Poverty & inflation:

What can be done now?

Extract from The Myth of Growth:Pakistan's Lost Opportunity, April 13, 2006:

2003- 2005: So the Government came up with the idea of Consumer Led Growth, something on the lines of Thaksin’s Thailand; forgetting the difference in work-ethic, the captive tourism over there providing consistent revenues, as well as the population skills, demographics etc.

Still it was fine as long as the consumer demand growing due to easy money could be satisfied domestically. It couldn’t, so the foreigners had a field day setting up all sorts of assemblies with zero value addition inside the country, and raking profits back home. The money still wasn’t absorbed so the stock and real estate markets tripled. The banking sector’s profits in a single year jumped from Rs. 30 billion to Rs. 100 billion, because they could now lend retail at 14% while paying the depositors 2%. Too much liquidity meant nil competition for deposits. In the meantime inflation touched 11% +. Too much money chasing after too few goods. A classic example.


And the festive season continues. Structural adjustments were left unattended for short-term gains of the urban elite purely for the next elections in mind. The urban rich can now buy BMWs on cheap leasing. The middle class can get Toyotas and Hyundai’s. Porsche is soon coming to Pakistan. On the other hand, the price of sugar, milk, and wheat is now something to be contemplated upon. That is one less cup of tea and one less bread for whom dreams of BMWs and Mercedes are quite distant.

It will take very drastic measures indeed.