The Myth of Growth:Pakistan's Lost Opportunity

Zee, I like the way you have tried to make this write-up conversation style. But I can not make head or tail of most of the content – I wish you had tried to write it so that bozos like this interactors can actually understand it – instead of the rest of the bozos here who CLAIM to.

Let me get the story straight by putting in my own interpretation.

Not having enough reserves is bad. The Pakistani government was running out – it was down to a three week supply. So it bought some high-priced forex from Dubai to augment its own. When 9/11 happened, lots of Pakistanis who had booties (and perhaps tush) hidden abroad converted that booty into stuff under the pillow – then remittances all dropped off. This left exports as Pakistan’s sole source of foreign exchange. To make up for the differential in interest rates between the rupee and the dollar, it then pumped a trillion rupees into its system. This caused massive inflation. They could (and should) have used that money to set up more state enterprises. End of story.

It is not clear to me if your beef is with the overall direction of the fiscal policy of the Pakistani Government or its short-term tactics.

And what makes you such an expert? You make a lot of ``definitive`` statements as if you know all the answers - and those are THE answers - and as if there are no reasons why the people in charge of the fiscal policies would have legitimately made some of the decisions that they did.

Also, the chowk editors appear clueless in how to streamline technical lingo – either clueless or just plain lazy – my guess is both! I have this suspicion that as soon as they run into the simplest of technical concepts which require the slightest exercise of brain, they react as follows:

``Uff Allah.... Ye kya museebat aa gayee!!!``

And throw their hands up in a hopeless gesture of despair!

Zee,

I hope you have researched this a little more. I think couple of things need some clarifications from you.

First “ A Rs 1 Trillion windfall could have been easily absorbed in the State Sector through issue of Government securities at market rates to the holders.``

I know others have picked on this too. Please correct me if I am wrong here.

Securities are issued by the governments to raise funds and money. Not to disburse the windfall as you have mentioned. If a governments needs to disburse a windfall without investing it into long term projects itself, it needs to relax the credit thru various means or holdback on money printing. The first (relaxing credit) can lead to inflation so it is a doo dhari talwar. If the government wishes to holdback on printing money, it will have to adjust the exchange rate and it will have an impact on Export and imports both.

So a windfall like this needed a careful study. The next step then is to use the resultant decisions to make changes in the fiscal policy. I would also like to point out that fiscal decisions take their own sweet little time to show results. In this case, the time elapsed between the windfall and the policy development and execution is not enough to make a judgement call.


“The emphasis has to be on “consumption”, not on “self-reliance”.”

I am sorry in the new economy there is no such thing as “Self reliance”. These words were thrown around in the sixties under the socialist influence. There is no way a third world country can achieve self reliance. So there is no point in even recommending that illusion.

Here is the current situation. Roughly 80% of world’s production is consumed in the West + Japan. The rest of the world has to live with the remaining 20% and actually it has to fight for the crumbs. The best model for a third world country is to find a niche in the world economy and work on that. For other stuff, they will have to RELY on other countries to produce what they need.

“On the other hand, the price of sugar, milk, and wheat is now something to be contemplated upon.”

Did you realize that Sugar, milk and wheat are the mainstay of the Pak rural economy and are mostly consumed in the cities? The increasing Sugar and Wheat prices help the farmer. Southern and the central Sindh is dotted with the Sugar mills and it has improved living conditions and incomes in those areas. Similarly, Wheat and Dairy farming has helped Punjab farmers. With inflation as it is, it is important that money should also flow towards the farmland or the whole political structure in Pakistan would crumble.

OTOH, Sugar and Tea are not essential items. Imo, the government should have kept those prices higher to reduce consumption of Tea and Sugar instead of giving in to urban population demands. Import of Tea and Sugar is waste of $s.

zeemax:

``A Rs 1 Trillion windfall could have been easily absorbed in the State Sector through issue of Government securities at market rates to the holders.``

are you saying the state/public sector could have become a job creator for the masses for a long time?

if a public sector is running in-efficiently how long that would have lasted??

would the public sector created any value or wealth for the country???

Pakistan is not doing well.
There are no animal shelters in Pakistan.
Animals in Pakistan are treated cruelly.
Its a very bad place.

<<< The emphasis has to be on “consumption”, not on “self-reliance”. >>>

Dependent development and debt dependency: in short a rape of the `third world` by the neo-colonial network of institutions and their domination of the political, military and economic institutions of the `developing (or force starved) countries`. The reality of our world in a few short sentences.

If only this author would put as much thought into understanding Quran and Islam as he does in these issue...

Zeemax wrote:

++
A Rs 1 Trillion windfall could have been easily absorbed in the State Sector through issue of Government securities at market rates to the holders
++

Who would buy government securities after the freezing of foreign currency accounts by Nawaz Sharif in 1998? The GOP knew its credibility had taken a hit and prudently chose not to test it in 2001/2.

Your recipe might work in 2006/7 (now GOP`s credit perception and worthiness is very healthy)... but 5 years ago it would have been a damp squid.

If Pakistan is doing well, which the economists say it is, then why is (basic) health and (basic) education not improving and why are rural ppl still really badly off? Why are there not decent roads where we need them? Where did that Trillion Rupees go?

Re: # 2

Chalta Sahib,

Until I am banned, (am counting the hours) I can bring up whatever I feel is pertinent. You are welcome to take your pitiful comments to UP.

I don`t think you understand economics. Pakistan is doing extremely well.

Question:

I agree with your thesis that whole economy and society is being restructured on debt/credit based consumerism, but this windfall of money that created this mode of consumerism was a result of exceptional circumstances (9/11 and aftermath); the question is, what will happen when these exceptional circumstances will cease to exist. How will consumers pay off their debts? It was one thing to steal money from people of Pakistan but it is quite another stealing from global soodkhors.

I do not see any way out of this inevitability except that GOP would have to imposes an extremely cruel tax system or decalre war on Iran alongwith USA to create another set of exceptional circumstances.

Also, do you think propping up SBU`s by synthetic valuations and infusion of capital is a good strategy? WHy not let the market determine the price and then see which SBU`s can be maintained as gov`t holdings. Selling off NPA`s is not bad, raising capital by selling of assets which can benefit from foreign investment-strategic or other..is a good thing as it usually brings knwhow, efficiencies and expertise into bureaucratic organizations. I htink if you look at Brazil`s experience in divestment of SBU`s and compare it to China it will give some idea of how to monetize correctly. China still has close to 35% of GDP in NPA`s tied up in SBUs.

thanks,

CH

What does his asinine comment in another thread have to do with his obvious knowledge about economic and financial affairs of Pakistan? It seems to me, Saminasha, that while you do have his ability to post offensive comments, you are no where near in topical understandings to warrant a FP publication. Instead of derailing his thread, try improving your writing capabilities. I will give you a topic. ``Failed Union leaders: Toussaint spends 10 days in jail``-Discuss

Zeemax uncle, Question re: consumption vis-a-vis self reliance...I am assuming that self reliance means having the resources, capital, man power along with resources of the natural kind combined with a kaleidoscope of comparative advantage to maintain sectoral driven growth. If I am mistaken, please do advise.

Also, I think you have articulated what the problems are quite clearly...what do you tink is the solution?

Amazing.

Last week on J. Saidullah`s FGM thread, Zeemax referred to women`s ``clits`` being ``chopped off``. After a short banning period, here he is today on FP.