Political deadlock responsible for economic downturn: experts
Monday, January 23rd, 2012 8:34:26 by Fayyaz Yaseen
Political deadlock responsible for economic downturn: experts
ISLAMABAD: (23 January 2012) Politics deter economic reforms and political instability perpetuates economic uncertainty, said Dr Ashfaque H. Khan, while speaking at seminar here on Monday.
The seminar “impact of current political deadlock on Pakistan’s economy" was organized by Sustainable Development Policy Institute (SDPI). Dr Abid Q. Suleri, Executive Director, SDPI chaired the proceedings while Dr Vaqar Ahmed,
Research Fellow and Head Economic Growth Unit, SDPI also spoke at the event.
Dr. Abid maintained that corruption had never been a major impediment in development nor did conflicts stop countries from economic growth as seen in the case of Sri Lanka and so many other countries. It’s the right economic policies
with firm implementation which result into economic growth, he added. Dr. Suleri said Pakistan, over the years, lacked policy consistency and certainty and had achieved sort of economic growth which is not in sync with human development. He said due to current
political scenario, state machinery is not functioning and is looking towards how political situation will unifold. He called for strengthening of democracy and normalization into civil-military equation. He also stressed on political parties to declare their
manifestos as soon as possible before the people of Pakistan. He asked parties to announce their economic policies as well as to declare shadow cabinet and especially name their proposed Finance Minister’s.
Dr Ashfaque expressed that political instability results into economic instability and also breeds corruption, mismanagement and bad governance which ultimately affects poor people. He said that in past four years, current weak
government seemed hanged in air almost all of the time and only to remain in power at whatever cost ignoring reforms or service delivery. He said that current government failed to implement reforms and call back several reforms on manipulation of smaller allies
in government such as on issue of value added tax.
He said that in last four years, government appointed 4 SBP governors, 4 finance ministers, 4 secretaries, 5 CBR Chairman’s and in situation where is no stability in economic team how can we look for consistency and stability of
economic policies , he questioned. Talking of current economic situation, he said that difficult decisions and reforms are not expected at this fag end and hence crisis will continue and keep compounding the situation and whosoever will win the next election
will face the extreme economic hard times.
Dr. Ashfaque predicted further depreciation in rupee adding that a depreciation of one rupee would increase Pakistan public debt by almost 60 billion rupees with also increasing the interest rate, inputs costs, subsidies and pile
up of circular debt. He said that financial accounts are entering into danger zone and if gap in current account deficit continue to rise it will dry up currency exchange reserves with serious consequences to exchange rates. He added that Pakistan, in last
4 years had accumulated debt equal to last 60 years of debt and balance of payments is another problem we are going to face in coming days. He said that financing the deficit seems more difficult, as IMF has not yet issued letter of comfort to Pakistan .
Talking of energy crisis he said that Pakistan has enough electriccity installed capacity and shortage was created to supplement demand of RPP’s. He also said that every economic reforms introduced in Pakistan ever was made on
pressure of IMF and political parties usually resorted to political decisions instead of economic benefits.
Speaking on the occasion, Dr Vaqar said that current political impasse between various state institutions is now costing the macro-economy of Pakistan in form of stagnant growth and investment. He said that it seems that the government
will face some key economic threats such as rising debt burden, surge in global oil prices, reduction in exports and a further free fall in the value of currency and all of these indicators are expected to adversely affect inflation. But sadly due to the ongoing
political and administrative crisis it seems that these economic issues are not on government’s priority agenda which is subsequently affecting the people of Pakistan. He said that poor macro-economic situation has now implied additional burdens on the poor
segment of the population with a reduced quality of life.
Dr. Vaqar said that we are again going back to IMF soon due to the expected balance of payment pressures in 3rd and 4th quarter this year. He also said that government has no roadmap for repayment of debt
such as $1.1 billion due in 2012 and $2.7 billion due in 2013 and rest in 2014. He said that despite stable remittances, SBP forcasts decline in forex reserves by $5 billion this year. He predicted that Pakistani rupee will further depreciate as sources in
Finance Ministry maintain that this is necessary due to export competition from countries like India. He raised the question of inflation created by making imports expensive and increase in debt.
“We don’t know who is incharge in agriculture sector after the 18th amendment. The country is still holding large stocks of wheat which should have long been exported. The import of fertilizer was delayed. The cane crop
now fears marketing delays and none of the provinces have so far come up with financial implications of 18th amendment for the medium term”, he said while talking about political impediments between the center and federation.
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Posted by Fayyaz Yaseen
on Jan 23 2012. Filed under Business, Politics.
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