Economic
Editorial

Economic challenges facing Pakistan

 

In its recent report, the Asian Development Bank has enumerated the challenges facing Pakistan. These include poor governance that underlies the institutional bottlenecks facing the country today ranging from deliberate obstacles placed to circumvent investigation on corruption-related matters, as is evident in the case of Nawaz Sharif and his family, Pakistan International Airlines’ rising losses, etc, and poor performance due to senior appointments made on the basis of nepotism rather than on merit. The other major issue is lack of economic growth momentum which belies persistent claims by the government that growth had reached levels not seen in the country in decades. These claims were hitherto accepted by international development financial institutions but were consistently challenged by domestic economists who pointed out the lack of rationalization between statistics released by the Statistics Division and other ministries and credible industry sources.

On the other hand, there is an urgent need to improve food security for a major section of the population. The report notes the prevalence of hunger and malnutrition due to poverty and lack of economic access to food as major contributors to a high level of food insecurity in the country. The ADB report says that antiquated farming methods, and inefficient use of resources contribute to poor productivity – a statement that reflects the failure of subsequent governments to fill the wide gap between the mode of farming employed by the majority of subsistence farmers in the country accounting for low national yield per hectare and the technically advanced form of farming by the rich farmers.

As per the ADB report, the inefficient way water is used in the country is a source of rising concern, as Pakistan has been cited in numerous international and domestic studies as an extremely water-stressed country – a ranking confirmed by the World Resource Institute claiming that more than 80 percent of the water available to Pakistan’s agricultural, domestic, and industrial users is withdrawn annually, leaving businesses, farms, and communities vulnerable to scarcity. India and Sri Lanka are defined as high-stressed countries with between 40 to 80 percent water available to agricultural, domestic, and industrial users being withdrawn annually. Disturbingly, the report also notes that a shortfall in investment in agriculture infrastructure and research and development also contributes to low productivity.

For the last four years, the present government has made tall claims about rapid economic progress but the actual position is quite different. The claims made by the incumbent PML-N administration in terms of its economic achievements have begun to be openly challenged by the DFIs. In this connection it may be relevant to point out that part of the blame can be laid at the doorstep of some DFIs, particularly the International Monetary Fund which issued feel good statements during the duration of the Extended Fund Facility (September 2013-September 2016) and continued to disburse programme lending. No basic reforms were undertaken as per the needs of the economy – a failure that led to an unsustainable current account deficit as well as disturbingly low foreign exchange reserves.

Significantly, ADB’s report has come in the wake of a 122 percent increase in current account deficit in July-October 2017 and dwindling reserves held by the State Bank estimated at 13.5 billion dollars as of November 2017 as compared to 19.7 billion dollars in the corresponding period last year. Clearly, a tough task of rehabilitating the economy confronts the Abbasi government. It remains to be seen how it tackles the situation.

About the author

Mian Bilal