LAHORE: Our rulers, like pigeons, have chosen to close their eyes upon seeing the hungry cats of economic threats, comfortably forgetting they would be eaten out of their offices if they didn’t take the right course of action.
No economic turnaround has been achieved, yet they claim surmounting this mountain. The claimed economic stability is a mirage depending on regular inflow of loans. We celebrate Roshan Digital Accounts that have crossed $1 billion as a great achievement on which we are paying 7 percent interest. On the $16 billion plus foreign exchange reserves accumulated we are paying around $64 million interest annually. All reserves are fluid and could be withdrawn by depositors. The money raised against bonds would have to be redeemed after their maturity. We are continuously consuming these reserves and adding new foreign loans.
This cannot go on indefinitely. We will have to generate foreign reserves from our own resources. Exports must overshoot our imports. When our imports are two times higher than our exports we cannot ever dream of building our own reserves. There is a limit to increase in remittances but there is no limit to ever increasing need for higher reserves. Today the rupee is stable on borrowed money which is a temporary solution. We will have to think long-term instead of making stopgap arrangements.
We must concentrate on promoting trade within the country and outside. We should endeavour to make our products and commodities globally competitive. We should discourage crops that consume most of our water and do not earn a penny in foreign exchange. Instead we have to periodically subsidise its exports. The politically strong sugar lobby has to be reined in. We need to cultivate more and more cotton that would both save us a lot of foreign exchange for its imports and earn us much more in finished goods. The decisions should be taken promptly. Pakistan climatically is not suited for sugarcane growth.
The sugar mills should be forced to make payment of the entire sugar crop purchased from the farmers immediately. This needs political will. There are only 79 sugar mills and competent officers could be deputed to ensure farmers payments within 15 days (they are bound by the law to make payment within 15 days of purchase which are delayed by months or to next season). The properties of the sponsors should be sold if they do not have cash.
The sugarcane area should be restricted. The cotton growing area encroached by sugarcane should be restored. We will generate exportable surplus only if we are self-sufficient in cotton and this could be done immediately. The wheat sowing is also delayed due to late harvesting of sugarcane.
Productivity of the wheat crop declines by one percent per day if sown after November 15. All these facts are known to both our agriculture and economic planners but they do not dare to confront the highly influential sugar lobby.
Currently our major exports are dependent on power and energy subsidies and concessional markup in the shape of export refinance. No serious efforts have ever been made to ensure supplies of power and energy at regional rates without any government subsidy. At the same time the domestic industry is charged exorbitant power and gas rates.
The loans are also provided to them at a market rate that is higher than that markup available to the regional industries. Still we see domestic big industries surviving. They are protected from imports through high tariffs. It is not possible for imported cars, cement and sugar to compete with high priced Pakistani products because of protective duties. For Small and Medium Industries this protection is lax (under invoiced products enter Pakistan market). We do not see such under-invoicing in cars, sugar, and cement that are owned by the influential segments of society.
The common consumer in Pakistan has come under huge stress. The upper middle class and the rich are not bothered by the price hikes. The prices of cars, fridges, air conditioners, television and other appliances have increased substantially in the past three years. Yet the sales of these gadgets are booming. The richer segments still have huge consumable surplus to indulge in these luxuries.
The rates of essential daily use items have also registered an abnormal increase. Again the upper middle class and the rich have no issue with this as well. They can manage the high prices because they have resources. The poor and the lower middle class have been devastated by historic increases in the rate of essential items.
In the last two years the rates of sugar and wheat flour have doubled, the edible oil now costs 40 percent more. Chicken meat is as costly as beef while beef and mutton prices have also increased by 20 percent, milk rates shot up by 25-30 percent in one year. The rates of vegetables, fruits and pulses have gone beyond the reach of most poor and middle class consumers. Their income remained stagnated or declined during the last three years. Sermons of a booming economy add insult to their misery.