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Mixed signs


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HOWEVER dim the signs may be, the Economic Survey of Pakistan 2011-12 does offer hope for economic recovery. The economy has grown by 3.7 per cent from 2.4 per cent last year despite energy shortages, floods and difficult global conditions. Manufacturing and agriculture have shown some recovery, albeit slower than projected. Growth in services, however, remains stagnant. But if the government has again missed the growth target of 4.2 per cent, it is mainly because of its failure to address energy shortages that cost two per cent growth. Still, this somewhat positive trend can be sustained provided the government takes measures to improve economic governance and the energy sector. More worrying is the pattern that has emerged regarding the government’s inability to tackle chronic fiscal imbalance, which is likely to reach just under seven per cent. The government hasn’t been able to raise the tax-to-GDP ratio of less than 10 per cent, the lowest in the region. Nor has it done much to cut energy and other subsidies or restructure loss-making state-owned enterprises.

On the external side, too, it is faced with serious difficulties. While inflation has remained within the projected limits, the current account deficit has surged to 1.7 per cent of GDP, not least because of the soaring trade imbalance and drying up of foreign official and private capital inflows. Our external sector has been sustained only by surging remittances sent by overseas Pakistanis. Given the global financial crunch, it would be foolish to expect foreign investors to return to Pakistan — even though the survey neglects to include a chapter on the economic cost of the war on terror. Global markets were awash with liquidity when foreign investment in Pakistan surged to $8bn by 2007. The country’s creditors and lenders have already told Pakistan to not expect too much.

Some of our economic problems can be taken care of if the federal and provincial governments start working in unison. The new National Finance Commission award and the 18th Amendment have transferred a major chunk of financial resources as well as responsibilities to the provinces. Given that, it is unfair to blame Islamabad alone for the country’s economic troubles despite reduction in its share in tax revenues and the transfer of liabilities such as debt and subsidies to it. The provinces will have to share the blame equally unless they start taxing the untaxed and under-taxed sectors instead of spiking their non-development expenditure on the back of increased federal transfers. Until the provinces realise their obligations, the economy will continue to teeter on the brink.

Comments (10) Closed

Syed. Nasir Mehdi Jun 01, 2012 11:11pm
It is on papers manipulated. Actual figures are imminent- load shedding price hike in every field. declining export and increase in imports.Who they want to fool?
zardari Jun 02, 2012 10:38am
Zrdari has laid the foundatios for and charted out a path albeit his tied hands , for political and economic future of Pakistan a strong future government can make huge advances on the road map provided
M. Asghar Jun 02, 2012 10:40am
If the provincial an federal authorities cannot collect taxes efficiently, then there is no way out except going to the wall à la Greece before our eyes.
@akhtartak Jun 02, 2012 10:40am
Zardari has laid the foundatios for a new stable and viable modern Pakistan
Kanadian Jun 02, 2012 03:35pm
Good that someone looks at the positive developments as well. however small they may be.
Syed Tirmizey Jun 02, 2012 05:45pm
I believe under the circumstances when the targets set are not being met and also foreign investment is not forthcoming then we should cut our wasteful expenditures, Many countries are following on this part.
Kashmir Khan Jun 02, 2012 08:47pm
Thanks God........little progress but positive signs ......
Haji Ashfaq Jun 03, 2012 07:09am
Total Editorial today is based on economic woes of Pakistan. The international Investors have developled a negative perception of our ability to manage loans , aid, grants etc. The only reliable source is remittances by overseas Pakistanis which, perhapes, is enough to pay debt interest. The rest is shooting from the hip. It is a common belief which even a layman can understand : if there are no chances of increase in income, control expenses. Not the total remedy but the only option - perhapes. The expenses of the President and PM house have increased , a lot of joy-riders on the foreign tours - the list can be very long. Manzoor Wattoo had gone to USA for treatment when he had common cold. Again - the list can be long.
Cyrus Howell Jun 03, 2012 11:37pm
To Do List:: Renewing electrical power to the country is number #1 The economy is #2, unless Pakistan wants to become the Mexico of South Asia. The Mexican economy also largely survives on remittances for Mexicans working in the US. #3 Pakistan needs to develop it's own natural resources. Whatever it takes!
Cyrus Howell Jun 03, 2012 11:41pm
If the federal government would take on their tasks one at a time they would not stand confused. They do not seem to focus on solving problems one at a time, which is the only way to get the country behind them.