Every year, two million more join the ranks of those already seeking employment in Pakistan. With tens of millions previously under- or unemployed, their numbers grow each year. So does the frustration with the socio-economy, making the conditions ripe for dharnas and shutdowns.
Nothing is more indicative of a mismanaged economy than the situation in Chakwal where thousands of applicants with graduate degrees lined up in June to apply to become gardeners and door attendants. It is not merely the uneducated or the unskilled who can’t find jobs; in Pakistan’s urban labour markets, university graduates don’t fare any better either.
That however need not be the case. The political leadership has to come together to focus on a single point agenda: the revival of economic growth in Pakistan. Instead, the country is being pushed into distractions and disruptions.
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The advice for firing up the economy is in abundance. Yet most advice comes from well-meaning individuals whose naivety gets the best of them. One should, however, pay heed to those who have the experience to manage, if not necessarily improve, global economies.
Christine Lagarde, Managing Director of the International Monetary Fund, is one such expert whose words need some reflection. She met with Prime Minister Nawaz Sharif on Monday and suggested that his government should consider the following three strategies:
- Reinforce Pakistan’s economic resilience
- Increase economic growth
- Make growth more inclusive
Pakistan is in dire need of economic resilience. Ms Lagarde points out that Pakistan's public debt stands at Rs19 trillion, which amounts to 65 per cent of the country’s GDP. Some economists would argue that this is no cause for alarm. Other countries, including the United States, have equally large, if not larger, public debts. True. But here is what they might have ignored: the public debt of developed countries, though larger relative to their economies, does not hurt their health and education sectors the same way it hurts them in an underdeveloped country like Pakistan.
Ms Lagarde reminded the prime minister that Pakistan pays more in interest than its development budget. As a result, the health, education and overall welfare of Pakistanis suffers. No wonder, with just under 10 million stunted children, Pakistan is home to the third largest population of stunted children. Malnutrition and preventable diseases like diarrhea are robbing Pakistan’s children of their height, stature, and potential.
For more: Pakistan Economic Survey: Two years of growth and several missed targets
So how to build resilience? Well, start with cutting losses of public sector enterprises, such as PIA, the Steel Mill, and the Railways. The public sector enterprises' losses are two-third of what Pakistan spends on the Benazir Income Support Program (BISP). Here is the rub. Whereas the BISP helps the destitute, the government at the same time spends billions on subsidising public sector employees by covering the losses of public sector enterprises. This non-productive use of public funds must end soon before the parasitic system kills the productive wings of the economy.
Pakistan needs to raise its own revenue through progressive taxation to support its growth and development. Ms Lagarde reminded the prime minister that Pakistan’s tax collection is slightly more than half of what is needed to sustain growth. If the tax net is not broadened, Pakistan will continue to rely on the IMF and other lenders of last resort. The choice is therefore straightforward: either tax or debt.
How can Pakistan increase growth? The answer lies with the ingenuity and entrepreneurship of the private sector. Private investment in Pakistan stands at just under 10% of the economy. The average for other emerging markets is 18%. At the same time, Pakistan’s exports account for a mere 10% of the GDP compared to 40% for emerging economies.
So how to fix it? Get the red tape and the bureaucracy out of running businesses. Improve governance by making operations and regulations transparent. Fight corruption and simplify procedures.
The above advice is not just for the government. It is more relevant for ordinary citizens who have succumbed to an unprecedented moral decay. A place where ordinary workers demand bribes for everything from admissions in schools to sanctioning water connections should not harbour hopes for growth and development. A place where people will outcast the corrupt has a higher chance of becoming a just and prosperous society than a place where religious rituals run supreme.
Also read: $70 million — the loss to Pakistan’s economy from internet shutdowns
For Pakistan, growth alone is not sufficient. In fact, economic growth that further consolidates wealth in the hands of a few will set the stage for even more societal violence. What is needed is inclusive growth. Ms Lagarde reminded Prime Minister Sharif that “one out of every 12 children in the world that does not attend school lives in Pakistan”. Not only does Pakistan need to spend more on education, it has to engineer an economy that could productively use the educated middle class.
And lastly, no country today has been able to achieve sustainable growth by preventing women from contributing to the society and economy. The government can help, but the change must happen at the family level. Pakistanis need to place greater trust in women by allowing them to become productive members of the society with greater control over their destinies.
Ms Lagarde’s advice carries no hidden agenda. She has asked to raise our own funds to support growth, cut economic losses, educate women and children, and end corruption.
How can one possibly disagree with this?