Hope and despair

The UN’s World Economic Situation and Prospects report has predicted that, while Pakistan’s economy will continue to slide for the next two years, it may make a slight recovery after 2021 based on improved tax collection as prescribed by the IMF and other reforms. The economy is a chief concern for the citizens of the country, hit as they are by unprecedented inflation with the food price hike soaring above 25 percent. According to UN projections, Pakistan’s economy will grow by the estimated rate of 3.3 percent for the remainder of the 2019-20 fiscal year but is projected to slip 2.1 percent next year. This makes it among the least prosperous economies in South Asia. The Indian economy is expected to grow by 5.7 percent in the current fiscal year and rise to 6.6 percent in the year after that. For Bangladesh, the growth rate is put at 8.1 percent this fiscal year and 7.8 percent in the next.

The news that Pakistan will continue to struggle for some time yet is obviously disturbing. The chief reasons for this are the problems with a balance of payments crisis and the burden of high public debt, forcing an arrangement with the IMF and corresponding fiscal tightening. Another of Pakistan’s problems is its declining economic growth. This has fallen to 0.4 percent, mainly because textile sales which constitute 60 percent of goods exports have declined sharply. According to international reports, Bangladesh has moved ahead of Pakistan in the textile sector. While there is hope that revenues from the tax hike and other government reforms may begin to bring in benefits after 2021, this will all depend on how effectively reforms can be carried out and who is taxed.

Pakistan’s economic planners should be keeping in mind the fact that IMF intervention in many other countries has brought almost no long-term benefits to people and has in fact sometimes contributed to a distinct worsening in their quality of life. It is also true that at the present time, it is the salaried class and middle income earners including traders who are facing the main impact of tougher taxation measures. Agricultural tax has not been discussed sufficiently among the possible measures that could be taken to add to revenue. Nor have land reforms, the factor that in countries such as Brazil have proved the most beneficial in uplifting the poor. The problems for Pakistan are acute. Economic analysts suggest radical change is required, and we hope that those planning it will put the third of our people who live below the poverty line first of all while devising policies for the future.