A poor country, indeed

The outgoing government seems oblivious to the fact that Pakistan is a poor country, it refuses to reduce its expense.

Pakistan is not making money. It is making no money because industrial growth is stagnant, jobs are not being created and as such retail spending is not growing as fast as it needs to in order to kick-start a demand-based cycle of economic growth. Because there is not enough growth in retail spending, the manufacturing sector, for the most part, is operating well below capacity and industrialists feel no compulsion to increase domestic production.

Even if industrialists did want to expand, say to target the export market, the security situation and subsequent shut-downs and strikes and the unreliable power situation is a deterrent. Not to mention the fact that banks are not willing to lend to the private sector anyway. They have a good thing going where they can just lend to the government and live off the spread. And then most Pakistanis pay no tax. In each of the last three years, only 270,000 individuals paid any kind of tax at all. It is no wonder then that we have one of the lowest tax-to-GDP ratios in the world. So is it any wonder that Pakistan makes no money? This is one side of the story.

The outgoing government, however, seemed oblivious to the fact that we are a poor country. It consistently refused to reduce its expenses and try and work within its means. For this, it has to take loans. This is the other side of the story. In a recent report it was disclosed that the PPP government, in the first eight months of the current fiscal year, spent Rs950 billion more than it earned. Out of this, Rs713 billion was just for interest payments. And the rest was for power subsidies. In other words, not a penny of this was spent on development expenditure that might have translated into economic growth or earnings in the future. All economic indicators suggest that Pakistan is a poor country. But government spending is the one indicator that fools us into believing otherwise.

Published in The Express Tribune, March 25^th, 2013.