As the recession hit; the jobless rates soared to 10% and more, banks at the brink of failing, stock exchange plummeted, and economy was left paralyzed. All this happened in United States, which sparked a global recession, bringing down Europe and Asia along with it. This global recession was worst on developing nations, as they feared to face the worst food shortage crises ever.
Though it seems like the worst is over, and US economy is on its way to stability, the recession is still there. US bailed itself out with trillions of dollars in a bid to avoid depression, but now fears a double dip recession. Europe that was also starting to see some stability as the US stabilizes, saw Greek go down, and was required a rescuing. Since economies today are so interlinked a country like Greek can bring the whole Europe down, causing a domino effect and taking United States and Asia with it.
Although Pakistan is not very globally interlinked country, as the ones mentioned above are, it still relies heavily on trade with United States and Europe. Being Pakistan’s largest trading partners – EU and US – any recession in those countries can tremendously impact Pakistan’s trade and economy. So the future of Pakistan’s economy is very much dependent on the global economy.
Though Pakistan’s economy was affected by the global recession, there were many internal reasons for the economic conditions Pakistan faced in the past three years. The internal security situation and political uncertainty dominates in this respect. As Pakistan moves from no action against terrorists to a full-fledged operation and from dictatorship to democracy, things seems to be moving in the right direction.
As of recently Pakistan has started seeing a positive economic outlook, as all its vital indicators look decent, and its purchasing power parity seems to be increasing. Projecting to trend upwards in the next five years. This positive trend is portraying the increasing power of consumers to purchase vital household commodities. This is not to say that things are perfect, but they do seem to be heading the right direction.
Besides the evident tangible benefits that can be measured with economic formulas there has been crucial decisions made in Pakistan that are impacting its present and perhaps the future. Those are some positive developments that can shape a prosperous future for Pakistan, thus can be quantified as intangible benefits.
One of those would be the decision to fight terrorists that enjoyed safe sanctuaries inside Pakistan for decades. Although the war on terror is a huge bill on Pakistan’s economy, there are some benefits that cannot be quantified with numbers or currency for that matter.
Those happen to be the fruits in the future for the pain and suffering of today. Eliminating the terrorist organizations will not only improve security situation inside of Pakistan but also help pave better relationships with neighboring countries and the west. As there will be no one from Pakistan conducting acts of terror such as the Mumbai incident or the 9/11, the relationship of trust and trade will develop with other nations, which will help ease security perception along with helping build a better economy by investing in butter rather than guns.
The investment in security agencies – such as police and other law enforcement agencies – today will result in a better force for the future. Those agencies – that have always been underfunded and under trained – will now be fully capable of handling terror and the organized crimes of today’s world.
Another investment in Pakistan’s economic future is its democracy. The decisions that are made under a democracy are sound and everlasting, such as the making of Pakistan’s constitution that is yet to be conflicted. Though dictators in the past tried making many constitutions and amendments, just to fail, as none were accepted by the people of Pakistan.
The decisions the government today takes, whether it be popular ones like the NFC Award and 18th Amendment, or it be the unpopular ones like improving and increasing taxes and eliminating subsidies, all will be everlasting and beneficial to Pakistan’s future. These are the investments for a better and a stronger Pakistan and its democratic system.
Although Pakistan’s economy is bouncing back, the growth could’ve been higher and achieved faster. More foreign investments could’ve come rather than flown the country in the past year. For that to happen Pakistan needs to provide security, independent judicial system, and reduce political uncertainty. Though security situation and some independence of judiciary has been achieved the political uncertainty has not reduced at all.
One of the major reason for that is, the Pakistan’s infant media, which loves to buzz on “corruption.” This cry, it knows very well sells and creates the sensationalism which it craves for its ratings. Although the judicial independence seems to have gotten better under democracy, we have seen a lot of politicking and judicial-activism in the higher judiciary. That is not good for economy either, since it fuels political uncertainty and scares investors.
As the Parliament debates the budget (2010 – 2011) we can see the challenges and the opportunities the government faces. Besides fulfilling IMF’s criteria, Pakistan itself has a great need to tighten the belt and spend within the means. This could mean to reduce spending or increase earnings through taxes or growing the economic pie. The budget seems to be doing both.
Though following those policies is not easy, especially on the poor who needs development and subsidies to survive, the government seems to have found an equilibrium. Steps such as increasing the wages of government employees by 50%, keeping subsidies on vital food commodities, and allocating more towards social safety net programs such as Benazir Income Support Progam. Those are all the measures to prevent poor from facing the brunt of a realistic, harsh, and a fiscally responsible budget.
Also published @ Foreign Policy Association Blogs
Tags: 18th Amendment, Budget, debt, Economy, fiscal policy, IMF, Judiciary, Karachi Stock Exchange, Market, NFC Award, Pakistani Media