Mohammad Jamil
A recent report on Pakistan’s socio-economic indicators paints a bleak picture. According to the preamble of the report, for a country confronting violent extremism with a high population growth rate and huge youth bulge and shrinking economy it is difficult to battle against militancy. It stated that there is direct or indirect link between militancy and extremism with over- all governance and services delivered by the government. Investment spending dropped to 10.99 per cent from 10.4 percent, which is lowest in the history of Pakistan. Savings rate has dropped to 13.1 per cent from 14.7 percent compared with 29 per cent, 30 per cent and 45 per cent of India, Bangladesh and China respectively. Local industries are unable to compete with cheap imports, thus rendering labour force jobless. Pakistan’s external debt is likely to rise to $93.4 billion to $145 bn in 2023.
In social sector, the situation is still worse. Over 22.6 million boys and girls i.e. 44 per cent of all children in the country are out of school. 43 per cent of government-run schools are in dangerous or dilapidated condition lacking basic facilities like furniture, bathroom, boundary walls, electricity etc. And 21 per cent of government schools are operating with single teacher and 14 per cent with single class room. More than 70 million people are living below the poverty line earning less than $2 a day. Around 78 per cent population is paying for health expenditures out of their own pockets. As per one estimate there are 145797 doctors, 10693 dentists and 55165 registered nurses taking care of 200 million people. 80 percent of population does not have access to safe drinking water. 72 per cent water supply schemes are functional but 82 per cent of theses are supplying contaminated water.
Pakistan is fifth most populous nation only behind India, China, USA and Indonesia. 60 per cent of Pakistan’s population is under the age of 30 with very few opportunities. Other Muslim countries like Bangladesh and Iran have successfully controlled their population which is also reflected in their improved human development indicators. Pakistan is ranked 147th in the Human Development Index. Yet Minister for Revenue and Economic Affairs Dr. Miftah Ismail said after announcement of the Budget 2018-19 that Pakistan was set to achieve high GDP growth rate during the current year again, and hoped to maintain this momentum in the coming years due to robust performance of the real sector of the economy. When government could not achieve its targets with regard to fiscal deficit, balance of payments vis-à-vis exports and imports; Pakistan’s external debt is around $93 billion, economic reserves have declined to $12 bn.
Yet PM says economy is in good shape. However, SBP report had stated: “Risks to overall macroeconomic stability have increased due to widening imbalances in the country’s balance of payments. Reserves have already fallen to less than three months of the country’s import bill.” It projected that remittances of $20.5 billion from overseas workers in FY18 would be slightly lower than the target of $20.7 billion; and imports may shoot up to $54.3 billion against the target of $48.8 billion mainly due to heavy oil imports and imports of textile and steel inputs. However, the growth in exports would remain insufficient to finance the gap in current account deficit. The report highlighted that the growth in revenue collection outpaced the increase in expenditures in H1-FY18, which led to a broad-based improvement in fiscal indicators. In view of the above situation, how SBP can talk about improvement in fiscal indicators?
With foreign reserves dwindling because of ever-increasing imports and declining exports, the government needs an International Monetary Fund bailout to avert a balance of payments crisis. The government and the SBP believe that with effective devaluation a weaker local currency would help the economy grow and contain balance of payments pressure. The SBP had previously attempted to devalue in July 2017 but the move was reversed by the-then Finance Minister Ishaq Dar, who claimed he was unaware of the central bank’s plan and ordered an investigation. But it is not possible to stop the decline in Pakistan rupee value through artificial means, as the market forces determine the exchange rate. In 2016-17, Pakistan’s imports registered at $51 billon and exports at $19 billion, the demand for dollar increased, and value of rupee declined. The trade deficit was $32 billion, and with $19bn expatriates’ remittances, the current account deficit was $13bn.
It appears that to manage economy, Pakistan will have to fall back on the IMF and other international finance institutions, and per force accept the conditionalites attached with the loans that are more often than not against the national interest. Otherwise also, Pakistan’s problem is growing public debt, as debt servicing – loan installments and interest – would consume about 33 percent of the federal revenue. Unprecedented growing public debt on one hand limits the capacity to build strong defence and on the other limits fiscal space to invest in human development and infrastructure. Around 23 million school-age children are estimated to be out of school and 20 million of them are between 10 and 16 years old; and efforts to reach them have been negligible. More than 3.7 million of our labor force is unemployed; and about half of total population is victim of food insecurity. This could lead to chaos, uncertainties and even anarchy.
