- Urgent need for taking some corrective measures and make good policies
Since independence Pakistan has been suffering from two deficits — current account deficit and budget deficit. Analysts believed that these two deficits will be overcome with the passage of time. However, the bad governance of the successive government kept the borrowing appetite high.
Over the years governments have been borrowing to pay off the loans acquired in the past. Instead of improving tax collection, the governments have been increasing tax rates, which fueled inflation rate in the country and the wizkids resorted to hike in the interest rate to contain inflation. Persistent hike in interest rate and increase in electricity and gas tariffs have been eroding the competitiveness of the local manufacturers.
In an attempt to contain the trade deficit, the governments kept on experimenting various policies. Most of the time efforts were made for import substation rather than following export-led growth. Pakistan’s exports were high till the time Textile quota regime was not phased out. Failure to boost indigenous production of cotton in general and long staple cotton kept textiles and clothing exports concentrated in ‘low quality, low unit price’ items. Despite enjoying various incentives the farmers failed in boosting production, yield and quality standards.
On top of all, use of uncertified seeds and rampant pest/ virus attacked ushered decline in annual production of cotton, an un-ceremonial fall from a peak of nearly 13 million bales to almost half. The result is that at present Pakistan’s share in the global trade of textiles and clothing has shrunk to less than2.5 per cent.
Myopic policies
Over the years, the successive governments in Pakistan remained hostage of textiles and clothing industry. It is evident that the sub-sectors like spinning, weaving, and processing failed in undertaking timely BMR (balancing, modernisation and replacement). It is also evident that the sponsors of textiles and clothing industry ventured into cement manufacturing, power generation and automobile assembly.
Refining industry is also the victim of myopic policies of the government. While the existing capacity is capable of producing products far higher than demanded, the government kept on importing POL products and LNG. The gradual phase out of high sulfur furnace oil in power generation on one hand increased LNG import bill and on the other hand forced refineries to operate below optimum capacity utilization. A little probe indicates that over the years the government failed in ensuring installation of sulphur separators at the local refineries.
While overcoming the twin deficits may be possible the real uphill task is overcoming the ‘confidence deficit’. Over the years people are losing faith in the policies announced by the government. If anyone has the doubts he/she may validate the authenticity of this statement from number of companies listed at the local stock exchange as well as the units pulling down their shutters.
The general public is losing faith in the government because of its lavish spending, excessive borrowing and persistent increasing of the tax rates. The depleting condition of infrastructure becomes more pinching because of the curtailment of the public sector development funds.
The worst is the condition of water reservoirs and water courses. Every year the country faces floods or drought. In the past many countries used to send aid but now they are reluctant.
One of the recent problems is mounting circular debt. While the government may give any number of reasons for the persistent rise in debt, people strongly believe that the sole reason of the persistent and substantial hike in electricity tariff is ‘capacity charges’ being paid to the IPPs. With the passage of time it is becoming evident that only the successive rulers are the cause of this malice.
While the expectation of immediate improvement in the prevailing conditions can be termed ‘hoping against hope’ there is an urgent need for taking some corrective measures. There has to be thorough accountability of every Ministry/Department.