ECONOMIC GROWTH IN PAKISTAN

PUTTING GROWTH ON TOP OF THE AGENDA

Pakist­an is creati­ng condit­ions that could produc­e politi­cal and social upheav­al in the not-too-distan­t future.

Shahid Javed Burki

The Express Tribune, December 12, 2011

A developing country without robust economic growth cannot know social peace and political tranquillity. This is especially so, if the country also has a high rate of population increase. This is certainly the case with Pakistan. Currently, the rate of GDP increase is stuck in the three to 3.5 per cent range, while the country’s population is still increasing at a rate of close to two per cent a year. This means that the income per head of the population is growing at a rate of no more than 1.5 per cent per annum. The rate of increase could be as low as one per cent a year. Since the distribution of income is becoming increasingly unequal, much of the growth in national income is being captured by the rich and the very rich. The poor and the not-so-poor are left with very little. There cannot be any doubt that the number of people living in absolute poverty is increasing at a rate higher than the rate of increase in population. Therefore the proportion of the poor in the population is increasing — perhaps increasing very rapidly. Pakistan is creating conditions that could produce political and social upheaval in the not-too -distant future.

The only way to address this problem is to move the economy forward at a rate much higher than the one at the present. This could be done but, it will need serious reflection on the part of policymakers and hard work by people in power. It would not be too ambitious to aim at a rate of growth twice the present rate — to set the goal at 6.5 to 7 per cent a year. This leads me to ask two obvious questions. Is such acceleration possible? If it is possible, how soon can this target be reached? I will take up the second question first.

My own six-year experience with Latin America at the World Bank, from late 1993 to late 1999, left me with some understanding about how fast economies that had faltered can recover. This can happen once policies are set right and once the right kind of people begin to walk the corridors of power. I saw the economies of Argentina, Brazil and Mexico recover rapidly when the policymakers began to pursue the right set of objectives with the right sets of policies. In all three cases, the command of the economy was taken over by new groups who could quickly reorient their economies. In other words, sluggish economies can bounce back reasonably quickly.

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