GDP growth: Falling short

While unveiling the Economic Survey of Pakistan 2010-11, the finance minister said that the economy grew at 2.5 per cent for the current fiscal year, falling well short of the government’s target of four per cent.

What the minister said was expected, given that the country is still reeling from several factors that inhibited economic growth, foremost among them the floods of 2010 and the law and order situation in the country in general.

Pakistan’s growth figure pales in comparison when compared with our next-door neighbor India — with 8 to 9 per cent GDP growth — or even Bangladesh. The hugely disappointing figure also points to a failure of the economic policies of the government in putting the economy on the path of robust economic growth. The finance minister also said that the fiscal deficit would not be as large as expected, but his assertion needs to be qualified given that the figure provided by him — 5.1 per cent of GDP — is still quite worrying. A large fiscal deficit imposes a burden on the economy in very real terms. Besides, the bulk of our budget is allocated to defence expenditure and debt servicing. Of the remainder, a substantial portion is spent on the running of the government machinery, leaving little for social sector development.

This neatly explains why we rank so abysmally in important indicators such as literacy, quality of healthcare, percentage of population with access to clean drinking water and so on.

Brining the fiscal deficit under control will be a challenge in fiscal year 2011-12. One can expect rising fuel and food prices as government withdraws its subsidies, and more people will be pushed below the poverty line.

While other countries at stages of development similar to that of Pakistan are also experiencing the same challenges and food and fuel inflation is a global phenomenon, Pakistanis are worst off because of the near absence of any safety social net for the most vulnerable. Unfortunately, ours is rapidly becoming a society where the government is unable to provide to citizens even the most basic of services and with a growing trend of the rich and resourceful being able to appropriate for themselves much of the resources and rewards that accrue in the economy.

Published in The Express Tribune, June 3^rd, 2011.