Economy’s performance

THE economy’s performance during the year 2001-02 has been termed fairly satisfactory by the State Bank of Pakistan (SBP) in its annual report released on Monday. During the first half of the year the prospects did not seem very bright. However, things began to look up on the external front, in the latter half of the year, following 9/11. According to the SBP report, the economy could not have benefited from that turn of events if the IMF and the World Bank-backed reforms had not been in place and been properly implemented. It warns that if the reforms are discontinued or allowed to slow down, the way ahead may once again become uncertain and the pre-Sept 11 fears of devaluation and a high domestic interest rate may re-emerge.

During the year, the economy grew at 3.6 per cent, slightly less than the target of four per cent, but 1.1 per cent higher than last year. However, the increase was concentrated in a few subsectors. Agriculture registered an overall growth of 1.4 per cent against the target of two per cent. Even this positive development was mainly due to the impressive performance of the livestock subsector. Other than that, major crops recorded a negative growth of 0.5 per cent. The manufacturing sector did better at 4.4 per cent, but lower than the target of five per cent and considerably less than its own performance in the previous year at 7.6 per cent — due largely to the uncertain economic environment through most of the year and the major military deployment along the Pakistan-India border. The rate of inflation in terms of the consumer price index came down to 3.5 per cent during the year — from 4.4 per cent in the previous year. Greater availability of essential commodities because of good production and available stocks of the previous year and 6.7 per cent appreciation of the rupee, reducing import costs, helped in holding inflation in check.

The situation on the fiscal front remained unsatisfactory. The overall budget deficit rose to 6.6 per cent of GDP, significantly higher than the target of 4.9 per cent and the actual deficit last year. This increased deficit was due to higher defence spending (Rs 17.4 billion), troop deployment on the border and one-time payments of income tax refund (Rs 22 billion), KESC restructuring (Rs 30 billion) and settlement of Wapda’s arrears (five billion rupees). Against this higher expenditure, the overall tax collection was much below the target. What saved the situation was a reasonable increase in non-tax revenues and savings in spending as a result of debt rescheduling. External developments also contributed to the marked improvement in external accounts. Our participation in the coalition against terror brought a $600-million grant from the US, payments for logistics support provided to coalition forces, and other bilateral grants. In addition, increased vigilance on remittances by Pakistanis through non-banking channels and the reversal of capital flight doubled the inflow on this account to Rs 2.39 billion. These factors increased the reserves and strengthened the rupee vis-a-vis the dollar.

But it is a little depressing to realize that the gains, where they have been made, are due mainly to external factors. The economy has suffered shortfalls in all commodity sectors compared to the targets and the previous year’s achievement. The external factors may not come to our rescue again. Growth, investment and employment which today occupy a back seat in terms of priorities need to be given much greater attention by the next government, which will be answerable to the people.

Basic issues

LEAVING aside the cliche that the PPP and the MQM are natural allies in the political context of Sindh, it is good that these two major political parties have begun talking to each other at long last. If the PPP represents the majority of Sindh’s rural vote bank, it is the Muttahida Qaumi Movement which holds the key to the urban sector, especially Karachi. Makhdoom Amin Fahim’s request to the MQM leaders the other day to put the past behind and to move forward for the greater good of the people of Sindh makes much sense, and can become a good starting point for reaching an understanding on the formation of a PPP-MQM coalition government in Sindh. But the demands put forward by the MQM leadership, in return for a possible rapprochement between the two, sounded more emotive than substantive. Surely, more basic issues are at stake than regrets or recriminations over past mistakes.

Despite some gains made by the religious parties’ coalition in Karachi in the recent election, the megapolis continues to be largely the MQM’s political bastion, as shown by the final tally of seats for both national and provincial assemblies. The Karachi voters would like to see their problems addressed by their elected representatives as opposed to seeing them dwelling on a past that only brings back bad memories. The city has a plethora of problems, such as lack of basic amenities like water and public transport, to name only two, that affect the lives of its people on a daily basis. Maintenance of law and order is another key area of concern that directly affects economic activity, investment prospects and creation of jobs for the swelling ranks of the educated unemployed. Unless these and similar other problems form the mainstay of the current negotiations on government formation in Sindh, the urban electorate will feel left out in the cold.

Guantanamo detainees

THE first of the Pakistanis incarcerated at the Guantanamo Bay detention centre in Cuba has returned home after his release. There are said to be nearly five dozen Pakistanis among the 600 or so people held in the US camp. A team of Pakistani officials recently given access to the country’s nationals had reported that it considered an overwhelming majority of them to be innocent of any involvement in terrorism. Mostly between the ages of 18 and 28, they were described as people who had been exploited or misguided to join the Taliban and Al Qaeda version of jihad. When the others will be freed is not clear. They have been subjected to intense questioning by US authorities, which have set up the Guantanamo facility outside US territorial jurisdiction to deny the detainees recourse to the American court system.

Little is known about the conditions in which they are being held or the interrogation tactics being used by American officials. Initially, there were protests from civil rights organizations about the setting up of the Guantanamo camp, but over the months interest in it has waned. The prisoners remain in judicial limbo, entirely at the mercy of their captors. Abu Zubaidah, the most important of Al Qaeda leaders captured so far (after a gun battle in Pakistan), may or not be at Guantanamo, but there is little evidence that the others held there had access to any valuable information. It is important that countries with nationals at the detention centre and international civil rights groups such as Amnesty should put pressure on the US to either produce the detainees before courts or free them.