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Bad governance – root cause of all economic ills

The mantra of corruption and bad governance of the previous governments of Prime Minister Nawaz Sharif and President Asif Ali Zardari still persist. There is no doubt that the previous governments made records in corruption and bad governance, but the present government still need to take unprecedented measures to improve quality of governance in the country.

The main issues in the economic development of Pakistan have been the bad governance and irrational utilization of funds. It is undeniable fact that economic growth is an important factor in reducing poverty and releasing resources for human resource development. There is a strong correlation between per capita income and indicators of human development such as adult literacy, life expectancy, infant mortality, political and civil rights. The quality of governance is essential for the development of human resources. The good governance ensures the transparency, efficiency and rationality in the utilization of public funds and national resources, encourages growth of the private sector, promotes effective delivery of public services and helps establish the rule of law. Along with good governance, the people friendly policies, and sound macroeconomic management are also of immense importance in this context. It is bad governance that promotes a culture of corruption in the national institutions.

The bad governance erodes transparency and efficiency in the work of public departments. For instance, under Zardari’s administration Pakistan delayed the signing of an energy deal with a French company after the Supreme Court took a suo moto notice of irregularities in the award of a multi-billion-dollar contract to the foreign firm. GDF Suez of France won the contract in February for LNG to be imported from Qatar at a price of $1.8 billion in the first six years. The LNG scam came to surface following local media reports that the deal cost the country a loss of $1 billion.

Lack of transparency in national institutions remained the cause of concern for Supreme Court during its probe into the process lapse in awarding multi-billion-dollars contract to the French firm for import of LNG.

Pakistan’s economy has been virtually in recession for many reasons which also include bad governance. The strife-battered economy, combined with higher than usual prices for staples such as sugar due to alleged hoarding by producers, has drastically weakened the purchasing power of the country’s largely impoverished population of over 200 million. The hoarding of flour, sugar and other food items is also an issue of governance, as the bad governance creates artificial shortage of commodities in the market. The bad governance promotes the growth of cartels in food-supply chain.

Misuse and underutilization of development funds is also an issue of bad governance. The governance involves from setting priorities for development schemes to their funding and completion of schemes in the target area. There has been rampant corruption in utilization of development budget in the country. The governance institutions themselves ignore merit while awarding a contract for a project to the contractor.


It is because of the bad governance that public institutions do not provide credible economic data for launching a development project. For example, poverty reduction has been a major official development objective in the country over the past many years. Critics blame the previous governments for downplaying the figures related to poverty incidence to cover up its respective acts of omission or commission. Sometimes, officials claimed the figure to be around 30 percent, which was further revised down to 26.5 using a new measurement formula that relied on caloric intake rather than per day income.

A poverty census was conducted by the Planning Commission’s Centre for Poverty Reduction and Social Policy Development (CPRSPD). The CPRSPD, however, lacked capacity as well as human resource to meet its objective of coming up with latest poverty figures as internal politics had compelled competent high-ups to leave the organization. With the existing workforce, the CPRSPD has not been in a position to come up with the latest analysis of poverty. The good governance is essential for the development of human resources.

The country’s tax system still needs to be reformed and more sectors need to be brought into the tax net to achieve a tax-to-GDP ratio at 16 to 17 percent, which is currently one of the lowest in the world. The low tax base actually poses a governance challenge to bring non-taxpayers into the tax net. Massive evasion of tax needs to be checked through good governance ensuring transparency in the system.

The Pakistan’s ailing economy is virtually living on cash injections from international lenders and donors. Majority of country’s population is at the mercy of a few people who have and control the resources of the state. The deepening economic crisis might convert into a political crisis leading to social chaos and political anarchy in the nuclear-armed country.

The acute energy crisis in Pakistan virtually suffocated the industry, causing widespread discontentment in the business circles. This resulted in closure of more industrial units and increase in the unemployment rate in the country.

The critics say that even the foreign assistance could not prevent the deterioration of the economy, as irrationally high interest rates and tight monetary policy of the central bank is holding back its growth. The experts believe that the country’s entry into an IMF program has caused a significant economic slowdown and the government is facing a major challenge in managing a slowing economy. Though the central bank has increased discount rate to 12.5 per cent, which is still highest in Asia and it is not enough to reduce the bank’s lending rate and to stimulate the country’s economy. The high interest rates are the main reason behind the fall in the country’s industrial output. Drastic reduction in discount rate can provide some relief to the ailing industry and trade.

In a country, where up to 40 percent of 200 million population lives below poverty line on one dollar a day or less, the critics say, the ruling elite want to keep its perks and privileges at all costs. The officials feel no hesitation in involving financial scams, slashing the country’s development expenditure, eliminating subsidies, begging to ‘friendly’ countries and borrowing from international lenders.

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