Causes of economic downslide

The poor and the low-income group are now more worried about the rapidly changing socio-economic conditions. There is no hope and no distant silver-lining for the under-privileged, no matter what turn the economy may take

By M. Osman Ghani

Although the trickle down effect was much in discussion and speeches in the era of economic growth of the past government, but somehow it never materialised and the common man remained in stress and nothing reached him or changed for him. The poor and the low-income group are now more worried about the rapidly changing socio-economic conditions. There is no hope and no distant silver-lining for the under-privileged, no matter what turn the economy may take.

Growing sense of insecurity and deprivation is spreading fast; common man is worried at the unbridled price-hikes and on top of it,, persistent load-shedding, higher fuel costs and scarcity of essential food items like wheat flour, etc. Industrialists are concerned at the rising prices of fuel and energy, higher import cost of vital inputs and non-availability of skilled labour-force. Farmers are facing untold hardship and are unable to make both ends meet, no matter how hard they work. They are faced with shortages of water, shortages of electricity and unavailability of better seeds and cheap fertiliser, and other inputs along with shortages of cheap capital.

Fear of unemployment and rejection from society are now consistent in the minds of young generation, which is demoralising for them. Their parent’s sacrifice in terms of finances and student’s hard work and long hours of studies and all that to come to nothing. The growing problems that our governments and policy maker now encounter are multi-dimensional, concerned not only to maintain the present level of economic prosperity but with the passage of time, how to improve the standard of living of people. The destiny of 170 million Pakistanis rests with the wise decision of the government, especially in the field of education, career building, employment generation, human sector development and overall welfare of the people and their basic needs. The nation’s worry of external threat and internal disharmony is also on the rise.

Witnessing one crisis after another on the socio-economic fronts, the hay days of growth and prosperity appears to have slipped away, thus the fiscal year 2007-08 will be remembered as one of the most turbulent years of Pakistan’s economic history. During the year, inflation recorded a growth of 12 per cent – highest since 1990-91 while food inflation was at 17.6 per cent it achieved levels never seen before and it was set to rise further only to devastate the fixed income group. Added to these the country faces a productivity crisis in her vital manufacturing sector, an oil crisis, an emerging water crisis. All these crises make Pakistan’s future destiny to look as grim. The trade gap and current account balance gap were highest ever at 15.3 per cent and 14.1 per cent of GDP in 2007-08 and if this trend continues in the future it will become the single most destabilising factor of the Pakistan’s economy. Trade deficit during 2007-08 shot by nearly 53 per cent mainly on account of rising oil prices and decline in Pakistan’s textile and clothing exports. After remaining low and within the stipulated targets for a very long period Pakistan fiscal deficit is again raising its head, which during 2007-08 was reported at 6.5 per cent of GDP. If appropriate measures were not taken the fiscal deficit could rise to around 10 per cent of GDP in the current fiscal year. Pakistan is losing its competitiveness in the field of textiles exports; power shortages are only aggravating the situation for the worse. Pakistan’s stock market had been one of the leading indicators of economic growth and prosperity for the last 6-7 years. During 2007-08 KSE 100 share Index and its market capitalisation suffered decline by more than 10 per cent over the previous year.

But the question arises is why, despite a strong economic base all of a sudden the ascending level of fear is bulldozing all positive gains and expectations. The answer is not so difficult to illustrate. It is because the so called era of economic boom and rising standard of living revealed the half truth, only the brighter side of the coin. Many economists now believe that the basic parameters of the often repeated story of a surging and booming economy was unrealistic and mostly based on engineered data, may be due to ignorance or inherent in competency of the economic managers.

But Pakistan has enough potential to fight back the impasses to achieve real break-through and milestones in her socio-economic sector with new initiatives and appropriate planning.

To revive the momentum of economy growth, investment activities and maintain prices stability what the government and the policy makers need to do is to cool down the hyper tempo of exaggerated fear and feeling of insecurity among the 170 million people. In fact, we need to fear no one than our own lethargy and inaction. Pakistan is strong enough to withstand challenges to its security, integrity and prosperity. Pakistan has enough potential to put itself on the path of rapid progress and prosperity. It has large number of working-age population, ready to accept any challenge. Unfortunately, only a minor fraction of the privileged class is creating all the mischief only for their unlawful gains. They are bulldozing law of the land, and creating artificial crises including food crisis. Among them the big hoarders, profiteers and smugglers are bent upon to shake the foundation of the economy. This small hoard of black sheep must be dealt with very severely and ruthlessly. Despite repeated public demands, not a single black sheep has yet been persecuted publicly under the law of the land. Lack of punishment and accountability only make them bolder to inflict more harm to the people and the country.

Major and visible initiatives need to be taken to increase agricultural and industrial productivity both in the rural and urban areas. To address the alarming level of poverty and unemployment micro and medium enterprises (SMEs) should be promoted in large scale. The purpose for which micro credit schemes were launched but yet to be availed by the public as they are out of the reach of the common man. This is mainly due to chronic and deep-rooted corruption and inefficiency prevalent in the micro credit system.

Through improved agricultural productivity and a modern livestock sector Pakistan can not only overcome her shortages of food but it can become a net exporter of those commodities. Live stock is another area where huge potential exist for growth.

Increasing the productivity of livestock systems and mixed crop-livestock systems motivates farmers to protect their rangelands and use them sustainable for raising livestock rather than putting them to the plough. Already, in many parts of the world mixed crop-livestock systems are the norm. In the developing world, livestock add value to resources that would otherwise go to waste. The livestock industry can generate a large economic impact through its forward and backward linkages in Pakistan’s economy.

The main objectives of livestock development in Pakistan should be to achieve self-reliance in livestock products and improve productivity of milk and meat and open huge employment opportunities in the rural areas. These objectives could be achieved through implementing enhanced productivity of existing livestock, dairy, poultry and fisheries resources, through development of new technologies, scientific methods of farming and improved management practices; exploiting export potential of livestock, dairy, poultry and fisheries and their products; promoting import substitution of milk and dairy products; ensuring availability of credit for livestock farmers, especially the landless ones; improving livestock marketing infrastructure; strengthening institutions for livestock research and extension and improving their linkages and coordination. Development of import substitution like edible oil, tea and renewable energy should also be developed.

To rapidly develop small-scale industry agriculture, livestock, forestry and fisheries a revolutionary system of interest free loan should be introduced. For this purpose a special fund could be established by the government. The criteria that would entitle one for interest free loan should be efficiency, hardworking and willingness to accept challenges. Young, educated and unemployed person could be included in such schemes on priority basis.