Let’s make economy a national priority

KARACHI:

Economy grows when more goods and services are produced. But growth in a period cannot be sustained if it has resulted primarily due to a low base or short-lived demand – or the forces that caused the growth become weaker.

Pakistan’s economic growth not only fluctuates widely during a “high average growth” period of five to seven years but is inevitably followed by another period of “low average growth”.

According to World Bank statistics, Pakistan’s economy grew 7.5% in 2004 but then the growth started decelerating in the years that followed and finally came down to just 1.7% in 2008. After trying to take off with a pace of 2.8% in 2009, the growth momentum again slowed down to a low of 1.6% in 2010.

From there onwards, the economy, however, continued to grow and peaked at 5.8% in 2018 - only to plunge slightly below minus 0.1% in 2019 and 0.3% in 2020. (Regardless of the difference in gross domestic product (GDP) rates calculated by Pakistani authorities and the World Bank, the fact remains that the high average growth period is inevitably followed by the low average growth period, so forget those differences for the sake of argument).

This means the country has never experienced sustainable economic growth even for a decade. This unsustainable growth is the root cause of many economic ills including poverty, joblessness and slow upward movement in social indicators which, in turn, makes the political system too vulnerable to interventions.

For the democracy to take roots, this must change – once and for all. Whichever government is in power must realise that strengthening economic fundamentals is the only way it can contribute to strengthening democracy and to ensure a larger share in the democratic power pie after the end of its term in office.

Sadly, this point is always lost by the government of the day. Pakistan Tehreek-e-Insaf’s (PTI) maiden federal government is no exception. That’s why we see the inherent vulnerability of the democratic setup becoming more obvious. Achieving a sound average economic growth during the PTI’s five-year term ending in June 2023 seems too big a task.

Opposition parties can either help the government in whatever average growth it can achieve and wait for elections in 2023 to persuade voters that with such low economic growth – and accompanying economic ills – the PTI doesn’t deserve the mandate.

Or, they can become impatient and try to bring down the government before the end of its term only to inherit a chaotic, low growing economy and see their own term truncated. The choice is theirs.

Even if the opposition parties achieve their objective of getting rid of the government, they would not only be able to complete their own term in office but, more damagingly, would also be unable to strengthen the economic fundamentals.

On the other hand, if the opposition learns to be patient, starts playing its due role in taking the government to task on its shortcomings and inefficiencies, the situation in 2023 will be different.

Democracy will emerge stronger and whatever average economic growth the PTI government will leave as its legacy will help the new elected government to pursue better policies to take that growth to new heights.

Now, let’s have a quick look at some economic fundamentals that are improving and their constant improvement, so necessary for strengthening democracy, depends as much on how the opposition parties behave as on the government in power.

• For the first time, the government has decided to take a harder look at incentive schemes for export sectors and link all future incentives – whether monetary or non-monetary – to their export performances.

• For the first time, the government has decided to allow more export-oriented companies to join the club of incentives-eligible firms under the umbrella of private sector business associations representing nine export sectors including textile and food.

• For the first time, the government is promoting sales tax rebate at the rate of 5% among consumers if they make documented purchases from designated superstores using their bank wallets.

• For the first time, the government has introduced a marvelous scheme to attract larger amounts of remittances through the Roshan Digital Account and that has helped boost remittances even at a time when overseas Pakistanis have lost jobs in their host countries and export of Pakistani manpower has decreased.

• For the first time, the government is paying more of principal amount of foreign debt along with interest, which will eventually help contain growth in such debt in the medium term.

• For the first time, the government has stopped borrowing from the central bank and is instead retiring old debt of the State Bank.

• For the first time, the exchange rate has been made truly market-based.

These and similar other measures – all very important from the nationalistic viewpoint – cannot be ignored and need to be carried to their next levels jointly by the government and opposition parties.

The writer is an electronic engineer and pursuing master’s degree

 

Published in The Express Tribune, January 11^th, 2021.

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