NEGATIVE IMPLICATIONS OF FOREIGN DEBT
IT IS UNIVERSALLY AGREED THAT INVESTMENT IN HUMAN RESOURCE DEVELOPMENTS INCLUDING TRAINING AND EDUCATION PAYS BACK UNPARALLEL RETURNS.
Mar 14 - 20, 2011
There is no harm in getting foreign loans provided they are put to good use for the benefit of the people and economy and producing results. An indebted economy which heavily depends on loans to run its day to day affairs has no choice but to follow instructions of the donor agencies. As far as Pakistan is concerned, its total foreign debts are estimated around $58 billion almost one third of the total GDP.
Enriched with enormous natural potential especially in terms of agriculture, energy, minerals, and above all human resource, Pakistan has to rely on foreign loans primarily due to half hearted implementation on economic policies and decisions.
Today, people in Pakistan are worried over every rising power tariffs, exorbitant POL prices, high rate of interest and mounting price inflation and sharp erosion in rupee value and purchasing power. All these economic and financial malaises or ills attributed to foreign debt especially the conditionalties linked with IMF loans. The federal government has increased power tariff across the board by two percent with immediate effect after an agreement with IMF last week. The two percent increase in power tariff is in fact a surcharge imposed on electricity consumption.
TRADE AND INDUSTRY WILLING TO RESPOND ECONOMIC CRISIS
The attitude of the new leadership of the trade and industry at federal level has kindled the light of hope. Given the opportunity, the private sector seems determined to invest in energy sector to provide a relief to energy starved people.
In this respect the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Senator Ghulam Ali has said that Pakistan being an agricultural country needs to be fully aware of the significant agriculture potential and its role in national development.
The production rate per hectare is much higher in the region like India, China and other country than Pakistan, which needs research work in agriculture fields. The country was facing energy crises and Ministry of Science & Technology (MoST) must carry out research to introduce alternate sources of energy to overcome the energy crises in Pakistan.
FPCCI has assured that its members will invest heavily in the projects of MoST for the prosperity of the country. FPCCI feels that research of MoST will help the economy to increase exports and agriculture production as well as national GDP.
To give a proper shape to this suggestion, FPCCI has signed a Memorandum of Understanding (MOU) with MoST to introduce research of MoST and its institutions for investment by the local investors, industrialists and business community.
Increasing cooperation between the two institutions will bring prosperity in the country and development goals will be achieved. The MoST is expected to introduce cheap alternate energy research to overcome the energy crises in Pakistan. FPCCI on its part is resolved to play its role for the awareness of industrialists, business community, and public at large to introduce the research of MoST.
According to informed sources, the government has agreed with the IMF to increase power tariff by six per cent, which will be imposed progressively by two per cent in March, April and May 2011 respectively.
Increasing power tariffs naturally have fallouts on general prices and cost of production of the industrial sector but it is not the end of the story. On one hand, the donor agencies press the government of the day to increase power and POL prices, which consequently add to the inflationary pressures and on the other hand the donor agency recommends increasing the interest rate to contain inflation. Consequently, the candle of the economy has started burning from both ends and the government has to deal with strong hue and cry from people.
According to analysts, the high interest rate and price inflation highest in the region are causing depressing effects on economic activity in general adding to unemployment and poverty numbers in the country.
The unaffordable cost of financing has brought the real estate and construction industry including over 70 allied industries to almost to a standstill. This is just an example and the policymakers would have to think twice about the implications of high cost of financing and adverse effects on economic growth. They would have to take decisions responding to the domestic conditions rather than to follow instructions of multilateral donor agencies.
In fact, besides reducing dependence on foreign loans, capitalizing on available resources is the key to get out of the economic and financial mess. Besides natural resources, Pakistan is a country of young people however due to lack of resources as well as vision the most precious human resource is being wasted without considering the fallouts of the unskilled and uneducated population, which would add to the national liabilities if not provided proper training.
According to Human Development Index, Pakistan is positioned at 125 out of 169 states. Since 1997, the Human Development reports have presented the Human Poverty Index (HPI), which combines different aspects of non-monetary derivations. The HPI is contributed to the way poverty is understood, but the measure does not capture overlapping deprivations suffered by individuals or households.
The current report has introduced the multidimensional poverty index, which identifies multiple deprivations in the same households in education, health and standard of living. In Pakistan, 51 percent of the population suffer multiple deprivations while an additional 12 percent are vulnerable to multiple deprivations.
In terms of income, poverty is measured by the percentage of the population living beyond poverty line $1.25 per day while multidimensional deprivation in Pakistan shows that income poverty only tells part of the story.
The purpose of highlighting these details of poverty is to invite attention of the policymakers that the opportunities offered by the young population of the country are being neglected to the extent that these opportunities are poised to become a serious liability of the economy.
It is universally agreed that investment in human resource in the form of training, education, and skill pays back unparallel returns. Why we are ignorant of the universal truth, which is the way to get rid of backbreaking loans.