Tuesday, December 28, 2010

‘Inflation likely to slip beyond 15pc’

‘Inflation likely to slip beyond 15pc’ 

Islamabad - Deputy Chairman of Planning Commission (PC), Dr. Nadeem-Ul-Haq, has said that macroeconomic stability remains elusive and inflation has now remained in double digits for about 4 years and threatens to slip beyond 15%.

Addressing to the 26th general meeting and conference of Pakistan Society of Development Economists (PSDE) here on Tuesday, Dr. Haq said despite efforts, the fiscal deficit remains beyond levels that would be considered sustainable. Not only is debt growing rapidly, State Bank of Pakistan (SBP) financing of the deficit is contributing to inflation.

He said despite some privatization and liberalization, public sector and government continues to pervade markets through loss making public sector enterprises and excessive regulation at the cost of productivity, growth and employment. PSE losses are now dominating the budget. He said our growth remains volatile averaging about 5% per annum over the last 20 years. For Pakistan to become a middle income country we need a sustained growth of about 8%.

Continual preoccupation with short term stabilization along with an unstable political and security situation has kept policy and public attention crisis oriented at the expense of medium term thinking that is required for building institutions and the software for growth, The Deputy Chairman added. He said internationally available indicators such as “competitiveness”, “Investment Climate”, “Enterprise Surveys” point to weaknesses in governance as major constraints to growth.

Dr. Haq stated that without sustainable growth, continued fiscal crises, a bloated public sector that places pressure on the budget and lowers productivity and growth, welfare indictors such as poverty and the MDGs are not showing improvement. A large percentage of our population remains clustered around the poverty line swinging in and out of poverty with every dip and rise of the growth rates. The regime of subsidies and protection leads to the structure of our industry remaining quite resilient to change.

As a result our exports are confined to low value added items. In short, he asked were the development economists playing the role that was expected of them—that of keeping a focus on emerging issues in the economy and forming policy and idea coalitions around important issues. When society, parliament or government is looking for ideas for solutions they should be able to turn to a community of scholars for informed debates and analysis!

He said the newly uncaged media should be turning to this body of research for informed opinion. Unfortunately this is not happening! Recent policy intitiative like the PRSP, the economic plans, the NFC and the 18th amendment too does not seem to be informed by domestic debates. Dr.Nadeem-ul- Haq said donor evaluation reports such as the IMF prolonged use and the World Bank OED reports have been self critical noting design flaws but most of all the need for domestic policy development and ownership! But how can we have domestic policy development and ownership without the development of a domestic research agenda.

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