Pakistan has now nearly had a haul of half decade with a GDP growth rate of below 5 percent. During the year ended June 30, 2012, Pakistan grew less than 4 percent and now in the second half of this year, the growth figures appear to be no better. Compare this growth with the average growth of about 6.50 percent during 2002 to 2007, and the change in country’s fortunes, strictly in terms of growth and development, unfortunately, do not make a good read.
The decline is even sharper if we compare the present growth trend to the peak of 7.50 percent during the five years mentioned above.
While corruption and wrong prioritisation of resources by the government are factors surely to be blamed, a part of this slowdown is also attributed to the simple paralysis in decision-making from which the government never really recovered in its five-year term that is about to end, in March 2013. The role of its paralysis is corroborated by the sheer inaction on the energy front, which has resulted in a compounded slowdown in manufacturing.
Manufacturing as we know carries a highly elastic behaviour vis-à-vis governmental decision-making. While there is no real data available on the growth of the SME (small and medium-sized enterprises) over the last five years, the LSM (large-scale manufacturing) has been growing well below the GDP growth level, which means that in effect it has been shrinking. Sadly for Pakistan, the services sector, which in many ways is less directly dependent on governmental decision-making, also took a nosedive due to the prevailing concerns on security and the law and order situation in the country.
This being said, perhaps, the greatest across-the-board negative impact on growth has originated in severe monetary brakes applied on the private sector and this with either the collusion of the State Bank of Pakistan (SBP) or due to its sheer indifference to redressing the situation in a prudent and timely manner: either way, the action or the lack of it cannot be condoned.
The story of the private sector being crowded out is well known, but less well known is the fact that the SBP has been injecting liquidity into the banking sector with a targeted purpose of raising governmental debt and that share of private sector borrowing from its peak in 2004-05 has been reduced to less than one-fourth.
Adequate monetary growth provides the grease that oils the forward movement of a growing economy. While too much of it can make the aggregate demand run ahead of real incomes – thus, fuel inflation – too little of it can arrest, even cripple, the forward movement. Historically, the SBP maintained a relatively steady (close to double-digit or double-digit) annual growth in the monetary base, which determines the availability of credit in the economy.
In recent years, however, the squeeze has mainly been put on the private sector that continues to hold since the government appetite for debt is growing; whereas, its revenue raising resources are failing to keep pace with its spending budgets. This credit crunch, complemented by high fiscal deficits, has administered a double whammy on the private sector.
Traditionally, the SBP has set growth with macroeconomic stability as the objective of its policy. Lately, it has abandoned the growth objective altogether. And even with respect to the macroeconomic stability, it has chosen to focus (nearly obsessively) on just one, even if key, element in such stability: inflation.
Setting aside any exceptional year or a certain brief period in the history of Pakistan, inflation rates have never consistently been in the single digit range. Yet, the SBP and the economic team dealing with the international lending institutions tend to tame inflation in the Pakistani economic context to levels that are neither realistic nor keeping in line with our past trends.
Ironically, the SBP has had at best partial success in combating inflation due to its poor management in another key area: the external sector. In the early years when Pakistan adopted the flexible exchange rates, the practice of the SBP had been to intervene in the foreign exchange market to smoothen out short-run fluctuations, while leaning against excessive appreciation of the Pak Rupee in the longer term. That policy stance provided short-run exchange rate stability, while allowing the SBP to build up somewhat reasonable levels of foreign exchange reserves.
But every time a political dispensation has taken place (the current one being no exception), their actions have thrown caution to the wind and they generally adopted a kind of hands-off exchange rate policy, which sadly saw huge devaluations in the Pak Rupee’s parity against the global currencies and a regular erosion of our dollar war chest from where we have not been able to recover.
These policies have not been without consequences for the economy. The gross external debt has rapidly climbed unprecedentedly in the last five years and now not just significantly exceeds the foreign exchange reserves, but, in fact, the gap is so huge that it seems that no real policy linkage can be established between the two figures. Or at least, the government certainly does not believe in linking these two.
Needless to say that this phenomenon of rising external debt, devaluing Pak Rupee and our failure to build up healthy foreign exchange reserves has left the Pak economy extremely vulnerable on the external front. In consequence, as things stand today, the ability of the SBP to credibly intervene in the foreign exchange market to stem Pak Rupee depreciation stands greatly compromised. So, the Pak Rupee has been going into this freefall with obvious consequences on inflation. A depreciating rupee means rising rupee prices of oil and other essential imports, even if their world prices did not rise.
A fiscally-strapped government has had no choice, but to pass on a large chunk of these price rises to the consumers or to the ordinary Pakistanis in an environment where they are already suffering because of the absence of any real growth and job creation in the economy. And unless there is change of heart at the SBP, this policy will take matters deeper into a vicious cycle, as it leaves the SBP with only one option if it is to keep on insisting on single-mindedly clamping down on inflation: a yet greater squeeze on the monetary base of the private sector and prolonging the misery of Pakistani people coming to an employable age, but finding, sadly, no jobs waiting for them in the market.
No subcontinental scene is complete without its complement of beggars and alms-seekers. While society considers beggars to be a scourge that spawns many ills including trafficking and crime, millions of people are inclined to encourage the practice by paying them. While I have always restrained myself from the practice, I have come to the conclusion that a vast majority of men, women and children that infest our roads and commercial areas are con artists with an amazing understanding of human psychology.
Take, for example, the ‘shivering’ routine. Motorists stopping at a traffic light on Jinnah Avenue are apt to see a tall emaciated individual who sells newspapers. He attracts immediate attention and pity by vigorous shivering, as if the freezing Islamabad weather is about to do him in. My daughter has on one occasion given him a brand new sweater she bought for her brother, only to discover that the individual had switched traffic lights and was ‘shivering’ away at his new spot minus the woolies.
Another intersection on Jinnah Avenue is home to a young man with ‘half an arm’. The expression on his face is so pathetic that it incites an immediate urge to help him. I almost fell for his act, had not my driver, who appears to be quite knowledgeable with reference to roadside phenomenon, stopped me. What happened next was like a slapstick comedy – my man grabbed the beggars open shirt front and pulled it down over his shoulder, to reveal the remaining part of the arm, folded back and secured under the shirt sleeve. Needless to say that I saw the aggravated young man at other intersections after this incident, but he always took off when he recognised my driver.
I once saw a blind man miraculously recovering his eyesight in order to recover the money that slipped from his hand, as he accepted it from the motorist in front of me. On this occasion, I doubled up with mirth on the blooper committed by someone, who appeared to be either an apprentice or newly recruited to the ‘begging’ league.
One often saw a young woman dressed fairly decently as a college student on the Kashmir Highway – Seventh Avenue Intersection traffic signal in Islamabad. This great actress walked up to cars and spun a heartrending story of how she wanted to continue her studies, but couldn’t, because her family was destitute. While I didn’t buy her tear-jerking tale, many did. If only they had driven a few weeks later on the Main Gulberg Boulevard in Lahore, they would have seen the truth – for there was the same ‘destitute student’ plying her trade on the Main Market Intersection.
My son unlike me, is a softy as regards beggars and has suffered much on this account. One of his favourite experiences involves an innocent-looking young boy, who approached his car in Rawalpindi and amidst artfully administered sobs narrated the story of how his old sick mother lay in a one room hovel without a fan. Now it being the height of summer, the kind-hearted young man told this boy to sit in the car so that a fan could be purchased for the needy mother. The young con artist managed to squirm his way out of what could have been a poor deal and secured Rs 3,000 in cash from the victim. A few days later, my flesh and blood walked up to me in a state of great agitation. It turned out that the ‘fan routine’ had been enacted again with one of my nephews, who had compared notes with his cousin only to discover that two members from the same family had been skimmed of their hard earned money.
While I normally make a nasty face and subject beggars with an even nastier stare, my late mother had evolved a technique that worked every time a character walked up to her side of the window. She would cluck over the individual like a mother hen and then would ask him or her to sit in the car, so that a domestic job could be given to her at our house. Needless to say that ten out of ten times, the person hurriedly withdrew with sometimes furtive and sometimes angry looks.
The writer belongs to a very old and established family of the Walled City. His forte is the study of History.
Elections are too serious a matter to be left to the political parties alone. The Election Commission of Pakistan’s (ECP’s) stance to rein in the candidates and parties through a stringent code of conduct has at least created a baseline for quality elections. The ECP has issued a laundry list to ensure violence- and corruption-free elections. Anything that could influence the results of the election is taken seriously into consideration and its limits specified to avoid rigging and violence. Those in high positions who will remain in office through the elections like the speakers, deputy speakers, governors, etc, would not be allowed to participate in election campaigning. Even the caretaker prime minister and chief ministers, not to mention the president, would be barred from taking part in electioneering. The right of voters to cast their vote for their desired representatives cannot be influenced either through intimidation or bribery. No public meeting would be allowed within 400 yards of any polling station. Any action leading to violence such as verbal abuse, aerial firing, wall chalking against opponents and instigatory remarks is prohibited. No loudspeakers will be allowed during campaigning except in public meetings. In short, every civilised democratic norm is included in the code of conduct. However, one area that has been left vague and needs definition as well as reckoning is the ideology of Pakistan touched upon by the ECP. According to the code, no one would be allowed to propagate any opinion or act in any manner prejudicial to the ideology of Pakistan, a restriction enshrined in Article 63(g) of the constitution. It would have been a great service to the nation had the ideology of Pakistan been finally defined by the ECP, since, right from the day of its inclusion in the constitution of Pakistan through the 8th Amendment, the terminology is waiting to be defined or elaborated. Unfortunately, Article 63 could not be amended while agreeing the 18th Amendment because of lack of consensus. Since its origin during General Yahya’s tenure, the concept of the ideology of Pakistan remains undefined and lacking in substance, despite having done enormous damage for its myriad hyperbolic and Islam-centric interpretations. How an unsubstantiated and undefined category can earn respect or be adhered to, calls for a logical answer. If the ECP could put us wise on this, perhaps the country would be saved from further psychological and material destruction.
Another matter that needs the ECP’s intervention is the stoppage of the dissemination of hate material done through seemingly innocuous means. This includes not only wall chalking (which has been banned by the ECP) but rickshaw advertisements that also require a complete ban on hate speech. A country right on the edge in terms of sectarian and ethnic strife, not to mention terrorism, requires caution and restraint applied on any act, verbal or written, that could destabilise the situation. Now that the ECP is preparing to stage the elections, it is imperative that the government announce the date of the election and the caretaker setup for the exercise. The sooner this is done the better, otherwise the way conspiracy theories are being spun, things could go wrong in the run up to the country’s crucial tryst with destiny. It is time to lay to rest all the conspiracy theories, if not actual conspiracies to halt or even delay the elections. There is no other way to do this except forging agreement on a caretaker set-up and announcing the elections at the earliest possible. *
SECOND EDITORIAL : A family’s suicide
In an act of tragic desperation, an unemployed
factory worker has killed himself and his entire family due to the demon of poverty and hunger. The 45-year-old Muhammad Qasim had been unemployed for about five months due to the factory where he worked being closed down because of the frequent gas and electricity load shedding. The factory was located in Faisalabad where many others have also been shut down due to the energy shortage, laying off hundreds of thousands of workers. Taking a gun, he shot dead his wife and five children in their sleep, turning the gun on himself in a final act of desperation. It has been estimated by the Human Rights Commission of Pakistan (HRCP) that 1,600 people ended their lives due to mass poverty in 2011, with this number increasing in the following year. These suicides are the very last resort for those thousands upon thousands of people driven to the brink of complete deprivation because of unemployment, inflation and lack of basic facilities. That this particular incident, where one of the children was only a year old, is heartbreaking no doubt, but what is even sadder is that this is just the tip of the iceberg. With millions deprived and the gap between the rich and the poor widening every day, frustration, suicides and crime are all increasing.
While the government may have invested time and capital in pro-poor initiatives such as the Benazir Income Support Programme (BISP), which has been applauded by even the World Bank, such schemes do not reach every needy person from the massively stricken masses. The energy shortage is typically seen as bothersome, inconvenient and miserable, but this hardly highlights the mammoth unemployment that results because of it, in turn contributing to the deprivation and poverty prevalent in the country. The government’s real fault lies in the fact that it has taken no steps towards fixing this major woe. Short-term measures such as the Rental Power Projects (RPPs) have been struck down and Independent Power Projects (IPPs) will be years in the making. Not much has been done by the authorities to kick-start any energy projects on a war footing. Our vast coal reserves, which promise to be a national treasure for this fuel-starved nation, remain untapped and alternative energy is still in the pilot stage. The collective suicide of this man’s family should serve to wake up those who have the power to resolve the problem although, judging from the track record of the last five years, this seems a fond hope. A couple of years ago, a man set himself on fire in front of parliament to protest against the state of the country’s poor and we stayed callous and aloof. This man and his innocent family may just have died in vain. *