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April 10, 2021

Economic fault lines

Opinion

April 10, 2021

There is a serious need for long-term economic planning that provides a way forward and continuity of policies, which is a missing factor now and that has to be factored in.

It is also beyond one’s imagination why long-term policy documents like Pakistan Vision 2025 or implementation of the 2030 Agenda approved by previous governments are not taken into consideration while taking decisions. If at all such policy decisions were faulty they should have been revised according to the new priorities, but nothing has been observed during the present decision-making process.

The agriculture sector needs to be subsidised the way it is all over the world – prioritised and subsidised. It is a matter of great concern that this sector is also suffering from inequity and inequality so far as subsidy and input cost is concerned. Almost 65 percent of our rural area population is totally dependent on this sector including for their employment and food security. Also, it contributes around 23 percent to our GDP growth. It has to be prioritised in our planning, and not casually as we are used to doing – by forming only committees. The people are suffering due to poor planning and its execution, and facing the worst kind of food inflation.

Industry is another sector suffering from slackness owing to a slow decision-making process and ill planning. Industrial infrastructure is improving at a snail’s pace. The CPEC industrial zone infrastructure development also needs a big push from the government. State owned enterprises are also suffering, as we see no progress of any participation of the private sector in industrial development.

The reason is obvious: the government is not taking quick decisions; generally, decision-making is very slow including but not limited to privatisation and facilitation to private investors. This is really making a mess of the economy, which in turn is disturbing the cycle of growth.

The services sector is another area that needs focus. It is almost contributing 55 percent to GDP growth. In this era of hi-tech, our telecom and IT services sector can play a huge role which should be rightly prioritised; exemption from tax may especially be continued for growth and development. The government is recently contemplating to do away with corporate exemptions, which may be reconsidered for the growth of IT and telecom services exports.

Population planning is another neglected area that has to be prioritised immediately. The government needs to focus on it, otherwise it will continue disturbing our resources and no economic planning can be successful without family planning. It needs a sharp focus from the policymakers. Education and out-of-school children need focus; technical education to the vast population has become a necessity for the growth of the economy.

For the immediate uplift of the economy, planning to introduce reforms at all levels is required. Economic and financial reforms are immediately needed on a priority basis right from a balanced monetary and fiscal policy. The interest rate should be lowered to five percent for investment growth in the country. Food inflation should be controlled by introducing more reforms in the agriculture sector and more subsidies are to be pumped in to provide relief to the general public.

Circular debt is touching almost Rs2.4 trillion, and needs to be curtailed immediately and a policy be introduced as part of the cost-cutting measures to provide cheap input to industry to make exports competitive vis-a-vis regional commodity prices in the international market. More investment needs to be attracted for cheap electricity production. In this, especially hydroelectric power generation can be ensured as we have a lot of potential for such cheap electricity production from dams.

The high volume of loans and the debt burden is another area of concern, which is almost touching 98 percent of our GDP. This is the highest in the world and is also a violation of our Debt and Fiscal Responsibility Act. It has become a debt trap which will continuously be disturbing our economy until we bring it back to a balanced level of not more than 50 percent.

The government needs to focus on these fault lines disturbing the economy, and it needs to focus on uplifting projects for the betterment of the poor. The country needs stability and long-term planning for economic growth as well as infrastructure development supporting all the sectors of our economy right from agriculture to industrial development to the all important services sector.

A visionary policy of an inclusive political and economic growth system will definitely attract investment in these sectors, which will be a big booster for the economy.

The writer is an economist.