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Article

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Pakistan's economic growth in the last four years has been quite disappointing both in relation to the preceding four years and compared to other South Asian countries. Austerity measures to contain fiscal deficit, achieve macroeconomic stability and reduce external borrowing have squeezed the space for public sector development programme. The uncertainty and lack of direction, political instability, energy shortages, security concerns and high interest rates have played to the fear of private sector which has withheld productive investment. Consequently, total investment-GDP ratio which had reached 23 percent has declined to 13 percent. Assuming that investment ratio and the incremental capital-output ratio at an aggregate level remain at least the same we can expect about 3.5 percent average growth rate. With population growing at about 2.0 percent, per capita incomes will stagnate at 1.5 percent. Unemployment will remain high and inflation being in double digits the fixed income earners and salaried class will continue to face severe economic stress. For five years in succession and particularly in the election year this state of affair is simply unacceptable. The budget 2012-13 is critical for the medium term. It can either aggravate the damage to the economy by reckless spending and populist measures or put in place a mechanism that leads the country towards a path of resuming growth with redistribution towards the poor. This article argues for the second option and spells out the specific measures that should be adopted in the formulation of the budget 2012-13.

Publication Source

The News

Publication Date

5-14-2012

Pages

1-3

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