Dr Ali urged the government to provide alternatives to encourage more of its migrant workers to channel their remittances into infrastructure and other development projects.
He said a major challenge for the country was how to mobilise domestic savings for investments, notwithstanding the importance of international resources.
The European Union delegate said the government should pay attention to growing inequality as economic growth alone could not reduce poverty.
He called upon the government to implement and ratify the UN treaties on human rights conventions, including a right to free, fair and transparent election process. He sought repeal of ‘discriminatory’ stipulations of the Hudood ordinance, Blasphemy law and Qisas and Diyat laws.
The delegate from Japan called for declaring compulsory education for all.
The education minister, however, said it would be meaningless because there were not enough schools while existing schools lacked basic facilities.
He said the government was ‘fooling’ itself as matriculate teachers could not be called trained.
The International Labour Organisation director said the unemployment of education class had increased in the past few years.
Local business leader Tariq Saigol spoke about challenges like the ever-widening trade deficit and looming energy crisis.
