THE outgoing fiscal was yet another year of uphill economic struggle for the vast majority of Pakistanis due to decelerating growth and rising prices. Investment dried up, unemployment escalated and poverty increased.
Ranked as the third-fastest expanding Asian economy after China and India in the middle of the last decade, Pakistan is now among the slowest growing South Asian countries. India, Sri Lanka and Bangladesh are forging ahead. Pakistan's economy is expected to expand by 2.4 per cent this year as the region is projected to grow by 8.7 per cent and the world's developing nations by 6.5 per cent. Even many African economies have out-performed us in recent years, according to the Economic Survey for 2010-11 released on Thursday. This officially sums up the economic dilemma Pakistan has been facing for the last three years.The Survey blames the country's poor economic performance on a number of persisting factors. Deteriorating security conditions, flood losses, rising global oil prices, stalled external capital flows and delays in fiscal and tax reforms are the main culprits that have slowed growth and strained the government's resources, leading to a huge build-up in domestic and foreign public debt for financing the budget. Investment has contracted to 13.4 per cent of the size of the economy from 22.5 per cent in 2007. Domestic savings are down to 9.5 per cent from 16.3 per cent in 2006. Growing energy shortages and a higher cost of borrowing continue to haunt private investors and affect industrial output. Public-sector enterprises continue to eat into meagre resources at the cost of public services like education; development expenditure formed only 3.4 per cent of GDP.
Still, there are some positives. Exports have increased on the back of higher commodity prices. An additional income of Rs342bn has been transferred to the rural economy during one year alone, compared to Rs329bn during 2001-08. The exchange rate remains stable and inflation is down to 13 per cent from 25 per cent in October 2008. The current account is also in surplus. The government has taken several tough and politically unpopular decisions like reducing untargeted food and energy subsidies. Though it has dithered on implementing many crucial fiscal and economic reforms under pressure from its allies and the opposition, it has pledged to move ahead with its plans to eliminate subsidies, bring the powerful into the tax net, prudently manage its debt, revamp public-sector companies and limit its inflationary borrowings. Recovery remains fragile, but it can give space to launch the country on the path of growth. If the reform agenda is implemented honestly and boldly, we can move faster in our race with other South Asian economies.