Situation calls for better use of the available resources

Mar 03 - 09, 2003

To make good use of leisure is said to be one of the most difficult things in the life of an individual or the nation.

Relatively speaking, for the first time the economy of Pakistan has come to a leisure, but not any sort of complacency to avoid recurrence of financial nightmare of the past where the country had reached at the brink of default. The economic situation is satisfactory as far as economic fundamentals are concerned. The foreign exchange reserves are likely to cross the mark of $10 billion at the end of the current financial year. The exports are equally improved and expected to even cross the target. Cash inflow from external resources is outstandingly improving especially the workers remittances and the stock market is also performing extremely well. These all indicators seem to have brought a feeling of leisure for the economic managers of the country who according to reports are planning to invest 10 per cent of its foreign exchange reserves through international investment banks. Of course the economic managers planning to make good use of the available resources, however there are some extremely important areas within the country which need the immediate attention of the people at the helm of affairs. Without any fear of contradiction, the best area of investment which repays more than any other sector is the investment in human resource development which is unfortunately a neglected area in case of Pakistan. The education sector in Pakistan has been allowed to drift towards a situation where it will be beyond reach even of the middle income group what to speak of the poor due to money minting trend in this sector. Situation demands for immediate and effective measures so that the quality education is made available to the common man at an affordable price. Investing in a bank is of course good but investing in human resource development through better education will surely repay much more in the long run than investing in an international investment bank.

Currently, according to a report, the Governor State Bank of Pakistan has said that we are going to hire an international consultant company to advice and screen some of the international investment banks.

Pakistan's foreign exchange reserves have raised to record high of $9.349 billion at the end of December 2002 while its total foreign exchange reserves are set to cross the $10 billion mark by the end of the current financial year.

It is the strong reserves position that had enabled Pakistan to plan the investment move for the first time, said Dr. Ishrat Husain, the governor SBP.

The central bank did not have in-house capacity to manage the reserves. It is for the first time we have a surplus, but the central bank has to be very cautious and conservative that it did not expose itself to any risk.

Dr. Ishrat Husain also said that the country was likely to hit six per cent economic growth by fiscal 2004-05, he also has asked the new civilian government to stick to reforms initiated in 1999.

Country was also in the process of building up its reserves of essential food and fuel in case there was war in Iraq. Pakistan aims to achieve 4.5 or 4.6 per cent economic growth in the current financial year and for the next fiscal year hopes to exceed five per cent growth. Dr. Ishrat said the new civilian government should remain committed to the economic reforms initiated three years ago under military rule by President Pervez Musharraf. The government should keep an eye on fiscal discipline, fiscal deficit to avoid falling in the debt trap once again. All the unpopular decisions were taken by the military government. Now it is time to reap the dividends from those decisions.

Former military government won praise from global donor agencies including the IMF for meeting stringent conditions, including broadening the tax base, withdrawing subsidies and increasing utility charges. The decisions met through resistance from traders, the business community and the general public.

About three years back the economy of Pakistan was in deep crisis to such an extent that it had reached at the brink of default on repayments of its foreign debt. All the macroeconomic indicators were moving downwards. The military government brought the economy out of crisis and gave it stability.

People generally expect from the new leadership to give relief to the poor, but it should not be done at the expense of reforms. In Pakistan when we were experiencing a six per cent GDP growth rate, poverty declined to three to four per cent whereas it surged to 34 and 35 per cent. One can see a clear correlation between the growth and poverty.

Economic analysis say about one third of Pakistan's 140 million people live in poverty. But the government calls the figures exaggerated.

Now the civilian government should continue with the devolution process and continue investing in agriculture, small and medium sized enterprises and irrigation. It should also promote information technology and invest in the oil and gas sector to spur growth and employment. But most importantly, it should keep an eye on fiscal discipline and fiscal deficit which is very critical and speed up reforms and restructuring of state-run utilities. If we don't do that we can get back in the debt trap.