PEF identifies areas for economic revival

LAHORE: The Pakistan Economic Forum (PEF) has identified six core areas for the long-term economic revival of the country’s rapidly sliding economy and for the societal uplift.

These areas include macroeconomic sector, regional trade, energy, water, education and social protection. Measures needed are reducing fiscal weaknesses, keeping the International Monetary Fund program on track, reviving role of government as development agent, energy sector reforms, industrial restructuring, restructuring of public sector enterprises, and increased education budget up to five percent of gross domestic product.

The PEF is a consultative body set up by the Pakistan Business Council on the pattern of the World Economic Forum to identify, prioritise and discuss issues and challenges facing the country and to make recommendations for policymakers.

The forum will present these core identified areas in stakeholders’ meeting in coming days and submit its recommendations to the government to include them in its policymaking for economic betterment of the country.

Sikandar Mustafa Khan, chairman of PBC, believes that the stakeholders’ consultation is vital for economic policymaking and the areas identified by the 42 largest businesses of Pakistan, who are the members of the PBC, are crucial for socioeconomic growth.“Energy crisis has retarded Pakistan’s GDP growth rate by three to four percent in the last few years, and also deterred any substantial local and foreign investments.

Energy demand in Pakistan is projected at almost 64 percent greater than the projected supply by 2030. A ministry of energy must be established, which would be tasked to design an integrated energy plan. This plan will balance energy imports with the development of indigenous energy resources and aim for a diversified economic energy mix,” said Khan.

He pointed out that the macroeconomic environment remains depressing. The GDP growth rate in the last four years has been around 2.5 to three percent. A chronically weak fiscal structure has fuelled high government borrowing and inflation, leading to a fiscal deficit of eight percent, which must be reduced to four percent. This along with policy uncertainties and weak governance standards needs to be urgently addressed if the GDP growth rate is to be sustained to at least 6 to 7 percent in the next few years, he said. “Nearly half (49 percent) of Pakistan’s population lives in poverty today, with government spending on social protection recorded less than one percent of GDP. In order to reduce poverty and inequality in the country, an efficient social protection policy should be implemented by the government that increases targeted subsidies to at least three percent of GDP over the next three to five years,” PBC chairman recommended.

“One out of every 20 children out of school around the world is from Pakistan. The country urgently requires policy reforms that do not only increase access to education but also improve the standard and quality of education at all levels. The future success of the country’s economy is critically dependent on the quality of its human capital. Education budget must increase from two to five percent of GDP over the next five years,” he further said. It needs to be pointed out that with less than a month to go for the general elections, political parties vying to form the next government need to clearly understand the criticality of these issues.

Failure to do so will not only place the new government in a position where its survival is threatened, but the slide into socioeconomic chaos will further accelerate, said Khan. Pakistan really cannot afford any more misadventures and while challenges like law and order and corruption too need to be addressed, politicians and policy-formers need to understand that these are really manifestations of other fundamental weaknesses. Correcting these fundamental weaknesses will automatically help the government overcome the other, more visible issues. Countries in the region and elsewhere, which have come out of the morass of debt, poverty and social strife, have only been able to do so by giving priority attention to the very areas that now the PEF has identified for a more prosperous Pakistan.

Published in The News - April 9th, 2013