As a journalist with experience of around two decades, I have witnessed every finance minister saying that Pakistan is going to be an economic hub very soon. I am still waiting for that VERY SOON service. I have interacted with quite a few finance ministers face-to-face and have heard them saying that our policies would lead Pakistan to the path of progress. It has never happened? Some people say that Pervez Musharraf’s era was an era of somewhat prosperity. I have so many reasons not to believe it at all since that era led us to consumption. Let me be very honest by saying that economic model of Pakistan is not consumption-oriented. We need to be a saving-oriented society for a sustainable growth.
Let’s look at an analogy, which may not be liked by the tax authorities in Pakistan.
In rural Pakistan, which is still around 60 percent of the entire nation, having cattle at home is considered a sign of prestige and wealth. I have travelled widely to rural areas of all four provinces of Pakistan and witnessed almost the same phenomenon. Villagers buy and sell cattle without paying taxes to the authorities. However, the thing to be noticed is that buying cattle can be considered a mode of saving. Livestock is around 12 percent of our GDP. The villagers and the investors should be encouraged to buy cattle for multiple benefits and to bolster the economy. This is actually not happening which may be one of the causes of our low economic growth since overall agriculture contributes more than 22 percent to our GDP. Looking at this example, one could imagine that saving is not taking place even in rural Pakistan. Inflation could be one of the factors for this since rural population finds it difficult to make both ends meet by and large. Buying cattle and retaining cattle for long time could lead to saving and production concurrently.
India is said to consume 25 percent of all gold production in the world. It is estimated that unaccounted money in India is about ten times the officially transacted money and the gold standard provides a very convenient method to stash away undocumented wealth since it is easy to acquire and easy to dispose. One can avoid taxes altogether in India by using weight of gold as a form of currency. Looking at this example, one can gauge that saving culture is dominant in India in the form of gold buying.
I sought opinions of around 50 people from rural and urban Pakistan regarding savings culture. Majority of the respondents told me that it was not at all possible to save since the inflation devoured all income. Some told me that saving schemes were not worth-investing. Others were of the views that materialistic approach of our society did not allow them to even think of saving. I got very dismal views about economy and savings in Pakistan.
We have witnessed Securities & Exchange Commission of Pakistan, Pakistan Stock Exchange, Asset Management Companies, Banks and Brokerage houses promoting savings and investment culture in Pakistan. However, when we look at the bottom line, the result is not encouraging in terms of saving-to-GDP ratio in Pakistan.
We all know that saving essentially means the difference between an individual’s income and spending. A country’s national savings rate is represented as a percentage of the gross domestic product (GDP).
Let’s look at the traditional saving-to-GDP ratio of a few countries: Qatar’s national savings rate has gone as high as 58%, Kuwait 55%, People’s Democratic Republic of Algeria 54%, the country of Equatorial Guinea 52%, China 50%, the Islamic Republic of Iran 50%, Singapore 49%, the Republic of Azerbaijan 43% of GDP, Gabon an African country 41% and a few of the other countries that have a national savings rate in the 30-40 percent of the GDP range are Oman, Norway, Botswana, Zambia, South Korea, United Arab Emirates, Uzbekistan, Nepal, Malaysia, Indonesia, Mongolia, Bhutan, Vietnam, India and Taiwan.
Pakistan’s savings rate has never touched even 20% of GDP.
Should we as Pakistani nation think that we do not have capable and professional as well as sincere economic managers who could take concrete measures to increase saving-to-GDP ratio? Should we ask the relevant authorities about the poor economic policies and inflationary pressures on the masses? I do not know how long we need to wait to have true professionals who could steer the Pakistani economy out of problems and lead it to the path of success.
Pakistan has got all potential to be an economic power provided that right steps are taken at the right time. Without promoting savings culture and controlling inflationary pressures, economic prosperity could be only a dream in Pakistan.