Our economy is in a chronic trap of uncertainty, persistently exacerbated by one crisis or the other, year in and year out mostly of our own doings since the beginning of this decade. Before the military government could make any long-run good impact on the economy, it has been plunged into a ‘war on terror’. While the regions adjacent to Afghanistan are constantly paying heavy price both in terms of colossal loss of human life and economic miseries, the main land is not left aloof in a number of ways. In the name of the writ of the state, an unfortunate episode has occurred in Balochistan casting a long shadow over the future of the federation. On economic front itself, the sugar crisis hard hit the poor consumer. In short there is a raft of such misfortunes the country has to successively undergo; these are daily underlined in the press and electronic media. The recent addition is that of the judicial crisis. The mainstream political leadership is in exile and they are continuously fuelling it. All this is causing a permanent damage to the economy. Way back in the late 80s or so to say in the early 90s the country had decided to pursue a free market development strategy in consultation with the donors. Major part of the agenda has been implemented over the last 27 years with not a change in commitment despite many changes in the political guards. One of the prime goals was to integrate the national economy into the global economic system.

In an uncertain environment continuously pent up, the economy’s resilience and strength to realize its potentials has diluted. Most of the graphs are seriously diverging from the long run trends and the country’s gaps with the other countries enjoying similar resources are widening in the fields of gdp growth, poverty, savings, foreign investment, human capital, education, health, environment, human rights, democratic institutions, independence of judiciary, law and order, and governance. The average GDP growth has remained around 5 per cent during 1999-3006. Agriculture which is labelled as the main stay of our rural population showed annual growth of little less than 3 per cent during this period including some years either with net decline or no increase in production. Most of the large-scale industry is dependent on agriculture either through forward or backward linkage. With the given development stage of the industry, any of its growth claimed above the base could be no more than a mere aberration from the normal trend. When the growth figures are quoted a common man does not believe them. His opinion is rational as he does not see any linkage in them with his welfare. So let us look at what is underneath these figures.

The land holding distribution is highly skewed and the growth is not shared by small farmers, tenants and non-agriculturists in the rural areas. If we look at GDP growth scenario against the national perspective, the poor and the unemployed did benefit from this and the capitalist class was the chief gainer. This is supported with continued deterioration in poverty incidence in the country. One of the serious fall outs of the structural and stabilization reforms which Pakistan is implementing like many other countries including the transition economies - universally recognized - is a rise in poverty as also established in many research studies and that is why many such countries have been recommended to supplement them with strong poverty alleviating strategies. Even when looked against the past perspective, this growth does not show a good comparison. The economy experienced gdp growth of around 7 per cent in the 60s and the 80s. It does show a margin over the 70s but that was a period when the economy had undergone a major structural overhaul and that was also partly due to some natural vagaries like floods, droughts and bad weather and external factors like oil price hike, international stagflation besides cessation of erstwhile East Pakistan. Nevertheless that decade witnessed a sharp decline in poverty incidence, a credible contribution of the egalitarian public policies. During that period some maga projects with long gestation period were started which reached fruition in the following decades.

This growth does not paint a satisfactory picture when we compare it with that in some other counties in the region. Ours is nowhere when we look at the East Asian scenario. We are lagging behind even India and China, two new emerging giants pulling the global growth as their gdp growth figures are some where in the vicinity of 10 per cent or above.

In the initial years, there was some let up in inflation but in most recent years it has been in the range of 8-9 per cent. Once inflation is above GDP growth which was so in our case, it invariably hurts the poor disproportionately more, and poverty incidence rises unless some extraordinary bold anti poverty measures are timely put in place. Our savings rate continues to be miserably low as it is 14.5 per cent. Like wise is the investment rate which is 16.5 per cent, and their gap is met through foreign borrowings. No economy in the world could afford to post 6 per cent growth or so with so low savings and investment ratios. It is only possible when social sectors are permanently ignored the way we did. With our planned economic growth in view, we have to depend on foreign investment to supplement our domestic efforts but that requires peaceful environment, independent judicial system, good-governance, in addition to market friendly economic policies. No country in a war or in a political turmoil has ever been an attractive place for foreign investment. Such investment has wings like a migratory bird to fly in no time from a hostile environment. We had before us the experience of the East Asian countries of financial crisis resulted from the flight of foreign capital in the late 90s. There should be no complacency about some transient improvement in some indicators. Crisis after crisis the country is experiencing is worsening the macroeconomic environment, a bad omen for future, which should be seriously looked at. What ever is humanly possible to roll back should be gracefully done and the real leaders do not shy away in sacrificing personal interest for a national cause.

If the political uncertainty were allowed to continue, the economic situation will definitely deteriorate. The nation wide judicial system is not fully operative and the whole legal fraternity is in a continuous protest. They form an elite educated class and the implications of their protest have wider effects on the civil society. This is causing delay in dispensing justice. Strikes disrupt the smooth running many economic activities. Police fleets are diverted from their normal duty to attend to the strikes. This has serious implications for the economy. Besides the worsening situation being experienced in the area of price stability, poverty, employment, human capital, physical infrastructure, the external trade sector has come under considerable stain.

The trade gap has increased to $ 9 billion in the first ten months of the current and it will climb to around $ 12 billion at the close of the year. Do we have that much foreign exchange resources? This signals many more serious developments in the offing as the real effective exchange has already overvalued. If we don’t correct this distortion on our own as deemed necessary under the neoclassical model being implicitly pursued to steer our economy, the IMF and the World Bank will eventually press for that. Devaluation is under the circumstances is inevitable. In any case the debt will rise. Our dependence on donors will increase and our independence in domestic economic management will be compromised. To quote Allama Iqbal " Too jhukka jub gher ke aghe, na mun tera na tun", which in our context implies that begging from foreigners would be compromising on policy issues.. I quote here some pertinent facts for a most recent year for Pakistan’s comparison with the Indian and Chinese economies. One can ignore the facts but cannot refute them.

Table

Country GDP Domestic Inflation Trade Foreign Human

growth savings rate surplus exchange develop-

rate +/ trade reserves ment

deficit in $ billion index

Pakistan 6.6 14.5 8 -$ 12 bil 13.6 bil 0.539

Est for 2007 on Apr 14, and

2007 Rank=134

India 8.2 28 5.2 -$56.1 bil $ 203 bil 0.611

for 2007 for April and

2007 Rank=126

China 10.7 42 2.7 + $200.1 bil $ 1202 bil 0.768

for 2007 for March and