‘Trade between Pakistan and India to be mutually beneficial’

USAID chief economist considers bilateral trade a positive development.

LAHORE: Steps taken by the governments of Pakistan and India to initiate bilateral trade are a welcome sign, United States Agency for International Development (USAID) Chief Economist Thomas Morris has said. The move will help both neighbouring countries strengthen their economies, as both nations face similar challenges in inflation, poverty and a burgeoning workforce.

Morris, during a visit to the Lahore Chamber of Commerce and Industries (LCCI), said that although India’s economy is growing at 6.1%, the country also has a huge workforce to tackle with. Pakistan’s GDP growth, despite government’s claims to be at 4%, will remain at 3%, he claimed.

The USAID executive said the country’s fiscal position is deteriorating and numbers suggest the gap is widening with every passing day. He linked it to the fact that a major chunk of tax-payers’ money was consumed in defence expenditures, subsidies and interest payments.

After spending huge sums of money on non-development expenditures, the government has been left with no finances to divert to ameliorate the hard-pressing problems of energy shortages and social development, he noted.

Morris pointed out that in 2008-2009, the government allocated Rs77 billion for electricity subsidies, but had to spend Rs99 billion when oil prices in the international market were still below $80. On the other hand, in the 2010-11 budget the government earmarked Rs32 billion for electricity subsidies, but had to spend Rs284.83 billion as oil prices had crossed the $100 per barrel barrier.

He was of the opinion that there is a dire need to correct the energy mix of the country, as any change in petroleum products prices adversely affects the government’s budgetary estimates. Any further delays in initiating sector-specific reforms will further aggravate the situation, he added.

Talking about the agricultural sector, the economist said that agriculture in Pakistan has been constrained due to insufficient investments. Its GDP share in 1960 was 46.2%, but in 2010 it was only 20.8%, he observed. Pakistan’s services sector is currently the major contributor to the GDP at 54.6%, followed by the industrial sector at 23.6%, he noted.

However, he also remarked that through the global recession, Pakistan’s economy had remained positive; which, he said, is indicative of its resilience. Pakistan’s remittance figures have been encouraging, he noted, and have remained mostly over a billion dollars per month over the past year.

He said that Pakistan should further strengthen economic relations with the United States by signing new trade agreements, as Washington is concerned about Pakistan’s economic situation.

On the occasion, the LCCI president said that the body was ready to collaborate with USAID in carrying out projects in the energy sector for the sake of economy and the interests of Pakistan and its nationals.

On the condition applied by a US Congress Committee to link economic and military aid to Nato supply resumption, the LCCI president deem it unjustified considering the present situation of Pakistan, which, till present, has suffered losses of over $65 billion due to its frontline role in the ‘war against terror’.

Published in The Express Tribune, May 16^th, 2012.