THE government thinks it is time to put the economy back on ‘a high growth trajectory while consolidating stabilisation gains’.

The current relative stability coupled with investments envisaged in the CPEC projects tend to support its assertion but a deeper insight into the two positive factors promises the oft-repeated cycle of short spurt of, not sustainable, high growth.

First, how has the relative stability been achieved and how long will it last? As seen in the past so frequently, the injections of huge foreign financial inflows and capital are even now responsible for some artificial improvements in macroeconomic indicators while the fundamentals of the economy remain as weak as ever.

As falling exports and rising imports show, the structural imbalance in foreign goods trade has not been minimised despite the falling petroleum prices that have come to the rescue of worsening external sector. The worker’s remittances exceed the export earnings of the leading sub-sector of the manufacturing industry — the textiles.

The relative stability has been achieved through beaten pathways which at best give a breathing space or a pause before the slow economic growth cycle returns. Once the capital and financial flows are reduced to a trickle, the economy resumes its downward journey, fears of debt default surface and once again the IMF is commissioned for a bailout. The cycle has been repeated with greater frequency in recent decades.

Eradication of poverty offers an enormous opportunity for a wide range of economic activities

However, it can be argued with much substance that if investment from the West is sluggish and the Middle East scenario does not hold promise of much capital inflows, Pakistan has embarked on the Chinese supported CPEC projects worth billions of dollars.

With so much lag in execution of major projects, big mismatch between physical and financial targets and normal cost over-runs, it is not clear such a positive move to spur a wide range of economic activities would not once again leave the country under heavy debt. Success of a project is currently not judged by its financial viability when completed but by the amount of money spent on it.Here the foreign lending agencies at also at fault for not carrying out cost-benefit analysis.

To achieve a ‘high growth trajectory while consolidating stabilisation gains’, the government intends to remove obstacles to growth when that requires: a paradigm shift in policies to improve the fundamentals of the economy. This is nowhere in evidence. It needs to recognise that since the early 1970s when the policymakers in most countries virtually abandoned ‘economic development’ — as the concept of ‘people’s-centred development’ was gaining currency — and switched to single-minded focus on ‘economic growth’, the frequency of financial and economic crises have increased rapidly.

The banks and the corporate world followed a similar path. They went all out to increase their value for the (majority) shareholders, forgetting that other stakeholders deserved to be served equitably. There are exceptions but they do not constitute a majority. When too much wealth concentrates in a few hands, recession is the inevitable consequence of it.

The frequently sought IMF support for perpetual fiscal and balance of payments crisis is more in the nature of relief measures that cannot improve the fundamentals of the economy which is delivered by a balanced socio-economic development. It is being forgotten that economic growth has to be made socially sustainable. It is the quality of growth that counts. Social indicators are as important, if not more, as the economic growth rate. In current environment, they cannot be de-coupled. Eradication of poverty offers an enormous opportunity for a wide range of economic activities.

While one cannot go back to decades-old economic or business models that have lost their viability in current times, but ways have to be found to end the growing social exclusion. And the solution lies in quickly adopting to new ideas — whose time has come — and latest technologies that are beginning to shape the new economic order.

Normally, a high growth rate tends to create imbalances in the economy if its various segments do not move in a rhythm, something virtually impossible in a complex development path. The macroeconomic stability can, however, be managed by prompt measures to contain imbalances from upsetting the high growth trajectory. Is the government machinery that resourceful and agile to respond to the fast changing challenges in a fast expanding economuy?

Published in Dawn, Business & Finance weekly, May 9th, 2016