Governance failure: ‘Cost of power failure almost Rs1.3tr’

BNU Institute of Public Policy releases sixth annual report on economy.

LAHORE:

The power shortage cost the economy Rs1,272 billion and 1.5 percentage points of growth rate in 2011-12 and is one of the major governance failures in Pakistan, according to a report prepared by the Institute of Public Policy at the Beaconhouse National University.

The State of the Economy: From Survival to Revival report was launched here on Tuesday with Governor Makhdoom Ahmad Mahmood attending as chief guest. It estimated that without power shortages, Pakistan could have had a growth rate of 4.5% rather than 3%.

The IPP report highlighted the security crisis and rising crime as indicators of weak governance and identified the “proactive” judiciary and media as factors in this. It described the foreign exchange reserve situation as “critical”.

In an evaluation of the quality of public services, the report noted that the public was least satisfied with the police and irrigation departments. It estimated that the police had taken bribes worth over Rs46 billion in the year, while the crime rate rose.

Two thirds of rural households reported a worsening of standard of living over the past five years due to inflation, insecurity, corruption and load-shedding, according to the report.

Divert funds

Speaking at the launch, Governor Mahmood said that he was in favour of all the resources earmarked in the Public Sector Development Programmes of the provinces for one year being diverted to the central government to tackle the energy crisis.

He said that Pakistan was a resilient country which had survived several financial, political and other challenges. He blamed the lack of governance for the instability in the country. “By now, we as a nation should have had a vision … as a politician, I feel we have let the nation down,” he said.

He said no party appeared to have an edge ahead of the “mother of all elections” on May 11. Whichever party wins would have a very difficult challenge due to the many problems the country faced. He said that the various political parties would have to learn to co-exist.

Dr Parvez Hassan, a board of directors member at the Lahore School of Economics, said that the fundamentals of the economy had weakened over the past five years, but it was still resilient.

He criticised the previous government’s development policy as flawed. He said that investment in human capital was key to improving the economy. “Pakistan faces deep security, financial and growth crises, all of which are interlinked,” he said.

Tax reform

IPP Vice Chairman Dr Hafiz Pasha said that the economy had deteriorated over the last 2-3 months. There had been a $4 billion drop in foreign exchange reserves and imports had reached their peak in March. He said that he had seen many financial crises during his service in government – in 1993, 1996 and 1998 – but the current one was the worst. He said tax reforms were vital. “We have been living way beyond our means for far too long,” he said.

IPP Director Dr Aisha Ghaus Pasha said load shedding had crippled the economy and held back GDP growth.

Former Punjab governor Shahid Hamid said that structural reforms of public financing were essential. “There is too much unnecessary spending,” he said. “We cannot afford to spend money on development projects which are there just for show.”

Published in The Express Tribune, May 8^th, 2013.