Yes, but things might get better
Everyone’s weighing in on what we’re doing wrong on the economic front. The Asian Development Bank is no exception. No one to blame there, the ADB has been helping us out off and on; it is our lot to hear them out. In its Outlook 2011 update, the ADB says that Pakistan’s public debt (at record Rs 11 trillion now) is going to pack quite a punch on the interest front.
The overall demographic picture is bleak. Pakistan gets a three percent increase in its labour force per year. To absorb that, the country must register a growth rate that averages out to seven percent per year. That isn’t happening. Our growth rate – less than three percent per year in the past four years, is going to hurt. Propensity towards social instability is a function of unemployment. We can hardly have any more of that. Some of the more rabid of anti-unemployment pundits go to the extent of suggesting that though investment in agricultural equipment might boost productivity, it is going to be offset by the social cost of a lowered requirement for labour. In fact, even the report under discussion suggests that though investment in structural reforms of the agricultural sector is necessary, other sectors have to contribute to job creation as agriculture employs 44 per cent of the work force.
The silver lining here – and this might not appeal to households across the nation – is the planned withdrawal of electricity subsidies. This is to translate into some fiscal space (a lessening of deficit, actually) for the government. It is going to help mitigate the circular debt issue as well. At the moment, even if one simply throws money at the debt, the dynamic between all of the players will start working up a large circular debt afresh. A phasing out of subsidies and rationalisation of power rates, on the other hand is going to be sustainable. Big business certainly won’t mind paying more for electric power as long as they get it on a reliable and consistent basis. Expect the next two years to be ones for the removal of subsidies, at least for the middle-classes and the rich.
