March 31, 2008	Monday	Rabi-ul-Awwal 22, 1429

PAKISTAN People’s Party and Pakistan Muslim League-Nawaz have told the international donor agencies that the country’s economic and financial system was ‘crumbling’ and new innovative policies were needed to tackle the looming crisis.

Representatives of the donor agencies, who met PPP and PML-N leaders, were also told that “from now onwards the defence budget would be discussed in parliament to gain public support to defence spending”.

Party sources said World Bank Vice-President for South Asian Region Praful Patel could not get an assurance from PPP co- chairman Asif Zardari that the new government would not bring any major shift in the economic policy pursued so far.

“When officials of the donor agencies meet politicians they generally prefer to listen more than talk, but this time Mr Patel discussed serious economic issues with Mr Zardari”, PPP spokesman Farhatullah Babar told Dawn.

Farhatullah Babar said: Mr Patel was interested to know how the new government would offer new subsidies to the people and whether it would economically be a viable solution. He also wanted to know about the policy direction of the new government. Mr Zardari told him that macroeconomic stability had to be achieved but that did not mean we should forget the common man as was done by previous rulers”.

Mr Zardari regretted that former prime minister Shaukat Aziz had left behind a mountain of economic problems and that the new government would facing numerous challenges.

He also informed Mr Patel that the coalition partners had serious reservations over the privatisation policy pursued over the last eight years. People need to know how the sale proceeds of the privatisation were spent by the previous government. Zardari wants to spend this money more for the welfare of the people.

The new government would encourage transparent sell-off that did not deprive employees of the privatised corporations from their jobs. There will be an audit of sale proceeds of the previous government.

There was also a need to audit $10 billion US aid received over the last few years. A lot of funds were provided by the United States for tackling terrorism and militancy. The issue is whether these funds were actually used for addressing the menace of terrorism and militancy. A number of serious economic issues were needed to be sorted out .

Ahsan Iqbal: Central information secretary of the PML (N) told Dawn that the international donors were being taken into confidence about the state of the economy and to suggest measures to improve it drastically for the benefit of the people.

”We want to know from everyone including the donors to tell us where the $70 billion has gone which came to Pakistan after 9/11”. Giving the details, he said $30 billion was sent by the overseas Pakistanis and $10 billion provided by the US. The central bank purchased $15 billion from the market during this period and foreign loans worth $14 billion were acquired. “And then they also received $5 billion from privatisation. This makes a total of $70 billion”.

While $70 billion came after 9/11, not a single power project was installed. “Not a single mega project started. Not a single hydro project and not a single infrastructure project launched and where had these $70 billion gone”, he asked.

“The nation wants to know where the $70 billion has gone specially when there was no poverty reduction, no significant job creation and bigger economic activity. The donor community should also try to know where this huge money had gone. The agricultural production today was the same it was eight years back in 1999-2000. Wheat and rice production were at 21 million and 5 million tons respectively in 1999-2000 which stood at the same figures today.”

He was filing a reference as to who should be held responsible for the current energy crisis. “While there will be an internal accountability, issues concerning donors will also be raised with a view to ensuring judicious spending of foreign assistance”.

Trade deficit has reached $12.5 billion during the first eight months of the current fiscal year. There were all indications that it would touch $17 billion at the end of 2007-08 and this would be very bad for the new government.

The people were ready to give a chance to the new government, provided it conducted itself with honesty, dedication and sincerity. “But if that does not happen, I am afraid, we cannot escape the wrath of the people”.

Analysts said that the PPP-led coalition face tough challenges ahead and quote the recent remarks of State Bank Governor Dr Shamshad Akthar: “ unless immediately addressed the present economic vulnerabilities emerging in Pakistan’s economy risks reversal of the high growth trajectory and even disruption of gains achieved”. It is facing “the twin shocks, global and domestic.”

A World Bank source, when approached, said it was basically establishing a contact with the new government and its political leaders. The donors were also offering possible solutions to various issues.

“Donors are currently in a listening mode and that is why they are meeting different politicians”, the source said. However, he said donors had assured Mr Zardari and others that they would remain active partners to help Pakistan resolve its economic problems.

PPP manifesto: A glimpse of the PPP’s economic manifesto indicates the programme and polices it is likely to pursue with the support of its coalition partners.

While anchored on social market economy, the manifesto 2008, approved by the electorate in February, is a blend of continuity and change in policies.

It aims to reinforce “economic liberalism” with “strong social democratic agenda.” Pursuing “business-friendly” “farmers-friendly” and “taxpayers- friendly” policies, it promises economic growth with social justice.

Investment: PPP has pledged to embark on an investment climate reforms programme to ensure a favourable and enabling environment for all businesses, foreign and domestic, especially for small and micro-businesses, to flourish. The private sector and export-led development will be the main engines of growth. Foreign direct investment will be encouraged in export goods manufacturing. Reforms will be initiated to reduce cost of doing business and market-based and fiscally affordable incentives will be extended to develop non-traditional exports.

Growth with equity: PPP will help individuals set up small businesses and provide a framework for development of a vibrant middle class It will address the basic needs of the low income persons. Food , clothing and shelter will be provided through “unique emphasis “ on full employment. It will develop a welfare state where market forces are balanced with safety nets for the poor. PPP recognises the right of every individual to food, clothing and shelter.

Agriculture: Farming and rural development will be an important pillar of growth and poverty reduction strategy. As a farmer-friendly party, the PPP will help farmers boost production and obtain fair prices. It will provide surplus electric power during off peak hours for tube- wells free of cost to farmers. Banks would be encouraged to expand rural lending , while maintaining sound credit policies.

Employment: High growth will be the main driver of full employment. A Public Works Programme to guarantee employment , for at least one year, to one working member of the poorest 25 per cent of the families of the country.

A short-term employment to educated youth would be provided through a Literacy and Health Corp Scheme. Employment for two years will be guaranteed to all youth completing intermediate, graduation and post-graduation in a single year.

Wages: Minimum wages would be enhanced to meet escalating needs of the labour.

Inflation: High inflation will be managed by prudent fiscal and monetary policies and special steps, including more agricultural credit to increase food grain production; enhancing competition in manufacturing and domestic trading and reducing supply chain constraints so that costs of essential goods are reduced; unleash competitive forces and combat monopolies and cartels.

Woman empowerment: The 10 per cent job quota for women in public service initiated by Benazirgovernment will be increased to 20 per cent.

Fiscal autonomy: Concurrent Legislative List to be abolished. Provinces to be given their share in]their natural resources. NFC Award to take into account contribution to revenues, geographical size, backwardness, level of development and population. Natural gas rates and royalty formula will be determined by 1973 Constitution

Sales tax will be progressively returned to the provinces. Octroi will return to local governments.

Companies engaged in exploration and exploitation of natural resources will be required to train local people and allocate funds for social development.

Privatisation: Provinces will be given a part of the sale proceeds of federal assets.