Has
the PPP government even tried to tackle economic issues since it came to power?
The transition
towards democracy was completed in Pakistan with the holding of general
election in 2008, in which Pakistan People Party (PPP) won the majority of
seats. After the assassination of Benazir Bhutto, the country went through a
difficult phase, which led to a multi-party government at federal and
provincial levels.
Zulfikar Ali Bhutto
coined the slogan of “Roti, kapra aur makan” (bread, clothes, and shelter) during
the 1970s which was later used during successive election campaigns. During the
2008 elections, the PPP decided to reach out to the masses with a variation of
this basic slogan, encapsulating economic uplift and social development (Ilm,
roshni sab ko kaam, roti kapra aur makaan).
The PPP promised
change through accessing basic education to every child of the nation, creation
of new employment, building new sources of energy, conserving environment for
future generations and brining equality.
Based on these
principles, the PPP set targets in the manifesto prior to the general elections
in 2008. The salient features of the manifesto are growth with equity, sound
debt policy for ensuring low burden on future generations, and combating
employment through vibrant economic growth by creating employment in private
and public sectors. There was a call for the adoption of a four-pronged package
comprised of labour-intensive public works assuring employment to one working
member of the lowest 25 percent poorest families, literacy and health crops
(LHCs) assuring two-year employment to all youth completing intermediate,
graduation and post-graduation, vocational training programme and
micro-finance.
It also includes
containing inflation through prudent monetary and fiscal policies. In addition
to these, enhancing staple production, promoting competition in manufacturing
and domestic trade leaving impacts on cost of goods, enhanced the role of SECP
for stopping cartelisation, strengthening supply of staples and maintain wheat
reserves and establishing a fair tax system through overhauling of existing
system and making it taxpayer-friendly for compliance, etc.
During the PPP’s
first budget speech in the National Assembly, Prime Minister Syed Yousaf Raza
Gilani promised to achieve GDP growth rate of 5.5 percent during Fiscal Year
2008-09. However, it could not be materialised due to multiple problems leading
to low GDP growth rate of 1.2 percent GDP. The government performed better
during FY 2009-10 where it achieved 4.1 percent growth rate. The situation
further exacerbated for the PPP led democratic government, which again failed
to achieve the targeted GDP growth of 4.5 percent. Growing terrorist attacks,
the war on terror and the energy crisis led to depressed domestic and foreign
investments, which are likely to prevail into the next few years, impeding
targeted GDP growth. The total investment has declined to 13.4 percent of GDP
in 2010-11 from 22.5 percent of GDP in 2006-07, out of which fixed investment
also declined to 11.8 percent of GDP from 13.4 last year.
Last year, public
investments had been revised in the wake of tight conditionalities imposed by
the IMF and flash floods. The national government has to adjust spending on
public investments downwards in order to remain within the limits of fiscal
discipline imposed by the IMF. In the absence of substantial private
investment, public investment stimulates private investment. The failure of
implementation of public investment funding, reflected in last year’s revised
estimates, presents a complex and long-standing hurdle to real public
investment outcomes. Diversion of resources away from productive public
investment to contain fiscal deficit within discipline may lead to hinder
expected outcome of public investments.
PPP promised to
generate robust GDP growth rate with equity, which could not be materialised
during the last three fiscal years. Poverty is likely to be reversed due to
declining purchasing power and high inflation. Regressive system of taxation address
through taxation reforms is yet to implement and produce the desired results
for the economy and people. Public also failed to spend money on pro-poor
sectors due to stringent IMF conditionalities due to diversion of resources to
expenditures, other than pro-poor.
The current budget
does not envisage an exit strategy from external debt, which will automatically
lead to another high cost loans for repayment of existing
stand-by-arrangements. One of the remedies towards achieving debt reduction is
the sale of finance starved Public Sector Enterprises (PSEs), which impose
substantial funding, burdens on the national exchequer. Previous governments
privatised state-owned enterprises and proceeds of privatisation were adjusted
towards public debt. Lukewarm response was given by finance minister with no
privatisation of PSEs, rather the minister announced to revitalise these PSEs.
It served two purposes; one is saving money from deficit financing and second,
is realisation of proceeds to public debt.
Food inflation has
reached double digits due to contributions from the supply side as well as
demand pull factors. The current government’s policies led to a devastating
situation for the poor and low income classes. Petroleum, wheat and electricity
prices leaped upwards many times during three fiscal years. The increased
lending rate is leading to higher costs of production. Currency depreciation
also brought unprecedented increase in prices. On other hand, high fiscal
deficits through bank borrowing, high interest rates and high interest payments
added woes to existing inflation hikes. Monetary measures may not be the
solution, rather the continuous supply of essential items and better logistic
may relive consumers in the short run.
The election manifesto envisaged employment
generation opportunities especially for the youth, in Pakistan. The statistics
highlights that under the army led regime, unemployment was curtailed to 5.60
percent, which was followed by an unprecedented increase in unemployment rate
under the PPP government, touching 15.20 percent. The PPP government could not
bring employment generation programmes in the country as promised in the
manifesto. The government should start employment guarantee schemes as our neighbouring
country took this milestone years ago.
The PPP election
manifesto promised energy security by bridging the 8000MW gap. After two
budgets of the PPP government, no concerted efforts have been made in terms of
allocations. Diamer-Bhasha dam is going to be kick-started during the fiscal
year, which will generate 5000 MGW after its completion in 2018. However, the
government is not taking proper steps to import energy from the neighbouring
countries through intra-regional energy trade. The government claimed to have
added 2000 MGW into national grid and promised to add another 1200 MGW this
year.
The federal
government’s flagship policy for social welfare revolves around the Benazir
Income Support Programme (BISP), which provides Rs1000 (US$12) per month to
poor households. The budget for the BISP is cut from PKR70 to PKR50 billion
rupees. Last year, the government spent PKR30 billion rupees and is committed
to spend PKR50 billion rupees this year.
As revealed in the
economic survey, literacy rate is increased to 57.7 percent in 2009-10 from
57.4 percent in 2008-09, showing very paltry improvement. The PPP promised the
change in the country through the spread of education to every child. The youth
in the country demands the provision of basic and technical education through
which the dream of high growth rate can be achieved.
The writer works at
Sustainable Development Policy Institute and can be reached at Gulbaz@sdpi.org.
http://www.jang.com.pk/thenews/jun2011-weekly/nos-26-06-2011/pol1.htm#7
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