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February 10, 2015

An historic opportunity for the economy


February 10, 2015

For almost a decade, the governments, one after the other, have been slipping in the financial sense on unusually high international oil prices and ending up with the usual lament that the country’s economy had been badly bruised by it. But no more! International oil prices are just about half of what they were some six months ago.
Against this background the observation by the IMF that the “sharp drop in oil prices represents an historic opportunity to reduce the vulnerability of the economy by building stronger fiscal and external buffers and to address some of the long-standing imbalances in the energy sector while still reducing consumer costs” merits urgent and focused attention. This would certainly be known to our own official policy makers and managers of the economy but the Fund putting it across at its early February meeting with them in Dubai should lead to some early initiatives in this regard.
At this point, it also needs to be mentioned that the government has reduced the cost of petroleum and its products in sync with the fall in global oil prices but barring direct consumers of petroleum products, the benefits have not yet reached the majority of the people in the shape of any appreciable fall in the prices of essential items as a result of lower transport costs. The recent visit by Prime Minister Nawaz Sharif himself to a couple of markets in the capital brought forth the opinion of the people that the relief in consequence of lower oil prices should have been more encompassing and much greater in its impact.
In energy sector, which the Fund has referred to as an issue of fundamental import, the cost remains high. For consumers it should remain low, says the Fund. Equally important is the emphasis on removing imbalances in this vitally important area as these have been persisting for long. The prime minister told the crowds that had gathered to greet him seeing him personally visit the bazaars that power and gas shortages would be

overcome within the shortest possible time. People have been crying to be saved from load shedding in summer and gas shortages in winter. They are not asking for the moon but only the right to live a life which is less painful and just normal.
The suggestion to build stronger buffers in fiscal and external sides hints at the advisability of moving away from excessive dependence on borrowing- both domestic and foreign. Pakistan’s debt burden of around Rs16 trillion is huge, much too big, and servicing this debt has become the largest charge in the government’s current annual expenditure. Dependence on borrowed money can leave the economy vulnerable to internal and external shocks. Pardon the repetition that a strong economy is the sine qua non for price stability, job creation, poverty alleviation and social services expansion.
It is also to be recognised that after the last NFC award, the provinces have been receiving huge amounts in funds from the divisible pool of taxes. With the kind of money available to them which is unprecedented, it was fair to expect a bold, robust and convincing effort to attend to the day-to-day problems of the people and address them without delay. But the pathetic condition of government’s educational institutions, hospitals, roads and transport and sanitation and environmental conditions speak volumes about their apathy in these areas. It was also for the provincial administrations to ensure that the benefits accruing out of reduction in oil prices do reach the common man in fullest measure.
The long talked about disconnect between the rulers and the ruled, the people and their elected representatives and the planners and development needs at the grass-roots level is perhaps one single most critical factor for the sorry state of socio-economic affairs. The newfound passion for election to local bodies raises hope that the problems would get some attention at the local level. It may sound cynical but barriers to power corridors do not usually let the woeful cries of the people reach there. If a change were needed, this surely qualifies as an area for one.

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