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Pakistan's economy

victim of a dozen

faultlines: S J Burki

IKRAMUL HAQ

ISLAMABAD: Shahid Javed Burki, Vice-president of the World Bank, has said that if politics had not intervened in the 1960s when the country was on the verge of economic take-off, Pakistan today would have been a middle income country, not different from the Asian tigers of today.

According to him, "if we create a political mess again, Pakistan may lag behind our neighbours like India and, perhaps, Bangladesh which are poised to take a leap."

He also presented a doomsday scenario fearing that "our children may keep weaving carpets to adorn the houses of tons of thousands of enterprising Indians, who are engaged in transforming their economy from economic and social backwaters to modernisation and technological sophistication."

He was speaking on "Overseas Pakistanis as a Catalyst of Positive Change" on the second day of the conference organised by Institute of Overseas Pakistanis.

Burki, who was speaking not as a World Bank executive but in his personal capacity, elaborated, among other things, on economic problems facing Pakistan, their possible solution and future prospects.

Pakistan, he said, was at a cross-roads. It could take a high road for economic growth, or the low road. In the latter case, Pakistan would be caught in a quagmire of economic stagnation and low growth. Then, Pakistan would be among the failed states in the comity of nations, he added.

Burki said in the past 50 years, the country's economic structure remained based on a dozen faultlines. One faultlines could bring about tremors, but if a few acted together, this would create havoc. These he listed as budgetary deficit, monetary system tied to politics, shaky financial system, low savings and investment, ever-growing trade deficit, poor and inadequate infrastructure, scarce human capital, rapid population growth, a dysfunctional government, expanding poverty line and politicisation of the legal system.

He warned that time was running out and resources were scarce for solving many of these problems and "a grim future awaits Pakistan."

His prescription for the journey on the "High road" was that the political base should exclude the more dynamic segment of the society. He said the system so far remained dominated by one class i.e. landed aristocracy "which is refusing to allow the other groups in the political system. Unless it is done, there will be no political peace and doors to economic progress would remain closed."

About the dozen faultlines in the economy, the first in the list was budgetary deficit, resulting from the country's greatest difficulty - to live within its means. Though continuing for a long time, the budgetary deficits have now reached a stage where these would cause great damage to the economy. "The only way is to overhaul the tax system and curtail current expenditure. Only a fully representative system could lay the basis for reforms," he stressed.

Speaking about monetary system's tie-up with political structure, he said budgetary deficits were being met by monetary expansion "for which the authorities that control money supply have to act under the direction of the government." Though the State Bank was granted limited autonomy three years ago, it was not able to completely insulate itself from politics. "The result is a rapid monetary expansion which, in turn, has fuelled high domestic inflation."