reform
The task ahead
By Raza Rumi
Pakistan has crossed a major milestone last week by achieving a historic consensus on the 18th Amendment with 105 clauses, additions and deletions to the Constitution. The distortions inserted by the military rule have been done away with. Political elites this time, however, have gone a step further and improved the state of provincial autonomy. Perhaps this is where a civilian negotiation and democratic politics of compromise has been most effective. Who would have thought a few years ago that this was achievable? There were many skeptics who thought that the amendments might not be approved. However, the ‘corrupt’ and ‘incompetent’ politicians have proved everyone wrong.
 

aid
Helping out
By Atle Hetland
At a Seminar in Islamabad recently, the Pakistan-Norway Association (PANA), with the Embassy of Norway, marked 40 years of successful development cooperation with Pakistan and discuss issues with partners and experts, including half a dozen speakers and over fifty invited members from the public and private sectors, NGO and UN partners, such as, Right to Play, Friends of the MIND, Sungi Foundation, Norwegian Refugee Council (NRC), Norwegian Church Aid (NCA), UNIFEM, and UNICEF. Norway channels its official development assistance (ODA) through various partners, including the government, NGOs and the United Nations in order to reach as good processes and outcomes as possible, although it is questionable if this is economical.
 

The root cause
By Dr M. Javaid Khan
In the 1800s, the British army was confronted with machine gun for the first time. At that time, British battle strategy was to have the soldiers — who wore brightly coloured uniforms — present a united front by marching forward toward the enemy in long, straight rows. This had been effective in times past, for the approach of many rows of highly visible soldiers was intimidating to the enemy. However, in their initial confrontation with these machine guns, 500 British soldiers were killed immediately. When the British field commander saw the devastation, he sent the communication back to headquarters: “Send me 500 more men!”
 

trade
Benefits of trade links

South Asian countries, mainly Pakistan and India, should reap the benefits of cooperation in the economic field
By Alauddin Masood

Since ancient times, there had existed strong cultural, historical and commercial bonds between the South Asia and Central Asia. However, those historic linkages got disrupted in the 19th century when the Czarist Russia occupied Central Asia and the Britain colonized the South Asia. In the Middle Ages, camel caravans carried merchandise, traveling on the Silk Route, which connected China, Pakistan, Afghanistan, Central Asian Republics and Europe. Following Soviet Union’s implosion in 1991 and emergence of CARs, Central Asia witnessed an upsurge in international prominence in marked contrast to its neglect under the Soviet rule as a faraway, godforsaken place of no serious interest to anyone.
 

Sharing is redeeming
Excerpts from speech by High Commissioner of India at the function organised by the Karachi Council on Foreign Relations and Pakistan-India Citizens Friendship Forum on April 3, 2010

 

Prospects of growth
Realising the GDP target is a tricky affair, especially in Pakistan where energy crisis and ineffective planning make the task uncertain
By Ather Naqvi

This year the State Bank of Pakistan (SBP) estimates a Gross Domestic Product (GDP) growth rate of 2.5 to 3.5 percent which, according to experts is a very low target. Since the GDP is a basic measure of a country’s overall economic output, it broadly reflects major indicators of a country’s economic performance and its eventual impact on the common man.

 

 

reform
The task ahead
By Raza Rumi


Pakistan has crossed a major milestone last week by achieving a historic consensus on the 18th Amendment with 105 clauses, additions and deletions to the Constitution. The distortions inserted by the military rule have been done away with. Political elites this time, however, have gone a step further and improved the state of provincial autonomy. Perhaps this is where a civilian negotiation and democratic politics of compromise has been most effective. Who would have thought a few years ago that this was achievable? There were many skeptics who thought that the amendments might not be approved. However, the ‘corrupt’ and ‘incompetent’ politicians have proved everyone wrong.

Leaving aside the discourse of corruption, the NRO, and a vociferous media campaign against the President, the achievements in the last one-year by all political parties have been tremendous. The Awami National Party, after its initial truce with the militants, has stayed the course and resisted Talibanisation by giving full support to the army operations against the militants. The PPP and PML-N, despite their rhetoric and political point-scoring, have worked together on the national finance commission award (NFC) and now on the implementation of the Charter of Democracy (CoD) that has become the basis for the amendments to become a reality.

The nay-sayers of democracy and the political process forget one fundamental fact: a federal structure cannot work without a robust political process. A start has been made through the recent successes after a decade of ‘controlled democracy’. However, despite the march towards the democratic ideal, there are clear and present dangers that democracy is as fragile as ever.

The reasons are not difficult to state: the political class that is adept at wrangling and the unelected institutions of the state whose quest for power is an ever-present reality. The second factor is the dwindling state of the economy that shows little or faint signs of recovery. This would spell disaster for any civilian government regardless of which party is enjoying power at the centre. Finally, the transition required at the federal and provincial levels of governance will also be a challenge bringing out the issues of state capacity into the limelight.

Some credit should go to the otherwise-discredited president. Mr Zardari has relinquished powers to appoint or sack prime ministers, service chiefs and judges. He has agreed to the abolition of limits restricting prime ministers to two terms, clearing the way for Nawaz Sharif, the opposition leader, to become prime minister yet again. And he has given the chief justice a veto over the appointment of fellow judges.

Political elites

There is no denying that history has been made. It is rare to find a politician who gives up powers of his own accord. The incumbent President who had no credibility to begin with, thanks to years of witch-hunts, media trials, and transgressions has proved all his critics wrong. His role and powers have been reduced to that of a figurehead.

But the relentless campaign against him continues unabated. This does not augur well for the future of democratic process. It is a truism that no political party wants a general election. The public position of the parties is clear on that front. Yet, the mounting campaign against the President who happens to be the leader of the largest political party implies that the consequences of his exit from the office stripped of all powers will lead to further instability. An in-house change that comes out of exigencies of power politics will also set a wrong precedent that the two main parties have worked to avoid at all costs.

Unelected institutions

The key power wielders in Pakistan are now the two institutions of the state, the army and the judiciary. The latter has acquired power on the basis of a populist movement and its decisions thus far have taken cognizance of public mood. Whether it was to set the price of sugar to the reopening of the Swiss cases against the President, there seems to a clear tilt towards the popular as opposed to the technically legal.

The army has also recovered from the setbacks caused by the Musharraf era. First, it has shown great resolve against the militants in Khyber-Pakhtunkhwa and the FATA and has earned public approval. In addition, the belligerence of Indian leadership has also made the army central to debate on Pakistan’s survival. Most importantly, the West, especially the USA, has also formally recognised the army as the counterpart negotiator. The latter views Pakistan army as central to its Afghanistan strategy even at the expense of the full authority of the civilian government.

Several analysts, however, maintain that the swing of the power pendulum towards the army and the judiciary is a danger to the future of civilian governance, which was achieved after prolonged struggles on the Pakistani streets.

A particular matter of concern is the issue of presidential immunity, which has been brought into public light through the judgments of the Supreme Court. Whereas Article 248 of the Constitution is quite unambiguous on this issue, there are strong indications that the court is in a mood to reinterpret the article and submit the judicial process to a populist clamouring for accountability and anti-corruption.

Policy initiatives over the last year have shifted from the federal cabinet and the parliament to the GHQ and the courts. Whether it is policy regarding India, war against terrorism, prices of essential commodities, promotions within the civil service or appointments of judges, the elected government has a very limited role to play and has had no choice but to submit to the decisions of the two powerful institutions of the state.

State capacity

The 18th Amendment calls for a major shifting of powers and functions from the centre to the provincial governments. Questions have already been raised on the limited capacity of the provincial governments to adjust to newer realities and whether they are prepared to assume enhanced responsibilities — from regulatory mechanisms to policy-making, curriculum-development or even legislation. What will happen to the mammoth federal bureaucracy and how would it manoeuvre to preserve its vested interest is a question to be reckoned with. In addition, the provincial governments have already rolled back the comprehensive local government reform initiated by General Musharraf, leaving a huge governance vacuum at the local level. Rights, entitlements and services are mediated and negotiated at the lowest level of governance. The citizenry is soon going to find it pushed to a corner when the local state is in a process of transition, while the provincial government is too busy acquiring and consolidating newfound powers. In the short-term, there is going to be administrative chaos, if not anarchy at all four provincial capitals. If we add the usual power struggles between the centre and the provinces, this process is going to be messy and, dare one say, conflictual.

Missing amendments

As noted above, the political consensus achieved thus far is phenomenal by all accounts. However, the reforms committee and the parliament have ignored two issues. First, the status of the Federally Administered Tribal Areas (FATA) has been left untouched. What were the reasons for not addressing this war zone and global hotspot by the maverick political elites of Pakistan? If they were scared of the national security apparatus, they could have engaged with the GHQ, as they generally do at the drop of a hat. Second, the Islamic provisions unlawfully inserted by General Ziaul Haq are very much there, keeping Zia’s ghost alive and kicking, even though his name has been deleted from the basic document. For instance, the condition of the Prime Minister being a Muslim is completely unjustifiable. Given that Pakistan is a Muslim-majority country, why should such a provision be retained in the basic governance document? This is just a simple case of pandering to the mullah lobby and the process since 1948 remains unchanged.

The ailing economy

The larger issue remains: how will the improved constitutional structure lead to economic progress, more jobs and opportunities for the millions living below or a little above the poverty line? The growth rate is struggling to increase a little over the population increase per annum. The 25 percent inflation rate is the highest ever witnessed by Pakistanis: and all estimates and forecasts suggest that the prices of food are going to further increase. The ongoing energy crisis has depleted what little industrial capacity there was, and the political squabbling over the type of power plants means that any solution to this crisis would be controversial and used for political gains. This is perhaps an area where the political elites need to reconvene and think beyond their immediate power-interests. Pakistan is in a desperate need for structural reform. Only 2 percent of the population pays taxes and there is little or no collection under the head of agricultural income tax. Similarly, the economic policy-making process is completely in the hand of the international financial institutions and generalist bureaucrats at the top. Unless the major political parties agree on an economic reform agenda and fully implement it, we will remain a debt-trapped, cash-starved and failing economy. The current signs are not promising: there is deep suspicion about the economic management at the centre and there is a lack of bipartisan consensus. In this situation, the democratic experiment reignited in 2008 faces a major challenge. Perhaps this is the biggest threat to the survival of democracy in the country. The fundamental cause of the lack of economic performance is political instability that may not go away so easily. Therefore, another reforms commission is required to deliberate and come up with a package that includes protection of citizen rights and confronting the economic oligarchies by strengthening the competition commission of Pakistan.

In conclusion, we have come a long way from the dark years of military dictatorship but we are still not poised to enjoy political stability, democratic governance and economic progress. Geo-strategic compulsions, over-powerful institutions of the state and dismal economic conditions may just dilute the effect of the recent constitutional amendment passed by the Parliament. Finally, state capacity to deliver on all these fronts is weak and under severe challenges, and it is time the Raza Rabbani committee is followed by several commissions to implement the reform in the political and economic domains. Otherwise, we will continue to be trapped in the cursed cycle of history.

caption

(Top) Consensus is finally achieved. (above) Raza Rabbani deserves appreciation.

 

aid
Helping out
By Atle Hetland

How successful was the two score years’ cooperation with Pakistan nobody knows, so neither PANA not the Norwegian Embassy can claim such high achievements. As in most development aid, the outcome and impact are at best moderate, sometimes even negative. At the same time, each specific project or programme is often successful as seen from a narrow perspective, but how useful the activities were as seen from the poor people’s perspective, those who are to benefit, is another thing. As much as we believe the Norwegians did as well as they could, and their aid is generally both well-meant and of high quality, but to say that it is indeed successful, is to go too far, especially in the case of Pakistan. We shall shed light on Norwegian aid in general and the aid to Pakistan in particular.

Pakistan is a medium-large recipient of Norwegian aid, with Afghanistan as the single largest partner worldwide, alongside the Palestinian Areas, followed by Tanzania, Mozambique, and the Sudan and other African countries.

Norway is one of the staunchest supporters of bilateral and multilateral development aid, this year allocating about 1.1 percent of GDP. Norway is the third largest donor of humanitarian aid and among the five largest donors to a handful of United Nations agencies, and in general, a strong supporter of the world body. Today, the Norwegian aid budget in Pakistan is about twenty million dollars; last year, some twenty million was in addition granted for IDPs. Afghanistan receives over one hundred million dollars annually in Norwegian development aid. Bangladesh and Nepal also receive sizeable amounts, but corruption scandals in the otherwise excellent education cooperation have recently overshadowed the good cooperation.

The first bilateral Norwegian aid project was the “Indo-Norwegian Fisheries Development Project in Kerala”, which started in 1952-1972. The project was successful as regards modernisation of the fishing fleet, and preservation and sale of fish, but fell short of improving the lives of the poor people. Well, even worse some researchers said, some poor groups became poorer! The Norwegians have always set high aims in their development cooperation, and one such aspect is that they wish the aid to reach the poorest and the most needy. In recent decades, women have been given special focus and other groups experiencing discrimination. And today, India doesn’t want aid from small donors like Norway. Unless small donors join hands with others, such as the European Union countries do, or the aid is large, such as that from the World Bank, India finds that it becomes too costly to receive, administer and report on the aid it receives. This is the case for all major recipients of development aid, including Pakistan.

Norway, where Christianity is the state religion, has a growing number of Muslim citizens and more than a hundred mosques. Norway wishes to underline the country’s religious freedom and it emphasises the important role of Muslims, including a large number made up of Pakistani immigrants and Afghan refugees, about 45,000 in a population of about 5 million. The country has seen minimal religious tension between various groups, and this promises well for the future development of a more multicultural and diverse society on the northern outskirts of Europe.

In Asia, Nepal has been an important country for Norwegian missionaries involved in social and development work, including successful electrification of rural areas, provision of health services and in recent years, large support to the education sector. Bangladesh remains a major recipient, and Norway and Sweden were earlier among the largest donors to Grameen Bank. Prof. M. Yunus, who founded this unique poor people’s, or poor women’s bank, was awarded the Norwegian Nobel Peace Prize a few years ago. In the 1960s and 70s, Norway provided technical assistance to Iran through the ‘peace corps’, sending teachers, nurses and engineers to the country, but with mixed results, according to Norwegian development aid historians.

In Pakistan, Norway’s aid was for a long time mainly commodity assistance, with fertilizers as the major component, and a controversial family planning programme some decades ago. Norway froze its aid when Pakistan became a nuclear power but has rebuilt the programme after 9/11. Today, the portfolio is broad and includes, among other things, assistance to gender and other human rights activities and good governance, community development in the Northern Areas, child health, and vaccination programmes in Sindh through UN agencies, education in NWFP and culture in Islamabad, Lahore, and Peshawar, and assistance to IDPs.

The Norwegian aid programme in Pakistan seems well-balanced. However, questions can still be raised about the areas that have been chosen, who have chosen them, and who are the implementing partners. For example, it is today common to channel a major portion of the Norwegian bilateral aid through UN agencies and large Norwegian and other international NGOs. Local NGOs are subsequently included and they are usually in charge of the actual implementation in understanding with the government. It is not clear how NGOs are chosen, and if new can be added, possibly in consortiums or umbrella groups.

In any case, to be a partner in implementation of development aid, including Norwegian development aid, is good ‘business’, as it is for the United Nations, NGOs, consultants and Norwegian diplomats and other aid workers. They all make good living out of it. We can always ask if it costs more than it tastes, but then who is willing to do it differently? Or, put differently. Is the donor willing to do it differently? Today, the UN is ‘popular’, a decade or two ago private consultants and NGOs were considered ‘best’. The government, which is always the main partner in bilateral development cooperation, is today often bypassed in implementation due to worries about implementation capacity and even corruption. But I believe the government (at its different levels) will again become the most important implementing partner, as it should be, along with the civil society. Even if implementation is not as smooth then, it is less costly and in the longer term, results are better.

Norway and Pakistan have not yet succeeded in establishing major trade links between the two countries. Except for one telecom company there is not yet any other large Norwegian company in Pakistan. In the essential hydroelectric power sector, Jacobsen Electro, Norway, with Iqbal Power Co., is planning work in Pakistan. A Norwegian textile and garment factory, Dale Fabrikker, is said to explore production in Pakistan. Considering, too, that there is a large Pakistani community in Norway, we need to see more trade and cultural and institutional cooperation linkages between the two countries.

Norway should be proud of the humanitarian and emergency aid it provides to Pakistan in the fields of Afghan refugees, earthquake victims and IDPs. Humanitarian aid is a particularly important area of Norwegian aid, and worldwide Norway is one of the largest and most competent donors of humanitarian and emergency aid, including to the UN refugee agencies UNHCR and UNRWA. After the devastating earthquake in Pakistan 8 October 2005, Norway granted about USD 75 million in assistance.

At a general level, it can be agreed that the Norwegian aid to Pakistan has been useful, but we do not know if it has really been successful, or as good as it ought to be considering the high cost of development aid administration, in salaries to foreigners and UN agencies’ and NGOs’ overheads. It can be agreed that it was agreed that important results have been achieved. It may well be true, but how can we evaluate that?

The recent seminar in Islamabad explained that Norway is a among the world’s leading donors to Pakistan and especially Afghanistan. Norway is not only a large donor in terms of volume but also in terms of quality. But as important as regarding high quality assistance, and a high volume, is it to take part in important policy processes and practical debates in support of the recipient country and the various civil society groups. Development aid only becomes development cooperation if such a dialogue takes places and there is professional exchange and assistance.

In addition to providing funding and helping develop fairer international trade; I believe that donors in the future should help the recipient or partner countries in taking part in debate and dialogue about development, emphasizing issues such as democracy at large and at local level. Debate should be about education and health for all, fair pay and good work conditions and a number of issues to help the large majority of ordinary, young, poor people to participate in their country’s development. Easy to say, but difficult to do, but advanced, small countries like Norway can be models. The ‘Scandinavian Development Model’ is still worth considering”. It proved useful when Norway moved from being a relatively poor state to becoming a welfare state in the 1950s.

It is important for poor countries to receive aid to help build expensive infrastructure, such as hydroelectric power stations, hospitals, schools, and so on, but as important is it to help local partners in formulating their own strategies for action, and concrete ways of actually implementing plans. Institutions and individuals from donor countries like Norway can play important roles in facilitating local partners in achieving the goals they want to achieve. They must always bear in mind that they should try to help in such a way that the locals themselves can do their best, including the best of ordinary people. Furthermore, in addition to cooperation with a country in the far North, I also believe in South-South cooperation, simply that we all try to learn from each other, including Norway learning from Pakistan, for example, in how to organize family companies or live in peace with scarce resources.

The writer is a Norwegian Social Scientist based in Islamabad. Email: [email protected]

caption

It’s never too late: an elderly receives aid.

 

The root cause
By Dr M. Javaid Khan

In the 1800s, the British army was confronted with machine gun for the first time. At that time, British battle strategy was to have the soldiers — who wore brightly coloured uniforms — present a united front by marching forward toward the enemy in long, straight rows. This had been effective in times past, for the approach of many rows of highly visible soldiers was intimidating to the enemy. However, in their initial confrontation with these machine guns, 500 British soldiers were killed immediately. When the British field commander saw the devastation, he sent the communication back to headquarters: “Send me 500 more men!”

What was the wisdom of sending another 500 men to their deaths by using the same strategy that had cost others their lives? And this is exactly what Dr Sania Nishtar has endeavoured to tell in her book Choked Pipes. Nothing could have portrayed better the universal truth that stagnancy leads to ruin, than the title of the book describing the poor health system of Pakistan. A timely forewarning to start taking steps for cleansing the clogged pipes, as today many are still trying to solve tomorrow’s problems with yesterday’s solutions, and it’s not working and will not work.

Exploring such clogged pipes and putting the picture on the table was really a gigantic task that an author could undertake. Practising “heart medicine” until a few years back the author is now contributing to health system development by diagnosing and prescribing for the ailing heart of social sciences — Public health.

Universal healthcare access has bedeviled, eluded, or defeated every government for the last 63 years. There had been fragmented efforts that too personality dependant but never a comprehensive approach ever adopted. Different governments toyed with different ideas, including hospital autonomy and health insurance that subsequent governments never heeded to.

This timely book puts the present government fresh quest for a new health policy in historical perspective and gives new meaning to hope. With meaningful cover page the book has a treasure of information on Pakistan’s health system. A major contribution to the public health policy domain, the book would unquestionably initiate discussions and dialogue and shape the public debate over it.

One of the many strengths of the book is its multi-sector health system approach arguing for a paradigm shift in thinking and evolution of a healthcare system in true spirit, rather than the continuation of current ‘sick care system’. Author’s call for developing a national consensus around a reform agenda is also very timely as different provinces, in view of recent increase in provincial fiscal space courtesy new NFC award, are contemplating reforms; comprehensive development strategy of Khyber-Pakhtunkhwa was an example.

She touches very elaborately on primary to tertiary healthcare. She argues with the enormously available current evidence for hospitals restructuring arrangements, strategic purchasing and Public Private Partnership for harnessing the outreach potential of private providers.

The directions for reform stated in the book present a logical separation of areas within which detailed planning now needs to be structured to outline the specifics of the nuts-and-bolts of how these directions will cascade into implementation. In particular, the variegated approach to social protection deserves special attention. By alluding to the different modalities applicable to the informal and formally employers sectors with regard to financial risk-protection, a whole new dimension in planning has been alluded to. Sector experts must now get a consensus on how to institutionalise this approach in Pakistan’s complex and fragmented health system.

In addition, to policy makers, students of public health, other social sciences and even medical professional will profit from the book. Figures, tables, charts in the book are attractive, simple, and conveying message at a glance. Those who do not have time to read the book in full should at least go through Table 14: Reform Agenda — a snapshot, on page 246 that describes concisely the gist of various themes/ideas.

Dr Sania’s book is a major contribution to health system strengthening efforts in Pakistan, regionally and internationally. Her efforts in identifying the issues and recommended options must be considered deservedly and implemented if Pakistan is to stand as a responsible nation.

 

The writer is a Health Economist and Population, Health and Development Professional, presently working as Advisor in Doha, Qatar for development of Qatar National Health Strategy

 

 

trade
Benefits of trade links
South Asian countries, mainly Pakistan and India, should reap the benefits of cooperation in the economic field
By Alauddin Masood

Mainly because of turbulence in Afghanistan, despite vast potential, there is negligible trade, at present, between the countries located in Central Asia and South Asia. Some other major reasons for the low trade are: trust deficit, unresolved political disputes, trade policies, intra-region competition and poor state of infrastructure in some states.

The IPI (Iran-Pakistan-India) gas pipeline project is a classical example which illustrates how trust deficit overshadows development. Initially, it was India that was interested in IPI pipeline. At that time, Pakistan opposed it because of its long-standing unresolved problems with India. Later, Pakistan realised IPI’s importance and its potential to add to the prosperity of the South Asian nations. Iranians were excited to know that Pakistan, for the first time, de-linked IPI project from its other issues with India and considered it purely from the economic point of view.

However, it was difficult to convince the Indian government because New Delhi said it was Iran’s responsibility to bring Iranian gas to Indian borders and that they would only negotiate with Iran. Later, Indian government accepted the project, but the questions pertaining to gas price, pipeline security and royalty to Pakistan, being the transit country, remained Delhi’s causes for concern.

Central Asia is a resource-rich region, in hydro-carbon and hydro-power energy in particular for which the growing economies of South Asia (SAARC) have a great appetite, while the latter possess a great potential to provide a range of products to meet the needs of CARs. The CARs also require an access to sea for their growing trade, commerce and industry and the nearest ports to them are the Pakistani ports of Karachi and Gawadar, which are barely a thousand mile away.

This time-saving, convenient, and economical access to the world can make the goods of South Asian states more competitive in the global markets. However, so far the regional countries have not been able to fully exploit their potential for trade because of strife in states that can serve as bridge for this trade. Some quarters have a feeling that the strife in Afghanistan and the unrest in some pockets of Northern Pakistan and Balochistan province is the handiwork of forces that conceive the rising China and CARs as threats to their economies.

Pakistan’s Foreign Minister, Shah Mahmood Qureshi aptly highlighted the potential for mutually beneficial cooperation between these the Central and South Asian regions when, while inaugurating a seminar, in Islamabad, on October 20, 2008. He said, the potential for cooperation between CARs and South Asia is very high and “so are the prospects for a better future.” Linkages between South Asia and Central Asia could go a long way in promoting political, economic and cultural collaboration between both the regions, he added.

Presently, rising energy demand and increasingly insufficient energy supplies are adversely impacting the economic growth of SAARC states. Unless corrective steps are initiated and implemented, it may be difficult to sustain the achieved and aspired growth rates of SAARC states.

In addition to unresolved disputes, energy shortage has emerged as another major impediment to the growth/development of SAARC countries. The need for energy security of SAARC states is accentuated due to extreme poverty that persists throughout South Asia. Out of its combined population of 1.5 billion, only 59 percent is connected to electricity; while its rural population still relies on biomass to meet their energy needs.

Fostering of cross-border energy investments and promotion of regional energy trade in order to take full advantage of the energy resources available within the region and its neighbourhood are important elements of the solution to this problem. A good example of such cooperation at the global level being that of the South African Power Pool created in 1995, encompassing South Africa, Lesotho, Mozambique, Namibia, Malawi, Zambia and Zimbabwe with a view to provide reliable/economical power supply. This pool works very satisfactorily with immense gain to all participating countries.

Likewise, the power system networks of Bangladesh, Bhutan, India, Nepal and Pakistan could be inter-connected to achieve greater efficiency/economy in the overall system. Studies to extend the CARs’ electricity grid to South Asia, via Afghanistan-Pakistan, also needs to be made.

At present, South Asia’s cross-border energy trade is limited to Bhutan, India and Nepal at a miniscule scale compared with the need/potential for energy cooperation. Now, for some time past, there have been talks for energy trade in the region through Iran-Pakistan-India (IPI), Turkmenistan-Afghanistan-Pakistan-India (TAPI) and Myanmar- Bangladesh-India (MBI) gas pipeline projects. These proposed energy trade projects, if implemented, may contribute to integrating the regional economies.

Currently, coal and petroleum are predominant sources of energy in South Asia. However, there are variations among the countries. For example, Bangladesh is dominated by natural gas (86 percent in 2005), India by coal (55 percent in 2006). Pakistan is diversified with petroleum (33 percent), natural gas (30 percent) and hydroelectric power (33 percent), whereas Bhutan and Nepal rely heavily on hydroelectric power (99 percent and 92 percent respectively in 2004).

This variation in the energy mix in the individual South Asian states provides a unique opportunity to enhance energy security in the region through mutual cooperation. At 204 billion tons, India has a good amount of known reserves of coal, but it is short of indigenous gas, and the country meets its needs by importing expensive liquefied natural gas.

Pakistan has a gas reserve of 27 Tcf and coal reserve of 185 billion tonnes. However, Pakistan is facing power shortage, ranging around 5000MW. Power shortage is hampering Pakistan’s economic growth by affecting the business, industry and the investments. Bangladesh has a gas reserve of 10.6 Tcf and an ‘undiscovered reserve’ of 32.1 Tcf and a coal reserve of 2.7 billion tonnes. Both Nepal and Bhutan have large untapped hydropower potential of 43,000 MW and 30,000 MW respectively.

IPI, TAPI and MBIN gas pipeline projects, if implemented, will deliver gas in due course of time. Meanwhile, Bangladesh can import electricity from Nepal through India if the transmission lines are constructed. Nepal can also sell its abundant electricity to other South Asian countries and, in turn, buy coal, natural gas and oil from states rich in these resources.

In short, revival of trade links between South Asia and Central Asia and the setting-up of regional electricity grids and gas pipelines can tremendously boost economic cooperation between these two regions and also meet the growing energy needs of almost 30 percent of the global population living there. But, much would depend upon the role and behaviour of South Asia hegemon. Taking a leaf from its Latin American counterpart, however, India needs to be magnanimous like Brazil, ensuring the Indus Water Treaty’s implementation both in letter and spirit.

Brazil and Paraguay, according to John Briscoe (The News: April 3), “have a binding agreement on their rights and responsibilities on the massive Itaipu Binacional Hydropower Project. The proceeds, which are of enormous importance to small Paraguay, played a politicised, polemical anti-Brazilian part in the recent presidential election in Paraguay. Similarly, Brazil’s and Bolivia’s binding agreement on gas also became part of an anti-Brazil presidential campaign theme.

“The public and press in Brazil bayed for blood and insisted that Bolivia and Paraguay be made to pay. So what did President Luis Inacio Lula da Silva do? “Look,” he said to his irate countrymen, “these are poor countries, and these are huge issues for them. They are our brothers. Yes, we are in our legal rights to be harsh with them, but we are going to show understanding and generosity, and so I am unilaterally doubling (in the case of Paraguay) and tripling (in the case of Bolivia) the payments we make to them. Brazil is a big country and a relatively rich one, so that will do a lot for them and don’t harm us much. India could, and should, in my view, similarly make the effort to see it from its neighbour’s point of view, and should show the generosity of spirit which is integral part of being a truly great power and good neighbour.”

Furthermore, “discussions on the Indus waters should be de-lined from both historic grievances and from the other Kashmir-related issues. Again, it is a sign of statesmanship, not weakness, to acknowledge the past and then move beyond it,” adds John Briscoe.

 Home of some of the ancient civilisations, the South Asia region has not been able to develop, during the current era, commensurate to its resources. The inter-state conflict continues to mar this region’s capacity to grow and reap the bonanza of international trade and the global tourism.

If the traditional and cost effective silk route could be revived it would connect the landlocked Central Asian countries and Caucasus with the world economy, accelerating the process of regional economic, social and political development to the greater benefit of all states in the South Asia and Central Asia regions.

The writer is a freelance columnist based at Islamabad. E-mail: [email protected]

 

Sharing is redeeming

The issue of water sharing that arose between our countries in 1947, was settled with the coming into force of The Indus Waters Treaty in 1960. This treaty was the result of 8 years of painstaking negotiations carried out by India and Pakistan with the good offices of the World Bank. The Treaty was voluntarily accepted by the two sides as fair and equitable. The thoroughness with which it deals with various aspects of water sharing is a testimony to the hard work put in by the negotiators of both sides to produce an enduring framework. It laid down the rights and obligations of both sides in relation to the use of waters of the Indus system of rivers.

Those who question the fairness of the Indus Waters Treaty to Pakistan need to note that it assigned 80 percent share of water of the Indus system of rivers to Pakistan. The Treaty gave the   use of Eastern Rivers (Sutlej, Beas and Ravi) — with a mean flow of 33 MAF — to India, while giving the use of the Western Rivers, viz. Indus, Jhelum and Chenab — with a mean flow of 136 MAF — to Pakistan. Since Pakistan was dependent on water supplies from the Eastern Rivers until the 15th of August 1947, India also agreed to pay a sum of 62 million Pounds Sterling to Pakistan to build replacement canals from the Western Rivers and other sources. These were clearly not the gestures of an upper riparian bent upon depriving the lower riparian of water, as is alleged by some today. The Treaty also permitted limited use of water of Western Rivers by India as follows: -

Domestic use: - This includes use for drinking, washing, bathing and sanitation etc.

Non consumptive use: - This covers any control or use of water for navigation, floating of timber or other property, flood control and fishing etc.

Agricultural use: - India can draw water from the Western Rivers in terms of maximum permissible Irrigated Crop Area. The total area permitted to be irrigated by India is 1.34 million acres.

Generation of Hydroelectric Power :- India can use water from the Western Rivers for run -of- the river hydroelectric projects as well as for hydroelectric projects incorporated in a storage work, but only to the extent permitted in the provisions regulating storage of water by India from the Western Rivers.

Storage of water by India on the Western Rivers: - The Indus Waters Treaty allows India storage capacity on Western Rivers to the tune of 3.6 MAF, in addition to the storage that already existed on these rivers before the coming into force of the Treaty. Out of this, 1.25 MAF is general storage. The remaining quantity is split between 1.6 MAF for generation of hydroelectricity and 0.75 MAF for flood control. In terms of rivers, 0.4 MAF storage is allowed on the Indus, 1.5 on Jhelum and 1.7 on Chenab.

In order to ensure that implementation of the Treaty received constant attention, a Permanent Indus Commission was created, with a senior and widely experienced Commissioner for Indus Waters from each side. The Commission is charged with the responsibility to establish and maintain co-operative arrangements for implementation of the Treaty, to promote co-operation between the Parties in the development of the waters of the Rivers and to settle promptly any questions arising between the Parties. Each Commissioner for Indus Waters serves as a regular channel of communication in all matters relating to implementation of the Treaty. The Commission undertakes a general tour of inspection of the rivers once in five years and special tours in the interim. The Commission meets regularly at least once a year and in the interim as required. It has so far undertaken a total of 111 tours, both in India and Pakistan, and has held 104 meetings. The Commission has shown tremendous potential in ensuring smooth functioning of the Treaty. In the 50 years of the Treaty, only once was an issue, viz. Baglihar, referred to a neutral expert. We believe that the potential of the Permanent Indus Commission can and ought to be used more effectively. In fact, we could even have the Commission sit in the nature of a consultative dispute avoidance body and take the views of experts – national and international – with a view to bringing up-to - date technology to the notice of the Commission to help it reach correct and acceptable solutions.

I shall now deal with the apprehensions, misconceptions, misinformation and allegations pertaining to India that characterize the debate on water scarcity in Pakistan.

The Indus Waters Treaty does not require India to deliver any stipulated quantities of water to Pakistan in the Western Rivers. Instead, it requires us to let flow to Pakistan the water available in these rivers, excluding the limited use permitted to India by the Treaty, for which we do not need prior agreement of Pakistan.  Reduced flows into Pakistan from time to time are not the result of violation of Indus Waters Treaty by India or any action on our part to divert such flows or to use more than our assigned share of water from Western Rivers. Water flows in rivers depend, inter alia, on melting of snow and quantum of rainfall. India itself suffered serious draught conditions in 2009, with around 250 districts bearing the brunt of draught. Rainfall during the monsoon season was 20 percent less than normal countrywide, with many states in the North experiencing a much higher percentage of shortfall. Even winter rains have fallen far short of normal. The quantum of water flow in Western Rivers, as indeed in any other river, varies from year to year, dipping in certain years and recovering in some subsequent years. Permit me to illustrate this point by using the flows data in respect of the three rivers.

Let us start with the river Chenab by using the average flows data for the month of September over a period of ten years since 1999 at six recording points, beginning deep on the Indian side at Udaipur and moving westwards to Marala, where Chenab enters Pakistan.

The annual flow in Jhelum at Uri, which was 8.29 MAF in 1997, dipped to as low as 3.07 MAF in 1999, but has subsequently recovered to register figures of 6.37 MAF in 2002, 6.31 MAF in 2005 and 5.67 MAF in 2008. The June to December flow in Jhelum at Uri shows the same pattern.

The data that I have provided in respect of flows in all the three Western Rivers clearly demonstrates that these flows have followed a curve moving up and down, depending upon climatic factors from year to year, rather than showing progressive decline, which would be the case if there were any truth in the allegations of India building infrastructure to progressively deprive Pakistan of its share of water.

One also hears the accusation that India is building hundreds of dams/ hydroelectric projects to deny Pakistan its share of water. This does not correspond to the reality on the ground. There are no quantitative limits on the hydroelectricity that India can produce using the Western Rivers. There is also no limit to the number of run-of- the river projects that India can build. However, India has so far undertaken a limited number of projects. We have provided information to Pakistan, as per the Treaty, in respect of 33 projects. Out of these, 14 are in operation, 13 are under construction, 2 are still at the proposal stage, 3 have been dropped or deferred and work on one project stands suspended. Out of these 33 projects, as many as 20 have a capacity of 10 MW or less. Projects identified for implementation in the coming years number 22. This certainly does not make for hundreds of dams/ hydroelectric projects.

India had communicated information concerning Baglihar project on Chenab to Pakistan as early as in 1992. Pakistan’s objections were referred to a neutral expert in 2005 at the request of Pakistan. The expert upheld India’s design approach and suggested only minor changes in the scope of construction. Pakistan subsequently objected to the initial filling of the Baglihar reservoir. However, this was done by us in keeping with the Treaty provisions. In fact, the Pakistan Indus Commissioner was invited to India at his request in July, 2008 to be briefed about the procedure of initial filling. The actual filling was done in August the same year within the time window specified in the Treaty.

The issue of water scarcity in Pakistan cannot be analyzed fully without looking at the picture in the large part of the Indus basin – around 65 percent - that lies in Pakistan’s territory or territory controlled by Pakistan.

According to the report “Pakistan’s Water Economy” issued by the World Bank in 2005, salinity also remains a major problem in Pakistan. According to the same report, much of the water infrastructure in Pakistan is in a state of disrepair. Water loss between canal heads and farms is reported to be significant, as high as 30 percent. The report further states that Pakistan has only 150 cubic meters water storage capacity per capita as against 5000 cubic meters in the US and Australia and 2200 cubic meters in China. Pakistan can store barely 30 days of water in the Indus basin. The report points out that “Relative to other arid countries, Pakistan has very little storage capacity. If no new storage is built, canal diversions will remain stagnant at about 104 MAF and the shortfall will increase by about 12% over the next decade.”

The Indus Waters Treaty is an example of mutually beneficial co-operation between India and Pakistan for the last 50 years. It has withstood the test of time. Article VII of the Treaty, which deals with future co-operation, recognizes the common interest of both sides in the optimum development of the rivers and lists out the avenues of future co-operation. We need to adhere to the spirit of co-operation, inherent in the Treaty, in ensuring its implementation and to identify further areas of co-operation within its framework. Let me end with the hope that the Indus Waters Treaty, which has completed its first fifty years successfully, will continue to guide us on water sharing in the future.

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Water distribution is the central issue.

 

firstperson
“We did not create militant groups”
By Raza Khan

Lieutenant General (retd) Asad Durrani, former Director General Inter-Services Intelligence from August 1990 to March 1992, has held prominent posts during his career and after retirement. Born in February 1941 in Rawalpindi, he was commissioned in the Pakistan Military Academy (PMA) in 1960, after graduating from Government College Lahore in 1959. During his 34-year stint with the army, he served in a number of capacities and took part in the wars of 1965 and 1971. His key appointments included Director General Military Intelligence and, most importantly, DG ISI. He also served as Inspector General Training and Evaluation at GHQ and Commandant National Defence College. Lt Gen Durrani is also a graduate of the German General Staff Academy (1975) and spent a stint as Pakistan’s defence attaché in Germany from 1980 to 1984. After his retirement from the army in 1993, he was assigned as the Ambassador of Pakistan to Germany (May 1994 to May 1997). Subsequently, he also served as Pakistan’s ambassador to Saudi Arabia from 2000 to 2002. Durrani has deep knowledge of issues pertaining to Pakistan and the region. He recently sat with The News on Sunday (TNS) and spoke on various issues, especially those relating to extremism and terrorism in Pakistan. Excerpts follow.

The News on Sunday: Do you agree religious extremism and terrorism is a living phenomenon in Pakistan?

Asad Durrani: Terrorism is a technique of war, used both by the state and non-state actors. For the non state actors, it is usually the only one available. Their motivation comes primarily from political or social deprivation; at times also from factors like nationalism or tribalism, and indeed personal causes like loss of their kith and kin by the state forces. Religion is, and can be used to provided additional incentive. So the grievances and political causes come first and motivation, also with ideological means, follows.

TNS: What are the causes of extremism and terrorism in Pakistan?

AD: Extremism, terrorism or radicalism has thrived because the present structure and the system are suppressive and do not take care of the desires and aspirations of the people. In a way it already has been radicalizing people. The result is that some elements, driven to desperation or fired by ideology, take up arms against the structure and the system.

TNS: Do you agree that the roots of today’s religious extremism are in the decades-long process of de-politicization and lack of democratization?

AD: It is possible but it is a question which is not entirely in my domain to respond. I can understand that if we were a more democratic society, and political participation and governance were better, most of our people would not take up arms.

TNS: Many people in Pakistan and abroad view that the ISI and the military establishment have been responsible for creating these extremist groups and what we are experiencing currently is due to these groups?

AD: If you are talking about supporting the Afghan resistance and the freedom struggle in Kashmir, than yes we have supported them. But we did not create militant groups. Moreover, we never trained our own people in militancy. But of course many of them joined the resistance against the Soviet occupation of Afghanistan and acquired this art.

TNS: We all know that there has been a political vacuum in Pakistan for long so did it also compel the military and the ISI to go beyond their mandate and do things which they should not have done?

AD: I don’t think this happened that way. I agree that army had been ruling for long years in Pakistan and what happened during these periods should be put in its account.

TNS: Some experts believe that social engineering was done by the powers that be particularly to the Pakhtoon society to attain its ends.

AD: Nothing of that sort we ever did, nor could we have done it. Whatever happened is the result of good or bad policies and not of any social engineering. For instance, when the tribesmen from FATA particularly Waziristan in 1948 decided to raise a lashkar and proceed to Kashmir to liberate it then no one had engineered the situation.

TNS: To what extent you would hold Pakistan’s policy regarding Afghanistan since 1973 for all the mess of extremism and terrorism in Pakistan?

AD: The Pakistani governments did not make their policies (on Afghanistan) in a vacuum but in response to the developments there. No one could foresee that the Saur Revolution would take place, and would be followed by Soviet invasion. Let us also not forget that (as a result of those policies) the miracle of the century (withdrawal of the Soviet Union from Afghanistan, and then its dismemberment) did take place. However, we could dit not manage the fallout as well as we could have. Moreover, we did not do 9/11; nor did the Afghans or the Saudis, whose citizens were involved. If we were to believe all the information coming from western sources, most of the planning was done in Germany or in the US.

TNS: To what extent the creation of Kashmiri militants has had played a role in the current wave of extremism and terrorism in the country?

AD: Militancy in Kashmir was a natural corollary of the population’s disillusionment with the Indian policies. Many studies in India and more importantly by neutral and credible sources like the International Council of Jurists, based in Geneva, have highlighted the causes. For example, promises made to the Kashmiris were not honoured and all the elections (except one) before the uprising were rigged. Even the one which was reasonably fair, its results were not accepted. The ICJ report also concludes that the militancy in Kashmir had very little to do with outside support.

TNS: It means the objective conditions were prevailing in Kashmir in 1989 for the rise of militancy?

AD: That is correct.

TNS: The rest was done by Pakistani establishment?

AD: We often use to tell the Kashmiris that once they rose against the Indian rule, there would be a chance of their freedom and we would indeed do whatever we could to help them.

TNS: So don’t you think the same objective conditions existed in Balochistan for the rise of insurgency there in recent times?

AD: Balochistan has been a very big failure for Pakistan. After 63 years we have not created conditions in the province to win over the hearts of the Baloch. It is to their credit that they still believe that they must remain part of Pakistan. They may have been promised Greater Balochistan but that does not seem to be a very viable option.

TNS: Irrespective of what policies resulted in the rise of large-scale extremism and terrorism in Pakistan now we have a large number of militants. Are they going to declare war on the state as they have expressed political objectives?

AD: Some of them have done so, but there are still groups amongst them who can be won over, others could be bribed, and the rest may have to be combated and defeated. It is important to remember that all of them do not have the same cause or the agenda. 

 

Prospects of growth
Realising the GDP target is a tricky affair, especially in Pakistan where energy crisis and ineffective planning make the task uncertain
By Ather Naqvi

This year the State Bank of Pakistan (SBP) estimates a Gross Domestic Product (GDP) growth rate of 2.5 to 3.5 percent which, according to experts is a very low target. Since the GDP is a basic measure of a country’s overall economic output, it broadly reflects major indicators of a country’s economic performance and its eventual impact on the common man.

The SBP, in its second quarterly report, suggests to the government of Pakistan to be on its guard as it has a severe revenue shortfall, increased military spending, and external and domestic debts that could result in fiscal deficit in the range of 5 to 5.5 percent for the current financial year. There is the apprehension that a growing current account deficit, due to widening trade gap — imbalance between imports and exports — could bring down foreign reserves and affect GDP growth. Setting the GDP target is a tricky affair, especially in the context of Pakistan where energy crisis and bleak law and order situation have hushed away prospects of growth in the past. The fiscal deficit — a situation where government’s total expenditure exceeds the revenue it generates — is another major drawback in realising growth targets, mainly owing to low tax collection and increased spending. In Pakistan’s context, inflation is also one of the biggest hurdles in meeting growth targets, which had jumped to more than 9 percent in 2005 before coming down to 7.9 percent in 2006. In 2008, after the increase in petrol prices, inflation at one point reached as high as 25.0 percent.

According to Moody’s, Pakistan’s “government is constrained in its focus on long-term economic issues,” says Aninda Mitra, Moody’s analyst for Pakistan, adding, the country’s “political position and legitimacy is constantly being questioned by various quarters, including state institutions as well as opposition political parties, and there is a somewhat tense relationship with the armed forces as well.” GDP growth, due to gains in the industrial and service sectors, remained 6-8 percent in 2004-06. The industrial sector accounts for about 24 percent of the GDP as textiles and apparel manufacturing are the country’s largest industries which account for about 66 percent of exports. The service sector takes the lead accounting for about 53.3 percent of GDP.

The News on Sunday spoke to a few economists and took their view on questions such as whether setting higher GDP target the real indicator of a strong economy and the only way to bring in development, does foreign aid make the difference in realising GDP growth rate, and what should be the future GDP target? This is what they had to say:

 

“We did not do our home work”

“The expected target of 2.5 to 3.5 percent is very low and is not satisfactory. It is not because of high incidence of terrorism or industrial output, etc but due to yielding to the IMF dictates.”

“The IMF has prescribed very high interest rates, something around 15 to 16 percent which is not the right solution. Our team of negotiators with the IMF should have been able to talk to the institution rationally to bring down the interest rates.”

“That did not happen because we did not do our home work. The interest rates should have been in the single digits. We had taken a firm stand with the IMF on these issues.”

“Our GDP rate is lower than Bangladesh, Sri Lanka, and India. It is over 5 percent in Bangladesh. This shows the state of our planning. Our expected GDP target is about as low as our population growth rate which is about 2 percent.”

“The IMF has given some good programmes to other countries elsewhere in the world. A lot depends on how we negotiate with the institution.”

 

“Setting targets alone doesn’t make strong economies”

“This is a very realistic target to achieve and the government should be able to do so without too much concern. I think there is something like a ‘natural rate of growth’ for the Pakistani economy of around 2.5 percent of GDP, which the economy can achieve without too much fuss even with problems related to the war on terror and the energy crisis. Of course, the government needs to play an active role in designing policy which can result in growth rates of 6-7 percent. With the exception of a very few bad years, which all had some specific causes, growth rates have not fallen much below 3 percent per annum over the last fifty years. Over the last sixty years, the growth rate of GDP has remained around 5 percent per annum, on average, which is a not a bad achievement by any means.”

“Setting targets do not make strong economies; achieving high rates of growth over a long period of time, without too many ups and downs, does. Although Pakistan has had a 5 percent growth rate over many decades, two factors make Pakistan’s performance relatively weak. Firstly, there is little consistency in trend, with high rates of GDP for a few years, followed by a few with very low rates. This topsy-turvy, roller coaster, sort of growth is not a sign of a strong economy. Secondly, while 5 percent of growth over many decades is laudable, other countries in the region now have much higher growth rates of GDP over periods of up to two or even three decades. While Pakistan may have been the regional growth leader till around the end of the 1980s, now India, and even Bangladesh, all have stronger economies.”

“In the 1960s and 1980s, the annual GDP growth rate averaged 6.8 and 6.5 percent, respectively. In the 1990s, the GDP was 4.6 percent, largely because of the high turnover in governments due to the interference of the military and the establishment, as well as due to stringent conditions related to IMF policies enforced on democratically elected governments. In the Musharraf years, the GDP was at its lowest in over a decade, at 2 percent in 2000-01, but due to the huge windfall which came Pakistan’s and Musharraf’s way after 9/11, the economy grew substantially, to around 5.8 percent between 2001-08. This only happened because of debt write-offs, greater fiscal space, and support by the international community after 9/11.”

“It is not always the quantity of aid which affects the growth rate, but the quality of its use by recipient countries. There are many countries which have benefited immensely from aid and assistance having made use of it strategically and carefully. There are more countries, many in Africa, and I would include Pakistan as well, which are manifestations of the worst form of the use of aid with unfinished projects littered everywhere, with massive amounts and forms of corruption. Donors have been complicit in promoting inefficiency and corruption in many countries, as well as in supporting corrupt and dictatorial regimes. Donors continued to support Musharraf for his role in the war on terror long after he had lost public support at home. Had their support ended earlier, he would not have lasted as long as he did. Moreover, the high growth that took place under Musharraf, gave rise to a bubble economy in which the key sectors for investment for the future, were ignored. That is why the facade constructed by the Musharraf regime quickly came undone.”

“Although the GDP rate may be above 3 percent this fiscal year, this is clearly not enough to deal with issues of poverty, unemployment, etc. Moreover, anything less that 6 percent over a long term period, is no longer acceptable, something that can be achieved, as the experience from comparable countries shows. This government has been caught in the straitjacket of the IMF stabilisation plan, which has worked well, but now the time has come to focus on growth. The government must have a plan to revive the economy and focus on high growth.”

 

“Our exports will be affected”

“We are facing a severe energy crisis coupled with no real increase in the output of our crops, it remains about the same as in the previous year. That means our exports will be affected.”

“Then there is high inflation. So if you don’t have high levels of production and you don’t have the buying power either, the GDP target will remain low.”

“The IMF has stopped the Pakistan government from borrowing more than 125bn Rs from the SBP. So, if the government needs money exceeding this amount it will have to borrow from the commercial banks, which is the depositors’ money, and since there is less money with the banks than the demand, the level of interest rates will go up. This is how the cycle works, at least at the moment.”

 

“We are prone to int’l shocks”

“The GDP target is of course very low but we have seen some growth in the manufacturing sector and the wheat and cotton crops have not been bad this time. So, the target is achievable.”

“Our economy is coming out from a difficult phase. We also have had the international economic recession. Now, since we’re in a stabilisation mode, the growth levels will remain the same for some time to come.”

“We are prone to international shocks such as the oil prices and we also saw that increase in sugar prices in the world had a domino effect on us as well. So we cannot see our situation in isolation from those factors.”

“There are two policy levers with the government — Interest rates and fiscal policy. You can cut interest rates if you are able to bring inflation to 10 percent or below that level because then you are in the comfort zone in economic terms.”

“And inflation is not coming down because subsidies have been withdrawn and currency devalued in the recent past. We should keep this in mind that if inflation is high, the growth rate will remain low. As regards fiscal policy, a lot will depend on our ability to generate revenue.”

 

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