The state of the economy
When foreign lending agencies review Pakistan’s economy, the comments they make are usually taken as either black or white — depending on who is reading those remarks. Supporters of the government will highlight the progress Pakistan has made, while the opposition would single out the vulnerabilities. More often than not, both groups are right. Moody’s Investors Service recently stated that while Pakistan’s economy has picked up pace — mentioning the CPEC as a good omen — a third of the public debt is still in foreign currency, leaving the country vulnerable to external risks. It also mentioned Pakistan’s institutional and fiscal strength as being “very low”, while susceptibility to event risk as “high”. These are hardly passing grades if we are to look at the overall economic position.
We also recently saw the World Bank applauding the government’s efforts, but it added that many of the economic gains were due to external factors. As a net oil importer, falling oil prices have aided our balance of payments’ position, taking down the cost of producing power and giving room to the government to cut back on subsidies. These are all crucial factors for a government plagued with the ills of circular debt and a power crisis. The IMF, too, has now stated that Pakistan had repaired its economy and was ready for fiscal independence. But in another report, the Mission Chief for Pakistan also said that economic growth was still insufficient to cater to job demand and exports far too low for the size of the economy.
There is no doubt that Pakistan’s situation — both in terms of foreign currency reserves, economic growth and balance of payments’ position — has improved in the last three years. Some of it has come from well-directed measures, while much of the progress has come from remittances and falling oil prices. Increasing tax rates on the sale of fuel has also helped mitigate the shortfall in revenue that falling crude oil prices tend to cause in oil-importing countries. All these recent statements from international financial institutions tend to look at the picture in a broad manner with their tone being one that gives a general overview of the economic situation, ignoring the specific issues Pakistan continues to face. The short- and medium-term issues may have been dealt with, but structural issues — in governance and policy — continue to be a problem. The bottlenecks in doing business and poor infrastructure continue to be ignored. Punjab is the only province that attracts new investment consistently while other provinces wait for miracles.
One feels that the progress that has been made is not sustainable if a turnaround isn’t achieved by making strategically long-term moves. In Pakistan’s case, widening the tax net, finding new export markets and products, and easing the red tape that discourages a business’ entry in the formal sector are crucial specifics. Pakistan’s policies are such that it is much easier for companies to exist in the informal sector than in the formal one and this is a huge issue. When it comes to taxes, a tedious process that leaves many far more confused than they were before they decided to pay them is a problem in increasing collection. In response, the government’s strategy has been to increase taxes for those already in the tax net, rather than widening the net. Loss-making state-owned entities continue to ride on bailouts and powerful lobbies continue to get undue favours. The agriculture sector is depressed and primitive methods of farming have not helped either. The government’s response to counter these issues is to rely on bailouts, which is good for securing votes, but not enough to secure a sustainable future for the economy. Pakistan has been helped by the IMF’s bailout programme that will end in September. Without that, the country’s economic situation might just become slightly more precarious. Oil prices have already increased around 55 per cent this year and long-term policies that aid growth are a need of the hour.
May labour have its day
May Day celebrations in Pakistan have been reduced, over the years, to no more than an annual ritual without the zeal and enthusiasm that had been the hallmark of the event in the recent past. Of course, rallies are staged by worker unions on the day and a number of conferences and seminars are also held not only to acknowledge the contribution of labour in the development of our country, but also to enlighten people about the problems being faced by them and their solutions. But that is that. The next day, it is back to the same old routine. The fate of labour in our country seems to have been handed over to the vagaries of the market. It is now the principle of supply and demand that is what is dictating our labour market currently. As such labour is often deprived of even minimum basic pay and minimum health cover and neither do they get enough to send their children to school.
A vast majority of labourers and daily-wage workers, including those who serve as domestic help, remain outside the field of labour laws, which means that workers have no job security, no medical coverage, no pension or provident fund, no limit on working hours and are paid no overtime. Besides, hundreds and thousands of children are also found either doing jobs meant for adults or are loitering on the streets begging. The menace of child labour has consigned a large portion of our future generation to a perpetual life below the poverty line. The power of labour legislation was devolved to the provinces under the 18th Amendment but the job that was to have been completed by June 2011, remains incomplete. Two of the money-generating legislations, the Companies Profits (Workers Participation) Act of 1968 and the Employees’ Old-Age Benefits Act of 1976 remain with the centre, which enables Islamabad to retain the funds generated under these legislations. It would be in the fitness of things as we celebrate May Day today, for the federal government to devolve these laws and also transfer these funds to the provinces in the interest of our workers.