As one looks back at the year 2003, there were many developments on the country's political front. These could breed excitement and spark a debate in favour or against the decisions of the government. But that was not the case on the economic front. To put it in a nutshell - the year 2003 only brought more of the same.
Old trends persisted and if there was a change at all, it was at best in the pace and not in the direction. The pertinent question, then, is: Should a change be expected? The answer has to be in the negative. There is no reason to expect any transformation. If one lends an intent ear to the small talk of our economic planners and managers, they never promised one. On the contrary, they have been loud and clear in their assertion that change in the direction of the economic policy is not on the cards.
The declared policy since 1982 (when the country negotiated its first Structural Adjustment Programme with the IMF), is that of liberalization, deregulation and privatization. Our experience with this policy package implementation over the last two decades showed that it has the potential to help the country attain better growth rate figures with the active support of donors and Western nations.
Pakistan's economy grew at an average rate of six per cent all through the decade of 80s, when the West and more specifically the US, was graciously kind. For the next decade Pakistan lost its utility, or may be it was unable to keep developed nations happy enough to retain their favours. Friends in the first world preferred to turn their backs on Pakistan, (concessional and soft loans were offered no more, IMF disbursement also dried up in 1990 and started only after former finance minister Sartaj Aziz's renegotiations). The same Structural Adjustment Programme delivered a stunted average growth of four per cent during 1990s.
Then came 9/11. It changed the economic fortunes of Pakistan and set it again on the path of posting improved growth figures. Pakistan managed to get $6.2 billion of its debt rescheduled. The US wrote off $1 billion from the sum that Pakistan owed. Donors started to rediscover the country that they abandoned earlier. The US offered a $3 billion aid package. Saudi Arabia granted a deferred payment oil facility, while the IMF offered to extend a $1.5 billion loan for another three years.
Pakistan also received $200 to 250 million from the US as compensation for logistic support that the country provided to the coalition forces in their operation in Afghanistan. These liberal dole-outs along with a massive inflow of remittances enabled the country to see its foreign exchange reserves soar from $3.3 billion before September 2000 to as high as current $12 billion.
In the present scenario, the expectations of the country's economic managers' to achieve a growth of 5.3 per cent during 2004 are not entirely misplaced. Only a mishap can cause an abrupt end to the growth, which is better than the previous decade.
The growth rate, however, is not an end in itself. In modern times even the most ardent of liberals and neo-Classical theorists admit that sustainable development is not achievable unless it is inclusive of a development process. Poverty alleviation is no more treated as a side issue in debates on economic options.
So much so that the Brettonwood institutions - the World Bank and the IMF - had to enclose the old product in a new wrapping and call it Poverty Reduction and Growth Facility (PRGF) in place of the Structural Adjustment Programme. How far their prescription actually makes a dent in the growing poverty levels in the recipient countries is another story.
Leaving the academic discussion over the fine details of PRGF aside, let the facts speak for themselves. In Pakistan despite better growth rate the poverty level has increased over the period of the programme that started in the year 2000. Unfortunately the poverty level touched the mark of 33 per cent in 2003. Critics of neo-liberal economic policy argue that the increasing trend in the poverty level could only be reined in by making a frontal attack on the problem of income distribution that the PRGF continues to ignore.
One of the major drawbacks is that the main thrust of the policy is on disengaging the government from the utilities sector, promotion of trade at the cost of industrialization and a skewed pattern of landholdings. In the absence of an efficient and effective land reforms, there is only a little hope for the poor and for those who are getting marginalized in the process.
The situation is further compounded in Pakistan as the private sector is shy and shaky and is not inclined to take up industrialization in a big way. Shrinking public sector, static rural economy and a shy private sector make a lethal combination to impact on prospects of job creation. Unemployment and underemployment thus continued to draw a long shadow over the prospects of sustainable development in the country over the year 2003.
The fact is that creation of a fund or two in the name of the poor or distribution of cheques to the underprivileged is not an answer. The economic base - agricultural and industrial sector will have to be broadened to create job opportunities to channelize the human resource of the country into the productive process. No stretch of imagination justifies the withdrawal of the government from public utilities sector in a country where the wedge between the rich and the poor is not only wide but continues to widen.
Why would the private sector (which is not even ready to venture into the industrial sector for it feels that its margin of profit is not ensured there) bother to supply key social services such as health or education on a sustained basis to the needy, unless such activities make them richer? These entrepreneurs are in business to maximise profit and not in pursuit of some lofty ideals.
Even if the question of fairness is set aside for a moment, it is not economically prudent to let the state sector absolve itself of the social responsibilities that it owes to the people, at least in a country like Pakistan. The public sector has a vital role to play in any genuine endeavour aimed at poverty reduction. It will have to handle public utilities and social services in an efficient and effective manner to broaden and deepen its reach before the country emerges from the poverty whirlpool. There are no short cuts or a quick-fix solution to the problem.
In January 2003, the government identified agriculture, small and medium enterprises (SMEs), the oil and gas sector, and information technology as drivers of growth. As year comes to a close it is difficult to assess contributions made by each of these sectors towards growth. Figures released confirm that there is an expansion in the private sector credit to Rs168 billion, investment has gone up by 16.2 per cent, and exports have touched $11 billion. These figures add up well on papers. They do not signify any change in the overall economic scenario.
The fact is that the current policy mix hardly ensures a long-term sustainable economic development. For a qualitative change in Pakistan's economic conditions it is imperative to look beyond neo-liberal economic options. Blind pursuit of policies of the past, liberalization, deregulation and privatization, have failed to put the country on the path of sustainable development. The problems of poverty and unemployment cannot be expected to disappear on their own even if the country succeeds in attaining six per cent growth rate.