The business does not see that happening unless right policies are put in place for wealth generation at a faster pace.
The cash doled out to the vulnerable was not an answer, they felt, as it was neither feasible nor sustainable. They were referring to ranting by scores of public figures to glorify Benazir Income Support Programme. Only better performing agriculture, services and manufacturing sectors could revitalise the economy through economic expansion, absorbing human capital and harnessing physical resources.
“It is hard to imagine sustained growth in domestic demand to substitute for a fall in export demand when international market is shrinking because of global economic crisis”, Eizaz Sheikh, a businessman told Dawn.
The fact is that there are clear indications of unemployment rising as industry readjusts itself to changing economic scenario, fall in consumer financing with cautious lending policies of banks, cut in development spending and a little hope for major tax cuts by the government, striving to achieve stabilisation.
How the cumulative impact of these factors enrich people to create a higher level of effective demand for goods and services? The large-scale manufacturing sector, according to the current report of the State Bank of Pakistan, shrunk by 5.4 per cent during July to January 09 against growth of 5.6 per cent in corresponding period last year and 8.3 per cent year before last.
Top bankers confirmed that consumer loans have been declining since June 2007. There is major fall in all categories of consumer financing from auto loans to home finance to personal loans to use of credit cards. So much so that a few banks were recently reported to be pondering to trim or outright close their consumer loan departments.
Sardar Asef Ahmed, Deputy Chairman Planning Commission confirmed to Dawn that the government has not been able to disburse even the slashed development budget so far. “We are trying to meet the disbursement target of Rs200 billion development budget that was originally double the amount.” He thought that despite the cut in PSDP, the stabilisation policies paid rich dividends in the form of contained inflation and improved balance- sheet of the country.
Last week, Salim Raza, Governor of the State Bank of Pakistan said, “the developing countries would have to stimulate their domestic economies, increase their capacity to consume surplus production in the wake of shrinking exports and achieve sustainable growth to effectively weather the international financial crisis.”
The strategy has been interpreted at great length by the Asian Development Bank in its report `Asian Development Outlook 2009`.
“I would have swallowed the bitter pill of losses that my business made because of the shift of the government policies from growth to stabilisation for the greater good of the country if I was convinced that the government has also been behaving responsibly by blocking financial haemorrhage of public funds and was sharing the pain of tight monetary situation with the people and corporate sector,” a top tycoon from Lahore complained.
“After chopping the budget for public works and social services they waste public resources mindlessly on a huge band of good-for-nothing ministers and advisors, their relatives and friends. Why should I not doubt the government`s credibility and sincerity?”, a bigwig of the private sector, asked.
To know how the government proposes to stimulate the domestic economy, several attempts were made by this correspondent to talk to the people managing the national kitty but in vain. Many senior officers, ministers and advisors were away on foreign trips.
It was confirmed that Shaukat Tarin, Advisor to Prime Minister on Finance, Hina Rabbani Khar, minister of state for economic affairs, Salim Raza, Governor, State Bank of Pakistan, Salman Siddique, Secretary finance ministry of finance were all out of country on official missions.
“We need to put our act together and recharge economy on war footing,” Farhat Ali, President, Overseas Investors Chamber of Commerce and Industry said.
“One per cent cut announced by the State Bank is a good signal but how can the industry compete with those who are getting credit at one-third the cost”, asked Eizaz Sheikh, a cement tycoon from Lahore referring to cheap credit availability in other countries of the region asked.
Tariq Mehmud, Chairman Aptma, hailed the expansion in long-term finance facility to include some more sectors of exportable surpluses. He did not agree with the impression that outlook for textile exports is gloomy.
“Every challenge also offers opportunities. The global slow down has opened a window of opportunity for exporters as the demand of high end textile products has fallen that has never been our forte. It has actually increased in categories that we produce. Now it is all about facilitating the local industry,” he asserted.
“The government must also realise the potential and facilitate the industry by ensuring uninterrupted energy supply and availability of local cotton in quantities and quality required by the textile. It must invest in cotton economy to let the textile sector work to realise its full potential for the country”, he stressed.
Some redeeming factors that have impacted the purse of consumers must not be undermined. The better performance of rural economy and rising remittances must have benefited some segments somewhere. These, however, need to be supplemented by pro-active growth policies to break the spiral of low growth and drowning in quicksand of foreign debt.