Full potential – Dr Farrukh Saleem

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Pakistan is performing way, way below its full potential. Historically, Pakistan’s economy has been a high growth, low inflation economy. In 1954, Pakistan’s economy grew at the rate of 10.22 percent. During Ayub Khan (1958-69), manufacturing growth averaged at 8.5 percent. During Ziaul Haq (1977-88), the economy grew at an average rate of 6.5 percent. From 2002 to 2007, the rate of economic growth averaged a healthy 7 percent. For the record, Pakistan’s GDP growth has gone into the negative only twice in our history – 1952 and 2020.

Pakistan has historically been a low inflation economy. In the 60s, the rate of inflation averaged around 3 percent. In the 70s, the rate of inflation first surged but then came down sharply. For the 58-year period starting in 1957 the rate of inflation averaged at around 7 percent.

Post-2008 is when things started going from bad to worse. From 1947 to 2008 (61 years), we accumulated a total public debt of Rs6,000 billion. It took the PPP a mere five years (2008-2013) to take our public debt from Rs6,000 billion to Rs16,000 billion. It took the PML-N a mere 5 years (2013-2018) to take our public debt from Rs16,000 billion to Rs30,000 billion. And it has taken the PTI a mere two years (2018-2020) to take our public debt from Rs30,000 billion to Rs43,000 billion. Lo and behold, our per capita public debt has moved from Rs500 in 1971 to Rs200,000. Take a look at PIA, for instance. It took PIA 61 years (1947-2008) to accumulate a loss of Rs73 billion. In the following 11 years (2008-2019), PIA’s accumulated losses went to Rs400 billion.

Our private sector is as competitive as any in the region – provided the public sector provides the private sector with a levelled playing field in terms of cost of electricity, gas, rate of interest and the rate of corporate tax. For the record, the cost of electricity in Pakistan is the highest in the region and so is our rate of interest. Yes, the rate of corporate taxation in Pakistan is one of the highest – if not the highest – on the face of the planet.

Post-2008, the public sector has become a real drag on the economy. Right now, Public Sector Enterprises (PSEs) are taking on additional debt of around Rs700 billion a year, every year. The government routinely doles out Rs900 billion a year in ‘grants’ and Rs200 billion a year in ‘subsidies’. Add the three up and the public sector becomes a Rs1,800 billion drag. To be certain, whatever the public sector loses the private sector must eventually bear.

Potential is “having or showing the capacity to develop into something in the future”. We can reach our full potential by cutting down the annual Rs1,800 billion PSE drag; by slashing the annual Rs1,000 billion electricity drag; by cutting down the Rs649 billion ‘commodity operations’ drag. I am convinced that all these are really low hanging fruit – the “most easily achieved of a set of tasks, measures, goals, etc.”

We must grow at 7 percent a year just to absorb the millions who join our labor force every year. There was a time when we grew at more than 10 percent in a year. We have the capacity. We can do it again. Two prerequisites: political intent and a capable team.

The writer is a columnist based in Islamabad.

Email: farrukh15@hotmail.com Twitter: @saleemfarrukh