Pakistan needs to do more on fiscal reforms and wipe out inequality: WB
Fiscal year 2014-15 (FY14-15): a mixed bag for Pakistan's economy!
DUNYA NEWS REPORT (HUMAIRA SAJID)
ISLAMABAD – World Bank President Jim Yong Kim arrived in Pakistan yesterday on a two-day visit to meet with its leaders and stakeholders to find out how best to support making the country’s economic reforms more ambitious.
The WB President stressed that Pakistan needs to keep up the momentum of reforms aimed at achieving higher pace of economic growth to lift people out of poverty. Kim was accompanied by Annette Dixon, Vice President for the South Asia Region of the World Bank; Dimitris Tsitsiragos, Vice President for Global Client Services of International Finance Corporation; the private sector arm of the World Bank Group; and Jan Walliser, World Bank’s Vice President for Equitable Growth, Finance, and Institutions.
The WB’s Optimism on Pakistan
“Pakistan has a great opportunity to become more ambitious in reforming its economy so that more people are lifted out of poverty more quickly and prosperity is more widely shared among its people,” said Jim Yong Kim during his meetings with Prime Minister Nawaz Sharif and economic and provincial chief ministers and the private sector to see what more support the World Bank Group can provide to Pakistan and its people in ending extreme poverty and boosting shared prosperity.
Speaking at the launching ceremony of Pakistan’s National Financial Inclusion Strategy, World Bank President Jim Yong Kim said the government had stabilized the economy over three tough years. “Now is the moment for Pakistan to step up to a higher level of growth and opportunity for its people,” he said, and added that he had discussed in meetings with the prime minister and finance minister about the importance of pressing forward with reforms that would unlock the country’s true potential.
“In my meetings with the prime minister and finance minister, we discussed going to a higher level of ambition for reforms for the economy. These could include strengthening the role of the private sector for job creation, accelerating energy reforms, making improvements at the community level for health and education, and ensuring that anti-poverty measures are effective at reaching poor people,” he remarked.
Dr Jim Yong Kim expressed full support for the government’s tough economic decisions and said that WB supports the structural reform agenda. “I recall my first meeting with you where I had shared my concern about Pakistan’s security, energy and macroeconomic stability,” Kim told the prime minister, and added, “Let me state that under your leadership, Pakistan has witnessed phenomenal improvements in all three sectors and we support your endeavors.”
He lauded the economic policies of the present government and said that Pakistan’s economic outlook had become stable in result of the ardent efforts of the country’s financial team. He said Pakistan was now on the path of increased economic growth and prosperity.
Jim and Prime Minister Nawaz Sharif also discussed a Development Policy Credit loan amounting to $500 million to promote economic reforms. The WB has forecast that Pakistan’s economy will grow at a pace of 4.5% in the current fiscal — 1% lower than the official target and far lower than the needed pace of 7% to absorb the youth entering the job markets.
“The government believes in liberal and private sector-driven economy,” Nawaz told Jim. He said the government’s efforts were aimed at ensuring ideal business environment for the private sector as governments are not meant to do business.
Think-Tank IPR’s Statements
However, recently, an influential think-tank Institute for Policy Reforms (IPR) released its fact sheet and exposed the actual image of economic state of affairs in Pakistan and the performance of the government, which was exhibited “falsely” in the statements issued by the International Monetary Fund (IMF). “This may be due either to wrong information being provided by the (Pakistani) authorities or a lack of awareness of latest trends or due to pressure to demonstrate the efficiency of the programme and its staff,” an IPR statement said.
“The cotton crop has failed and output is likely to be down by over 18 percent. This alone can reduce the GDP growth rate by one percentage point, given the role of cotton in the national economy,” it added. “Exports plummeted by over 14 percent in the first six months. Imports grew in overall quantity terms, thereby adversely impacting on production in import-substituting industries.”
The think tank said the largest industrial plant of the country, the Pakistan Steel Mills, is shutdown. Therefore, it is unlikely that the GDP growth rate will substantially exceed three percent in 2015-16. IPR criticized IMF on its assessment on the country’s poverty reduction. The mission said, “Over the last decade or so poverty has come down in Pakistan.”
It said, according to the Social Policy and Development Centre’s estimates, the number of poor is annually increasing by more than three million. “The pressure for fiscal contraction under the IMF program has probably been one factor contributing to the recent increase in poverty,” the statement said.
The think tank said the cash deficit may exceed 4.3 percent of the GDP in 2015-16 due to the cost of the prime minister’s agriculture relief package, higher tariff differential subsidy following the reduction in electricity tariff by Rs3/kilowatt hour, lower revenue from the gas infrastructure development cess and lower cash surplus by the provinces. “In fact, it will not be surprising if the fiscal deficit in 2015-16 exceeds the level attained last year of 5.3 percent of the GDP,” it added.
Pakistan’s Elusive MDGs:
Pakistan is unfortunately one such country that is shuffling in the millennium development race. According to a UN Report, Pakistan’s pace for progress on MDGs has been extremely slow and achievements minimal. The overall development indicators have not been particularly encouraging. The country’s population and unemployment are growing, pushing more people to poverty. The health sector is scrambling to tend the ever growing number of patients. Pakistan’s performance regarding 4th and 5th MDGs i.e. maternal and child health has been prominently bad. Its maternal and infant mortality ratios are amongst the highest in the region.
Despite much-claimed pro-poor efforts by successive governments, precisely it is safe to say the country has failed to meet the Millennium Development Goals (MDGs); making the MDGs an elusive dream.
The scourge of rising inequality
Similarly, achieving Strategic Development Goals (SDGs) does not seem be possible at all. All sorts of subsidies and food stamp schemes have failed to empower the poor segments of the society economically. The per capita income of Pakistanis has risen to US $ 1513; but, this is the average or mean income that is meaningless for a big number of Pakistanis who despite toiling labor throughout the day, earn not more than 4 to 5 dollars a day. This has resulted in development disparities among federating units and intra-provincial and within district inequalities. Punjab is rated as the most developed province while, Baluchistan is dubbed as the most impoverished region. To ensure a trickle-down effect of all macro-economic development on the masses, reforms need to be put in place; otherwise, the vision of a comprehensive development will remain distant even in the years to come.
Exports on decline: PPMA’s Concern
Speaking at a press conference on February 2, 2016, Pakistan Pharmaceutical Manufacturers Association (PPMA) Central Chairman Hamid Raza also demonstrated his concern over the constant decline in medicines exports of Pakistan and said that ill-advised policies of the government and undue interference by the Health Ministry had caused serious impediments to growth of the Pharma industry.
The PPMA s representatives including former chairmen Dr Kaiser Waheed and Zahid Saeed said that with present non-conducive policies of the government, Pharma industry of the country could not achieve its "Vision-2020" for increasing medicines exports from mere $200 million to $5 billion on annual basis.
