Survey with mixed findings

TNS, Jang, June 17, 2007

By Dr Abid Qaiyum Suleri

Despite the government’s claims of robust economic growth, the Economic Survey contains a lot of alarming facts.

They say when one has to tell that love is happening or justice is being done then there must be something wrong. Everyone automatically finds out when there is love and justice. I would add prosperity and development to this list. My submission is that when governments have to repeatedly inform that it is bringing prosperity and development for masses then pro-public development is actually not taking place. People would automatically acknowledge when such development takes place. One can imply this principle to understand why our rulers (civilians, semi civilians or military) have to inform the masses of all the good things that they carried out in the ‘larger national interest’, including the extent to which they changed the destinies of the common masses.

June is usually the month when our rulers, during the launch of Economic Survey of Pakistan, and presentation of annual budget, inform us how sincere they are with their citizens. Since the launch of Economic Survey of Pakistan, government spokespersons are busy painting a rosy picture of robust economic growth, claiming that Pakistan is one of the fastest growing economies of the Asian region with 7 per cent GDP growth, with per capita income of $925, foreign investment of $6 billion and a recipient of $5.5 billion in the form of workers remittance.

The economic managers have all rights to celebrate the above mentioned macro-economic achievements. However, they should not forget that economic survey also revealed that all was not well at economic front and the country would miss the export, import, trade deficit, current account deficit, and large scale manufacturing targets by the end of the current fiscal year. The survey also revealed that contingent liabilities cost (specific government obligations defined by a contract or a law), internal and external debts, and spending on defence as well as on debt repayment go up.

To me the most alarming aspects of our economic performance are missed inflation target and widening of rich-poor gulf. According to the government sources the average inflation for the year is likely to be around 7.5 per cent –100 bps above the target. Food inflation during current fiscal year is expected to be 10.5 per cent as against 7 per cent of last year. According to economic survey, “This year’s inflation has largely been driven by higher food inflation as opposed to last year where the major culprit was non-food inflation”. The type of inflation (food or non-food) that hits an ordinary person is irrelevant as both types would have equally negative consequences. It is just like asking someone whether she/he would like to be killed by gunshot or by getting stabbed.

In my personal opinion, the intensity of food inflation would be much severe for low-income and bottom quintiles of the society. What should the general masses eat if the commodities like pulses, rice, chillies, onions, tomatoes and edible oil go beyond their economic access?

With this type of food inflation do we deserve to celebrate the 5.0 per cent growth in agriculture sector? Highest wheat crop and second highest sugarcane crop would turn meaningless if these bumper yields fail to bring any improvement in the life of their growers. Perhaps it is more to do with the lack of planning than irony of luck that despite promising performance in agriculture sector and despite the fact the Pakistan is a member of Cairns group (food exporting countries) in WTO, our food imports grew by 5.3 per cent and touched a historic figure of $2.3 billions during first ten months of the current fiscal year. Major contributors to the rise in food imports include pulses, milk and milk products, dry fruits, and edible oil.

Government tries to defend her position by pointing out that higher food inflation is a global phenomenon and the global food price index is up by 16.1 per cent. This may be true to some extent, but merits a detailed analysis. Government duties on edible oil are major source of revenue generation. Pakistan imported edible oil worth $763 million during first ten moths of this fiscal year (spent 24 per cent higher than previous year in this regard). Government levies 23 rupees per litre duty on edible oil. Is this duty not contributing to increased food inflation?

Now let us consider the imports of milk and milk-products. Pakistan is the fifth largest producer of milk and second largest producer of buffalo milk in the world. Despite this massive production, is it not a dilemma that value of milk and milk-products imports in current year saw a change of 36.9 per cent compared to previous year?

As a measure to combat food inflation, government has announced supply of essential food items through Utility Stores. This is an ad hoc solution that would lead to market distortions as well as social problems. General masses have not forgotten the agony when they had to queue up at Utility Stores for hours to obtain subsidised sugar in recent past. The cases being investigated by National Accountability Bureau against Utility Stores corporation high-ups reveal that such subsidy lead to corruption. Government should try to check the hoarding of food items to bring down the food prices at a reasonable level. In the case of edible oil, the better option would be to reduce the duties to the extent to an amount that government wants to spend in the form of subsidy through utility stores. This would automatically lower down the price of edible oil and ensure its supply to each and all at a reduced price.

Coming back to the economic performance and government’s claim of bringing prosperity, let us ponder how to define the type of development that widens the rich-poor gulf. According to the economic survey the share of consumption of the richest 20 per cent is far more than four times the share of the bottom 20 per cent population in the country. The poverty line set by the government is Rs 878.64 per month with caloric intake of 2350. The government claims nearly 10 per cent reduction in number of people living below poverty line during last 5 years. This claim is disputed by many non-governmental sources including international financial institutes. However, going by government figures, it is still sad that nearly a quarter of our population lives below a poverty line of 48 cent per day. One way of bridging the gulf between rich and poor is to use taxation system effectively. However, the three lucrative economic activities i.e., gain in real estate, gain in stock exchange markets, and agricultural income was not brought in tax net, thus leaving the salaried class and to some extent corporate sector to be the major tax payers.

There is no doubt that Pakistan’s economy is growing at an average rate of 7.5 per cent during last four years. However, one needs to recognise that macro-economic indicators do not reflect the micro realities at grassroots level. It should also be recognised that strategy for economic growth and the same for distribution of gains of economic growth are two distinct things. For economic growth to be pro-poor, generation of employment opportunities and an increase in real wages is a must. This is certainly not the case in Pakistan. In 2000-01, GDP grew by 2 per cent and unemployment rate (official statistics, independent sources claim that it was even higher) was 7.8 per cent. In 2003-04, GDP grew by 7.5 per cent but unemployment rate was 8.3 per cent. In 2004-05, GDP grew by 9 per cent, however, unemployment rate remained almost constant i.e., 7.7 percent. In these circumstances, where GDP growth does not seem to have a correlation with employment generation, there may be instances where labour force is compelled to work on lower salaries due to scarcity of jobs.

Economic growth, without social justice is meaningless and certainly not a sufficient binding force to keep the society and nation intact. During the 1960s, Pakistan had an impressive growth rate. On an average it was 6.8 per cent from 1963-68. Just before 1971, Pakistan had observed a marvellous economic growth rate nearly 9.6 per cent. However, due to lack of social justice, this growth alone could not stop partition of East Pakistan.

Unfortunately we are not learning any lessons from our mistakes. One may observe infrastructure development activities, but those are confined to elite areas of major cities. These developmental disparities are giving rise to social injustice, a major cause of social unrest. It is more than a coincidence that according to a World Food Programme-SDPI report, the areas termed as ‘axis of evil’ in Pakistan such as Dera Bugti, South Waziristan, North Waziristan, Hungo, Bolan, Kharan are among the most deprived and food insecure districts of Pakistan.

Things become even worse when people find obvious disparities between developmental and non-developmental budget, especially the disparities between the allocation of resources for defence purposes and those for public sector development including health and education. Situation gets worst when masses find out that mere allocation for developmental expenditures do not mean anything and one third of allocated funds for public sector development programme remained unspent whereas there was an over expenditure on defence.

Along with these statistics and facts are issues like bad governance, judicial and democratic crises, and non-consultative, non transparent policies that widen the gap between micro-realities and macro-indicators. This leads to a situation where masses don’t feel any ownership in the so-called ‘development plans’ of the government, leaving government in a situation where it keeps claiming and reminding that its policies are bringing prosperity and pro-people development in the country.

The writer is an Islamabad based policy analyst and columnist. Email

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