EDITORIAL

The economy in its right focus

In its Annual Report for 2002-2003, the State Bank of Pakistan has adequately demonstrated that in its analysis of the economic situation in the year under reference it has adopted an objective approach, which is quite in keeping with the stance it has displayed over the past couple of years. For one thing, while pointing out that the economy grew by 5.1 per cent in fiscal year 2002/03, it has noted that the incidence of poverty has risen from almost 20 per cent to 33 per cent. However, at the same time, its observation that the increase in poverty incidence in the country "is not a direct result of the policies pursued in the last four years and that it has happened over the last 15 years," will make it less embarrassing for the present government, which takes great pride in asserting that it is continuing with the policies it inherited from the previous political dispensation. Nevertheless, it will be noted that this saving grace does not completely absolve either the preceding or the present government of their responsibility in increasing poverty, for the element of relief for them revolves around "direct" and certainly not "indirect" outcome of their policy pursuit. As such, both will be left with a great deal of responsibility for not taking due care to ensure against it. Again, it has rightly pointed out that the biggest challenge facing the economic managers in the short term is to create as many jobs as possible. In this regard, notable also is the emphasis it has laid on shifting the policy focus on to expenditures to improve infrastructure, supportive fiscal and monetary policy and institutional capacity and bureaucratic hassles forced upon private entrepreneurs.
More to it, it has also unmistakably observed that, notwithstanding impressive improvement in the macroeconomic fundamentals, a strong and secure external sector, increased development spending by the government, upsurge in growth rate, easy monetary policy and quantum jump in private sector credit, the popular perception about the economy does not reflect these improvements. Again, as for reversal of the trend of increase in poverty, it has rightly pointed to inevitability of putting back on the trajectory of a sustained rate of 6 per cent over the next 5 years and pro-poor policy interventions. Lest the central bank's seemingly overemphasis on poverty alleviation, misconstrued as being misplaced, it needs be noted that the entire purpose of economic development in a free and independent country basically revolves around improving the living standards of its teeming millions. As such, while analysing the overall economic situation it has taken due note of the performance of the government and the private sector. It has deemed it necessary to relate the achievements to their effect on the social sector, where lies the right barometer of the fulfilment of the objectives of purposeful economic development and good governance, as being more enthusiastically pursued over the past four years. It will also be noted that the report argues that "a large population is Pakistan's biggest economic resource, but it will be a source of strength only if properly developed through extensive investment in education and health. An analysis of various socio-economic dimensions of poverty suggests that Pakistan's performance has been dismal during the 1990s - not only the income poverty but also the income inequality, increased during the period.
Seemingly disappointed by a great deal that needs be done towards that end, the central bank will be seen to have prescribed the right remedy, saying "it is, therefore, important for the country to have realistic expectations rather than to hang on to false pretensions or indulge in financial speculations. Given the carryover of the past legacy, current geopolitical and security situation, non-supportive external economic environment, and weak institutional capacity, it will simply be a pipedream to expect an accelerated fall in the incidence of poverty in Pakistan in the short term. All this put together, the SBP Report can be seen as the last word on the state of economy of the country and what needs doing to pave the way for meaningful socio-economic progress in all directions.