Economy Of Pakistan Essay, Research Paper Pakistan A Portrait of the Death of an Economy My subject trades with Pakistan, its relationship with the IMF and World Bank, and its internal jobs that are doing unemployment, poorness, economic crisis and hungriness. I shall be analysing the state of affairs utilizing the neo-classical theory, as it is what the economic experts of the Pakistan authorities and the IMF are utilizing to relieve the economic instability of the state. Situated in the sub-continent, Pakistan is a low-income state, with great promise for growing. Unfortunately, it is held back from making middle-income position by chronic jobs like a quickly turning population, ample authorities shortages, a heavy dependance on foreign assistance, perennial governmental instability and big military outgos.
It is to turn to these cardinal mistakes in Pakistan’s economic system that the IMF has initiated the Structural Adjustment Programs ( SAPs ) in the state. This is discussed in farther item later in the paper. Like all developing states, Pakistan’s population is mostly employed in the agricultural sector, which accounts for about 48 per centum of the labour force. In today’s universe the Industrial and Service sectors are the largest turning countries of a developed county’s economic system. Yet Pakistan merely employs 39 per centum of its population in Service, and a minute 13 per centum in Industry.
This is a negligible figure, compared to the employment statistics of a developed state. Pakistan is besides to a great extent dependent on a individual export harvest, cotton. Hence the state’s lucks rise and autumn with the cotton market. It is no admiration that there are so many poorness afflicted people in Pakistan.
When about half the population is involved in a really volatile market, a batch of the clip, a batch of people will be burnt by monetary value fluctuations. The state is besides capable to the clemency of the conditions. Concentrating on a major hard currency harvest means really small variegation. This translates to mass hungriness and difficult times for the agricultural sector whenever the agricultural lands are ravaged by inundations, or conversely, by drouths.
Even more significantly, Pakistan’s agricultural sector is marked by big landholders, commanding most of the production. Hence, merely a minimum sum of the net income from exports goes to the hapless people working for the big husbandmans. It is these people who constitute a big part of Pakistan’s population. It is besides these people who are populating in low poorness in the rural parts of the state, devoid of the right to feed their households.
This is a great illustration of a subject discussed in? World Hunger, Twelve Myths. ? Lappe, Collins, Rosset and Esparza discuss the normally believed myths about why hungriness and poorness exist. In it they clarify this really of import point: hungriness does non be due to a deficit of available nutrient, but because of? fright? and? impotence, ? ensuing in the? anguish, grief and humiliation? felt by the hungry and poverty stricken. Pakistan is a authoritative illustration of this theory.
Based on a feudal system, particularly in agribusiness, Pakistani society is chiefly controlled by feudal masters, ( a.k.a. the politicians or relations of politicians ) , who own or oversee most of the agricultural land and industrial base. Being above the jurisprudence, due to their political influence, these corrupt people can literally acquire away with slaying. Therefore, maintaining their labourers subdued and underpaid is no difficult undertaking.
Anyone who dares to kick is used as an? illustration? for possible hereafter agitation. As a consequence, the people in their? elakhas? , ( controlled lands ) , remain impoverished in the throes of poorness, unable to assist themselves due to their deficiency of power and the fright of the? thekedars? , ( big landholders ) . By a deficiency of power, I refer non to a famine of physical art but to a scarceness of basic human rights. These are the same rights that people in developed states take for granted. The right to vote for whomever one feels like is losing. Alternatively a batch of villagers are forced to vote for the local land proprietor due to a combination of fright and ignorance ; a fright of the reverberations of a possible loss by the feudal Godhead and the ignorance of any agencies to get away this same master’s wrath.
Very frequently there is besides no pick of campaigners. There are really few people willing to put on the line their ain and their households? safety by running against their subjugators. All this goes against the very nature of the free market economic system that Pakistan is supposed to be running. While the IMF and World Bank are utilizing Neo Classical theory to turn to the state’s jobs in the capital, half the state is still being run under the feudal system. Till this system is broken, and the huge lower categories are empowered there is non a dent that can be made in the state’s poorness and hunger issues.
Rather the job will go on to turn right under the economic experts? olfactory organs. Pakistan is besides set back by cultural jobs, holding legion groups including Punjabis, Pakhtoons, Sindhis, Balochis and Mujahirs. Talking different linguistic communications, the different cultural groups do non acquire along really good as is witnessed by the legion clangs between Sindhis and Mujahirs in the force lacerate metropolis of Karachi. The linguistic communication barrier besides translates to a deficiency of mobility of labour, which is a key to economic success under neo-classical theory. Hence the big sparsely populated state of Balochistan is soon under utilised. Due to a deficiency of available labour, industries are tough to put up.
If the language/ethnic barrier could be overcome, the rich lands of Balochistan could potentially go the Jesuss of Pakistan’s economic system. Pakistan besides has a really hebdomad industrial base. Bing an ex British settlement it suffers from a similar job to the one ailing a figure of the African and South American states. This issue is that the settlers ne’er bothered constructing up the necessary base for industrialisation. While the remainder of the universe was busy constructing this base, avaricious settlers who did non care about the state and therefore paid no attending to its development were working states like Pakistan.
Hence Pakistan is for good playing catch up to the remainder of the developed universe go forthing really small money for societal services to assist the state of affairs of the hapless. The literacy rate in Pakistan is besides really low. In 1992, the official literacy rate for the grownup population was said to be a low 36 per centum. Even more blue was the statistic that listed 45 adult females being educated for every adult male. With this famine of qualified forces, there is no room for economic growing as there are no new heads to head the growing. Womans are besides the primary nutrient manufacturers in Pakistan.
If they are non being educated, it means that they are non up to day of the month on the latest production techniques, which in bend translates to inefficiency and the aforesaid ignorance. Once once more it all ties into the impotence that marks the hungriness and destitute. Women represent 54 per centum of Pakistan’s population. If they are non allowed to exert their rights to an instruction and to vote, how can the state be expected to come on? It is like inquiring a adult male with one leg to run. Like other 3rd universe states, in Pakistan, substandard lodging, unequal sanitation and H2O supply, and widespread malnutrition contribute to spread of disease and to high baby, childhood, and maternal mortality.
The prima causes of decease are stomach flu, respiratory infections, inborn abnormalcies, TB, malaria, and typhoid febrility, all preventable diseases. Unfortunately the hapless, uneducated lower categories are non given adequate attending by the corrupt functionaries running the state, which is ensuing in their state of affairs deteriorating twelvemonth by twelvemonth. These, along with other economic and societal issues are doing huge hungriness and poorness in Pakistan. Presently Pakistan is go throughing through an unprecedented economic crisis, made worse by the planetary recession. The convulsion in domestic markets and the instability between resources and liabilities threatens to turn over back the modest degrees of economic development and industrialisation that Pakistan has achieved so far.
Had it non been for a moderately strong agricultural base, the state of affairs would be much worse. This? state of affairs? has been caused by a mixture of issues, including the close eyesight of politicians and their continuity in following politically popular, but economically black policies. An illustration of this is the explosion of a atomic bomb a twelvemonth ago. Simply to demo off to India and the remainder of the universe, every bit good as to raise their local popularity, the Pakistani authorities decided to travel in front with an unneeded trial that brought economic countenances against them and besides be them a batch of their assistance from western states.
However, much more of import have been the structural grounds underlying this impairment, all of which have been lending to the turning feeling of despair the hungry and poverty stricken have been sing. Before this paper begins happening solutions to the jobs at manus, we need to remind ourselves of the cardinal issues. 1 ) One major job that Pakistan needs to cover with is the fact that its disbursals are far more than its grosss. Partially due to decennaries of slack financial direction, but more because of myopic policies in its external dealingss, the militaristic construction of the province and the narrow vision of its raper elite, Pakistan is Rs 100 billion short of the money to merely maintain its bing machinery operational.
How is a 3rd universe state supposed to develop an substructure when it is passing more than its cyberspace grosss on merely two points, debt service and defence? In fact, Rs 18 billion of its defence has to be financed to borrowing. The Pakistani authorities has non been regulating ; it has merely been moving as a debt-securing bureau. 2 ) Recently the authorities has been touting the fact that it has achieved the IMF imposed budget defect mark. What it neglects to advert that it achieved the mark through questionable agencies. First, it drastically reduced its developmental outgo from 7.5 per cent of GDP in the early? 90s to a paltry 3 per cent, which translates to a cutback of 140 billion in present monetary values. A cutback of outgo of such extent in the authoritiess purchases of private sector goods like cement, pipes and overseas telegrams and services like technology explains why a figure of private sub-sectors are at the point of shuting down, runing at a immensely reduced capacity.
This is adding to the issues of hungriness, poorness and unemployment being faced in Pakistan. The authorities has besides reduced the sum it givers to the states by Rs 30 billion, reassigning some of its debt to the provincial authoritiess. In other words the authorities has done nil to decide the issue of structural defect. 3 ) What’s worse is that non merely has developmental outgo been aggressively curtailed, but that the scarce resources set aside for substructure plants have been diverted to less productive investments_like the new expressway and the new Lahore airdrome.
This monolithic decrease of the populace sector’s developmental activities is doing a contraction in employment chances for Pakistan’s turning figure of in-between category educated youth. This is peculiarly serious in the countries where the private sector is improbable to turn up due to the deficiency of substructure. Thus the truly hapless countries continue to populate in poorness due to the authorities’s inability to supply equal physical and societal substructure or make an environment for private sector investing. It has besides non been able to keep jurisprudence and order and is guilty of non populating up to its contractual duties which is further detering foreign and domestic investing in the state.
The intervention of its foreign currency history holders and IPPs last twelvemonth illustrates this point. 4 ) Pakistan suffers from the typical jobs that all 3rd universe states suffer. One of these is monolithic corruptness at all degrees, estimated at Rs 100 billion a twelvemonth. This means that a big part of national wealth has been stolen from the hapless. No admiration, the state is unable to raise itself out of the morass of poorness and hungriness. 5 ) Tax equivocation is another issue that the authorities needs to turn to.
Consecutive authoritiess have failed to set up a revenue enhancement civilization due to an unjust construction, which revenue enhancements different beginnings otherwise. An illustration of this is provided by the big husbandmans who, despite now acquiring higher international monetary values for their harvest, are unwilling to pay the modest degrees of provincial revenue enhancements. The political leading itself does non pay its revenue enhancements diligently. Therefore, unless companies owned by sitting curates install bill based systems for revenue enhancement accounting, it will go on to be hard to implement retail revenue enhancements. Besides, the repeated bowing down of the authorities to shutter-down menaces of bargainers and the perennial refusal of big land-owners to run into their revenue enhancement duties is increasing the load of revenue enhancements on the incapacitated hapless, the organized sectors, and the honest people foolish plenty to pay their revenue enhancements.
If the rich are non willing to run into their duties, how are the hapless supposed to last? 6 ) There is the extra job of a spread of between 5 an 6 per cent of GDP per twelvemonth between domestic national nest eggs and investings which translates to about Rs 150 billion being financed from external adoption. This farther adds to the stultifying debt that is leting the IMF and World Bank to interfere in the preparation of domestic economic policies. 7 ) The external debt of around US $ 34 billion is more than 50 per cent of GDP, and four times the one-year foreign exchange net incomes. Pakistan can neither refund nor serve this debt. So far I has merely postponed the inevitable, default by stacking up farther debts at detestably high rates.
8 ) Pakistan’s exports compromise 0.2 per cent of universe exports and variegation from a individual harvest economic system has remained an elusive dream. Therefore to trust for exports to be the driving force of economic recovery, as the authorities is making, would necessitate an astronomical rise in exports, and the monetary value of cotton. In other words it is impossible. 9 ) The state’s ability to export is besides affected by sulky universe trade, which coupled with an over valued currency, is rendering Pakistan’s exports uncompetitive. With the rise in the monetary value of oil, the spread between import measures and export grosss is widening.
10 ) Until now this spread has been met with remittals and short-run adoption. But due to a diminution in remittals for a figure of grounds and Pakistan’s worsening recognition, this is no longer an option. It hence seems that it is impossible to keep the present degrees of growing rates and imports every bit good as fitting debt service. 11 ) Public sector industries are besides profoundly in the ruddy due to over-manning, corruptness, and the protection given to big defaulters of public-service corporations. The combined debts of merely WAPDA and KESC, ( which trade with electricity and gas severally, ) are Rs 91 billion while the loans of 18 public sector endeavors is close to Rs 250 billion.
12 ) The authorities is offering 15 to 18 per cent involvement rates on its economy strategies which is far to high for it to be able to bring forth high plenty returns to serve the debt and still hold adequate left over to finance developmental activities. 13 ) Most of Pakistan’s industry faces the issue of negative or nominal growing, while value-added industry is runing at 30 % below capacity. The limited growing is due to a deficiency of comparative advantage, the deficiency of recognition handiness and a high involvement rate. Despite rising prices being good below dual figures, involvement rates are every bit high as 15 to 18 per cent on loans! This is excessively high to maintain the present economic system afloat, allow entirely raise it to a maintainable degree of growing. 14 ) There is besides a deficiency of assurance in the authorities by the private sector. How can a authorities that can non even manage domestic peace issues be expected to turn around an economic system that is in the throes of a downward spiral? Therefore the private sector has been occupied in short-run trading and currency guesss which do nil for growing or the public assistance of the province.
15 ) An obvious consequence of this state of affairs is that the disparity between the rich and the hapless has grown. The portion of the poorest 20 per cent of families has fallen to 7 per cent while the richest 20 per cent are having over 45 per cent. The low rate of economic growing and the high rate of rising prices over the last few old ages have left the hapless with no purchasing power ensuing in about a 3rd of the population life below the poorness line. There is besides anger amongst the hapless about the fact that the incidence of increased revenue enhancement has been heaviest for them ; expenditures on services for them have declined. Social tensenesss are lifting with the growing of the absolute figure of hapless, illiterate and idle, as employment chances and rewards decline due to the stagnating economic system.
Such conditions are barely contributing to political and societal stableness, without which growing will stay a distant dream. On top of all of this, Pakistan is plagued by the expletive of the IMF and World Bank. Changeless defects in the current history of the balance of payments and consuming foreign exchange militias is doing the extension of recognition to go an exercising in higgling and bargaining. Each clip there are dialogues along with a twine of conditions attached to the loan. The release of recognition is so delayed until each and every status of the IMF has been met.
The lone manner that Pakistan can now procure loans and critical extensions on its debt is to establish the Structural Adjustment Programs that have been drawn up by IMF economic experts. The job is that the benefit of these plans is questionable. Most states have suffered vastly from them. Alternatively of bettering the economic system, these plans have been destructing them. Unfortunately, like other states that have yielded to the them, Pakistan is virtually being taken over by the IMF, along with the World Bank.
There is increasing grounds of this everywhere: & # 183 ; A few months ago, the IMF opened a resident office in the capital, Islamabad, to supervise the economic policies and public presentation. & # 183 ; Before the budget is presented to the Assembly, it is sent to the IMF examination squad for blessing. & # 183 ; Even after the Assembly has passed the budget, the IMF can amend it, wholly against the will of the Assembly and public involvement. & # 183 ; Undertakings are started, speeded up or stalled at the will of the World Bank. & # 183 ; Not, merely are major undertakings subject to their blessing, but even little monetary value alterations in consumer merchandise s are also dependent on their assessment.
· Either the mission is visiting the country and having meetings with various government departments, or the heads of these departments are rushing every week to Washington to plead for more time and/or money. This is reminiscent of countries like Brazil and Russia in the ?80s and ?90s when they were drowning in debt and faced mounting poverty. And did the IMF and World Bank?s policies help them recover? The answer is ?No.? In fact they made the situation much worse. From 1980 to 1989 Brazil paid $148 billion in debt servicing on a loan of $ 64 Billion. Ten years later, having paid $148 billion on the debt, Brazil now owes $121 billion.
This illustrates the viscous cycle that the IMF puts its borrowers into. In Russia, the IMF contributed to Russia?s collapse in 1998. Competition combined with intelligent privatization and correctly channeled investments in capital markets could have brought about the growth that Russia was so desperately searching for, but the IMF never emphasized competition and economic growth. Instead they imposed their rigid, set, standard formula_reducing inflation and cutting budget deficits. Insisting on a fixed exchange rate, it destroyed all prospects for export of oil, gas, and energy, which earns Russia half of its money leaving the country in tatters. Whenever the IMF?s policies fail, they give the standard excuse of poor implementation by government officials, corruption and the lack of political will.
Policies are made within constraints. The IMF refuses to acknowledge these constraints just as it refuses to make country to country adjustments. No two situations are alike. How can the IMF expect one standard plan to solve every type of problem? It is obvious to laymen in economics that it cannot. Yet the geniuses at the IMF cannot see this.
It is not the fault of the IMF that countries have taken loans and are now in debt. On the other hand, they are completely responsible for the havoc their policies have caused, and are causing, in victim countries where hunger and poverty have increased many fold instead of having been reduced. The particulars of the IMF and World Bank?s policy in Pakistan were recently announced and by the Government of Pakistan and were approved by the overseeing organizations. The three-year structural reform agenda is basically focused on the budget and on the restructuring and strengthening of the financial position of public enterprises.
Substantial efforts are to be made to broaden the base of domestic taxes, revamp tax administration, implement the restructuring plans for the energy sector and a number of other public sector enterprises, and raise the productivity of government expenditure. The government is also to move forward with the privatization of financial institutions, trade liberalization, and to make further progress in the development of the market-based foreign exchange and payments system. The main points of the agenda are as follows: Agriculture The government?s strategy in this area is to limit the role of the public sector, transfer management to the private sector, strengthen local capacity, and assist in natural resource management and environmental protection. The government?s control over imports of fertilizers and the remaining restrictions on imports and exports of agricultural commodities are to be reduced. The wheat subsidy is to be phased out as well, and the private sector will be gradually allowed to participate in the wheat market on terms similar to those of the public sector.
The functioning of the agricultural credit market will be improved by gradually phasing out credit subsidies and directed credit and by developing more effective, market-based credit institutions. Social policies Pakistan?s Social Action Program (SAP) was launched in 1992 to expand and improve the country?s very weak social services in elementary education, primary health, population welfare, and rural water supply and sanitation. The second part of the SAP (now underway) emphasizes improvements in the quality of services, particularly education, and the maximization of the impact of expenditures. The SAP program will continue to be agreed upon on an annual basis by the government, the World Bank, and other participating donors. In 1998/99, the government is to ensure that total rupee expenditure (not including foreign project assistance) for basic social services will be at least PRs 56.5 billion, including at least PRs 5.5 billion on critical quality-enhancing nonsalary expenditures in the provinces and federal areas.
The focus in education is to be on enhancing the quality of services through improvements in the teaching environment; provision of textbooks and materials; and greater access to educational opportunities, particularly for girls. The objective of the healthcare sector is to be on strengthening of basic health care and family planning services at the community level. Transport Pakistan?s growth and export potential depends importantly on the modernization of its outmoded transportation systems. To improve the transport system, the government will implement a reform program over the next three years to upgrade and expand the country?s highways, railways, and ports. The highways are to be improved through the incorporation of tolls and through the encouragement of private sector investment while the railway is to be prepared for privatization by the end of 2000. Infrastructure In Pakistan, the provision of basic infrastructure and services in the urban and water sector lags considerably behind the rapidly growing urban population.
To improve the living conditions of the urban population, particularly those of the poor, major efforts are proposed to improve Pakistan?s water supply and sewerage and solid waste management systems which include reforms to develop local governments? capacity to meet this need with private sector participation in urban services delivery. Power sector In the energy sector, Pakistan?s reform program is to increase the efficiency and reliability of energy supply and to create a competitive market structure. The government is to encourage private sector investment in new energy supplies while initiating the restructuring and partial privatization of the energy utilities. The government will consider restructuring and privatization of Pakistan State Oil Ltd., the largest oil marketing company, while shares of SNGPL, a major gas distribution company, will be offered for sale to investors.
The government is also considering restructuring the Oil and Gas Development Corporation and natural gas tariffs will be adjusted to achieve a rate of return on assets as agreed with the World Bank. Environmental issues One of the most pressing issues in sustainable development for Pakistan is the strengthening and improved monitoring and enforcement of environmental protection. The areas of concern include the inability of provincial environmental protection agencies to design cost-effective strategies for the enforcement of National Environmental Quality Standards and other provisions of the Environmental Protection Ordinance, and the absence of a pollution control system. The steps that are to be taken over the program period include the development of provincial capacity for monitoring and enforcement, the implementation of mass awareness programs, the development of a comprehensive pollution control and environmental impact assessment system, and the increased enforcement of compliance by the industrial sector with sound pollution control. Government The effectiveness of the government in public expenditures is limited and contributes to poor economic performance, low investment, and inadequate social services.
The politicization of routine decision making has weakened the civil service and diverted expenditures to lower-priority activities. To prevent this, the government is to downsize itself to a reasonable number of staff so as to increase its processing efficiency. Statistical issues In addition to plans for the improvement of the quality and timeliness of data on public expenditures, the government is to address remaining deficiencies in the economic database of Pakistan: in national accounts, through Public enterprise reform During the course of 1997/98, seven major public sector enterprises developed plans to restructure their operations and to improve their financial performance so as to increase their efficiency and/or prepare for privatization. Public debt management Due to the high levels of public debt and its effects on the budget, the government is to adopt a debt management policy to reduce the debt and debt-service ratios. Banking sector The banking reform program has already started to stem the losses from the politically motivated lending and subsequent operating losses. The efficiency of the banking sector has been improved through a change in management and by reducing overstaffing and the excessive numbers of branches.
Regulations and financial disclosure standards have been brought to international levels to increase transparency. The central bank?s autonomy, especially in monetary policy and banking supervision, has also been strengthened through the amendment of the law. This is to lead to the privatization of the rest of the government controlled banks over the next two years. Reform in the Foreign exchange market Pakistan is to increase the role of market forces in the process of determining the exchange rate by developing the spot and forward markets, and by eventually having a freely floating exchange rate. Tariff reform Plans have been made to remove the remaining restrictions on exports and imports and to further lower import tariffs. The elimination of import bans on textile products is expected to be agreed upon during negotiations between Pakistan and its main trading partners.
Only tariffs applying to automobile imports will remain for balance of payments reasons. Tax reform The focus of the tax reform program is to achieve larger revenues from tax collection, while promoting a more equitable distribution of the tax burden and greater documentation of the economy. To achieve this, the tax base is to be broadened by including previously untaxed income and under taxed sectors, and tax administration improved in order to provide scope for a lowering of statutory tax rates. A comprehensive review of the income tax system is also to be completed soon, and the recommendations from the review are to be implemented in the 1999/2000 fiscal year. Expenditure and civil service reform Improvements in expenditure policy are to concentrate on maximizing its effectiveness and developmental impact.
To achieve this the government is to reduce spending on lower-priority activities by reducing the public investment program, lower spending on personnel, allocate resources toward high-priority and essential operating and maintenance expenditures, provide adequate money for basic social services which are part of the SAPs, and improve the planning and monitoring of budgetary expenditures. Pakistan is currently at the brink of complete collapse. It has got to the point where the army has stepped in and declared martial law and the people are happy about it! This shows how desperate the situation is. For many of the poor and starving, martial law represents their last hope as everyone including their government and international financial institutions has betrayed their trust. The question arises as to what the military can do to alleviate the problems and stem the collapse.
The following are some suggestions: a) Until now taxation structure has been a dependent on import related taxes and excise duties. Along with sales and income taxes for mobilizing revenues no matter how poor the enforcement, the speed of imposed tariff reform program effects the capacity of the taxation structure to raise adequate resources to meet operational expenditures. The slowdown of industrial activity has also weighed greatly on this factor. Therefore there is a great need to place a structure which taxes incomes of all sources equally. b) Contrary to popular belief high rates of return on government issued instruments do not necessarily increase savings rates. They, instead, influence the switch from one instrument to the next.
This encourages an outflow of capitol. A more practical proposition for decreasing the deficit would be for the government to lower yields on its securities and saving schemes. Taxation should also be brought up to date and been adjusted to levy new issues rather that old. c) To assist industries interest rates will have to be cut further in order for these operations to breathe.
d) The industry should weed out the units that do not operate up to a certain efficiency standard so as to allow the inflow of cash to competent units. Ceasing to provide revival packages to dying industries as Pakistan has being doing for the last decade can do this. They need to let the free market take its course and eliminate non-competitive firms. e) The rupee is substantially overvalued and must be allowed to float so as to allow exports to sell fairly in international markets and to make foreign products less competitive in local markets. In turn, a revamping of the monetary system to correctly assess drawback claims would greatly improve the financial situation. f) There is one government servant for every thirty-five Pakistanis.
Therefore the government needs to ?right-size? itself so as to improve its efficiency and cut back on expenditure on benefits. The multiple layers of required processing shake the present effectiveness of policy. A smaller, more efficient government would mean that policies would not hit the streets after the fact. g) A problem far greater than corruption is the lack of competence in public sector enterprises. There is a need for more specialists in key departmental positions instead of the present use of generalists to man key positions. h) Pakistan currently spends more than twice as much as India and Sri Lanka do per student at the primary and secondary levels.
Hence there is a need to restructure the social aspect of the public sector through decentralization, so as to bring about greater efficiency. I) After the acquisition of nuclear weaponry, Pakistan needs to review its defense spending and the size of its army. There is no real need to be spending more than the size of the budget on a defense that could, most probably, never be required. k) It also needs to establish independent institutions to conduct a thorough accountability for the government?s actions so as to dissuade corrupt officials from stealing, evading taxes and mistreating the poor people living and working on their land.
l) The quality of political leadership also needs to be improved. Decreasing the incentives of holding a seat in senate or assembly can do this. For example, the discretionary power to give tax breaks could be taken away. The economy could be further decontrolled and privatized. The income tax forms for those in office and heir immediate family should be made public for their time in office so as to control corruption.
In this way the politicians and their relatives, who control a lot of the agricultural and industrial sectors, would have a harder time evading taxes and mistreating their labor. m) The government also needs to stop focussing on debt servicing which is obviously impossible at this point, and start focussing on getting the debt either absolved or completely restructured with equitable interest rates. Money saved from the reduction of the annual spending on debt servicing could then be used for financing re-prioritized infrastructure related developmental programs. Primarily focussing on deprived areas, particularly in the smaller provinces, and for financing human development programs and social safety nets for the less privileged segments of the population, the country could provide its present lower class with an option that they have not had before. This is the option to improve their lot through hard work and with the opportunity to break free of the controlling feudal system. After all, capital is not such a major constraint if there is an educated labor force that can deploy the existing capital productively.
The major setback to growth is the lack of human capital that can absorb technology and the experiences of other countries to leapfrog a number of developmental stages Which is what Pakistan needs to do to undo the damage done by the colonists. It is people that make the biggest difference, not the capital hat they are using, since assets are just a means to an end. On the other hand, expanding good-quality education can create islands of skill wherein important skills in various key disciplines can be developed so as to push up the growth rate. To support this, I believe that all investments in, and incomes from education should be exempt from taxation. Furthermore, money saved from debt-servicing could be used for public sector investments in agriculture to enhance yields per acre in essential food production, thereby placing a constraint on the drain of foreign exchange being used to purchase imports of agricultural commodities like wheat and edible oils.
This would make these vital food products cheaper and more accessible to the poorer citizens going some way to reducing hunger. As wheat and ?ghee,? (a local edible oil), are major mainstays of the local diet, they should be made completely tax-free and subsidized, so as to further cheapen their prices. I feel that this would go along way towards lightening the burden on the poor. Investments in agriculture are also critical as it continues to be the mainstay of the economy and provides a livelihood for a large majority of the population. It can also play a strong role in supporting small-scale industry and in checking rural-urban migration.
If the military decides to impose these policies, or policies similar to these, Pakistan may have a hope of avoiding what appears to be an inevitable crash of its economy. The situation of the poor and under privileged could also be alleviated eventually as long as the government decides to start spending money on developing an infrastructure that can help feed the hungry by providing them with jobs. Nevertheless, there are no easy options left. Only the painful ones remain.
It is, however, important that the pain of reform be distributed equitably, and not born largely by the poorer classes, as is very often the case. There are tough times ahead. Unfortunately, there is little evidence that the Pakistani ruling elite is aware of the gravity of the situation; or that it has what it will take to steer the country out of its mess.
