International Monetary Fund (IMF) Managi
Inflated food prices and rising power and gas tariffs have been seemingly considered a trivial issue in the last four years of the Pakistan Peoples Party (PPP)-led coalition government and no effective steps have been taken in the government’s four budgets to address these core problems.
Now, the PPP is going to present its fifth budget but the people are not hopeful of getting any substantial relief that could drive prices of food items and utility charges down.
In absence of any serious price-checking campaign, manufacturers of various goods continued to give pre-budget price shocks while the government kept increasing tariffs and oil prices.
PPP’s objective of providing bread, cloth and houses has proved to be a hollow slogan, as the budgets ignored the concept of peoples-friendly budgets. Besides, consumers’ woes multiplied in the shape of power and gas load shedding, tight job market, rising cases of suicide due to high cost of living and a sense of insecurity.
On the contrary, the focus of Pervez Musharraf’s regime, in its early years, mainly focused on promoting jobs, besides empowering the banking and corporate sectors.
One of the key developments of Musharraf’s era was to pave the way for low-price Chinese motorcycles, to break the monopoly of a Japanese motorcycle-maker. Chinese motorcycles are still lower by over Rs 20,000 than its counterpart. As a result, the country’s motorcycle sales have crossed over 1.8 million units per year now, as compared to the previous 100,000 units.
However, the share of car financing by banks in that period, which was 70-80 per cent, has now fallen to 20 per cent now due to rising interest rates. While one dollar was equal then to Rs 62, its current inter-bank market rate is Rs 93.
Food inflation remained under control while businessmen invested heavily either in setting up new units, or in vertical expansion in their existing units. Many industries, such as textile mills, had taken to balancing, modernisation and renovation which created thousands of jobs.
Chairman Karachi Wholesalers Grocers Association (KWGA), Anis Majeed believes that successive governments have not done much to raise productivity of both minor and big crops. However, the production of cotton, wheat, sugarcane and rice improved in the current season due to increase in their support prices, which encouraged growers to produce more but ultimately made an impact on the end users in shape of price hike.
“Price-hike can only be controlled by raising productivity of our local minor and big crops, as improved supplies automatically cause drop in prices,” he told Dawn.com.
Recent floods, while destroying many standing crops, proved beneficial by fertilising many a land.
Senior Research Analyst at Top Line Securities Nauman Khan blames a challenging security environment, escalating energy crisis and increased fiscal slippage for the on-going harm to Pakistan’s economic health in the current government’s tenure.
In addition, the successive floods of 2010 and 2011 also played their due role in Pakistan’s underperformance on the economic front. The country’s average GDP growth stood at 2.9 per cent (FY09-12) against 5.3 per cent in the preceding eight years (FY01-08), while several other economic variables also portray a perturbing picture.
Political hindrances, security environment and strained relationship with strategic partners (particularly US) and not lack of intent in trying to initiate the energy sector (increasing power and gas tariff) and taxation reforms (reducing tax exemption) to overcome structural weaknesses, have played a round-block for the government to take bold initiates, which would have resurrected country’s economic growth.
Major sources of concern have been double-digit inflation as compared to 6.6 per cent in the eight years (FY01-08) before the current government took over, residing in monetisation effect of higher fiscal deficit (5.9 per cent against 4.3 per cent) and depreciation of the Pakistani rupee (average devaluation 6.6 per cent versus 3.0 per cent), with higher oil prices affecting on the external account.
The perception of an insecure environment and worsening energy crisis, have led to a decline in country’s foreign flows. FDI, which reached an all-time high of US$5.4bn in FY08 was reduced to US$1.6bn in FY11, while it is standing at a mere US$666mn in 10MFY12. There is a high probability that FDI in FY12 may not cross US$1bn in FY12. Overall, investment to GDP has declined from a high of 22 per cent of GDP in FY06-08 to a mere 13.4 per cent in FY11.
