Economic tightening

LAHORE: We have to base our hopes on reality and not on the mirage that our rulers tend to show us. Global credible institutions have predicted Pakistan’s growth at plus-minus 2 percent in the next two years. This hardly covers our population growth.

These institutions have also praised the steps that the government of Pakistan has taken to improve the economy in the last 30 months. Despite moving in the right direction, our country is not geared up for higher growth. This also means that at best, we can achieve a status quo and not improvement in the short run. Still, our rulers continue to promise the moon to the electorate, which is not possible in the current scenario. The power rates will continue to rise; we will adjust gas prices upward on a quarterly basis. Tax rates would increase if we failed to meet our revenue targets agreed with the IMF. Subsidies would be withdrawn from all sectors.

All these measures make economic sense, but all these steps are painful as well. We will have to live within our means. In fact, we must, as a nation, live simply and modestly, and this goes for our ruling elite and bureaucrats as well. At least they must forgo enjoying luxuries at taxpayers’ expense. A vanishing luxurious style of rulers and bureaucrats will be a barometer of the extent of decline in corruption.

We have borrowed heavily in the past. Now, paying back that debt is giving nightmares to a few concerned planners. We must reduce both our foreign and domestic debt in a planned manner. We should ensure a level playing field for all our citizens. If the incomes are stagnant in the private sector, then the incomes of public servants must remain static for two years, and their perks and privileges should be diluted to spare money for debt servicing. The elected representatives should get a monthly salary only and a ticket to attend the assembly sessions, and that's all.

This is the high time that we rationalize the salary structure in the country. The perks, privileges, and post-retirement benefits enjoyed by our judges are out of reality. Despite these goodies, our judicial system is ranked as one of the worst in the world. In the bureaucracy, the salaries of lower-grade employees need to be increased while those of higher cadres reduced, including their perks and privileges. All federal departments whose functions have been transferred to the provinces must be closed. The impact of operations of these obsolete entities is akin to operating a loss-making public sector entity.

As far as common men are concerned, they are likely to face inflation which, in statistical terms, may look low, but its impact on prices would be very high because of the high base effect of prices that increased in the past. Even with lower inflation, the actual impact on prices would be much higher. For instance, in the last two years, inflation remained above 30 percent; that means the prices generally jumped up from Rs100 to Rs130 in the first year and to Rs170 in the next year. Now, if the inflation cools down to 20 percent (not probable in the short run), the probable average impact on prices would be Rs34, and the average prices of the same items that were Rs100 two years back would jump to Rs204. The nation must further tighten the belt because, with projected growth, there is no way our incomes will increase in line with inflation.