Both economic growth and state capacities are major issues facing public policies being pursued worldwide. Pakistan is no exception.
After two fiscal years of close to six per cent economic growth, the State Bank of Pakistan sees the economy slowing down to 3-4pc in 2022-23.
Initial market reports show that the textile and technology sectors are shedding labour owing to the economic slowdown. “Some Pakistani exporters have reported cancellation of export orders by foreign buyers in the backdrop of global recession fears,” Fahad Rauf, Head of Research at the Ismail Iqbal Securities was quoted by an analyst on July 13.
“It is going to be a tough 2022 — and possibly an even tougher 2023, with increased risk of recession,” wrote Kristalina Georgieva, the Managing Director of the crisis lender International Monetary Fund (IMF) in a blog published last week ahead of the meeting of G20 finance ministers and central bankers in Bali.
Once elected in fair elections, peoples’ representatives must honour the electorate mandate and for this, they have to be accountable to the voters and not someone else
She warned that the global economic outlook has darkened significantly and could deteriorate further, threatening widespread hunger and poverty.
The crude oil (West Texas Intermediate) price fell to $95 per barrel on July 12 compared to around $120 about a month ago. The Shahbaz Sharif government lowered the price of petrol by Rs18.50 and diesel by Rs40.54 last week, mainly because of lower international oil prices.
An opinion piece describes the situation in Pakistan as follows: ”We are faced with a perfect storm. Inadequate investment in education and poor economic growth have generated enormous resentment and anger among a youth cohort that sees few prospects for advancement among contracting employment opportunities.”
In his presentation on ‘State Capacities for Delivering Higher Economic Growth’ at the State Bank in December 2016, distinguished scholar Timothy John Besley said: shore up faltering state capacities (legal, fiscal and collective) for higher growth to reach the final destination of the common interest state.
He further elaborated: What matters is how groups are treated even if they do not have direct access to political power. This requires cohesive political institutions that can promote common interests, guaranteeing the provision of public goods, while a more representative government can increase state capacity.
Street demonstrations or street power is no substitute for empowering the voiceless in taking their own decisions to fend for their livelihood
The common use of the state reduces conflict over resources, leads to more investment in a collective and legal capacity and increases incentives to build fiscal capacity, Mr Besley explained.
In Pakistan, the multiple party Pakistan Democratic Movement supported PML-N’s government and has been described by some as a sort of national unity government. Yet the two major partners, PML-N and PPP, have been unable or unwilling to honour their commitments made to smaller parties.
Neither the governor of Sindh has been appointed by the federal government nor local bodies have been empowered in the provinces as promised. Similarly, the Baloch coalition partners have expressed their disappointment over unmet expected demands.
The Council of Common Interests and the National Finance Commission have not met regularly. In fact, this has been happening for more than a decade despite the roadmap charted out by the 1973 Constitution to build a participatory federal democratic and egalitarian system. Those subscribing to an overcentralised system or monopolisation of power and resource did not allow the Constitution to function smoothly and made governance more cumbersome.
The issue of the common good acquires much more significance because none of the three mainstream parties is a truly federal party. A majority party rule is a thing of the past and coalition governments led by the largest party have become virtually unavoidable both at the federal and sub-federation levels.
With faltering democracy, the issuess of distributive justice and directing national production to meet the needs of the people areare put on the back burner. Much of the time, public policy is focused on export-led growth based on imported inputs financed by unsustainable foreign debt and more frequently repeated IMF bailouts.
The IMF announced on July 14 that a staff-level agreement has been reached with Pakistan which would qualify Islamabad for a tranche of $1.17 billion. It is time now for the Shahbaz government to evolve long-term policies in coordination with the provinces that work for the common good.
The course of persisting structural transformation lies in the organic growth of democracy that works for many and not for few. Once elected in fair elections, peoples’ representatives must honour the electorate mandate and for this, they have to be accountable to the voters and not someone else.
Under citizen-based democracy, the voiceless should have an institutional voice at relevant levels where both the leaders and the masses play an active role in shaping a better future.
In a democracy, as PPP founder chairman Zulfikar Ali Bhutto Bhutto said the people lead and the people are led. What is badly needed is a serious effort to adopt a bottom-up approach to make participatory democracy work for the common good and help push up the economic growth rate. Street demonstrations or street power is no substitute for empowering the voiceless in taking their own decisions to fend for their livelihood.
If critics are to be believed, many of the dominant ideas governing Pakistan have lost their vigour and vitality and yet are being pursued with the same zeal by policymakers as in the past. Successive governments have been either unwilling or unable to overcome the resistance to long overdue structural transformation. The incumbent is not pursuing any different path.
The road to economic progress and prosperity of the nation’s people lies in a democratic common interest state.
Published in Dawn, The Business and Finance Weekly, July 18th, 2022