June 18 , 2010
Annual Economic Survey of Pakistan
At the end of the fiscal year, the government releases its annual Economic Survey of Pakistan. This lengthy report gives an overall picture of the state of the economy and society. The big headline this year is that the GDP growth came in at 4.1%, improved from last year’s dismal 1.2%, but still much slower than the average 6.8% of the last six years of Musharraf’s rule. The pickup in growth is welcome, but too slow to meaningfully raise living standards, and the gap with India is widening as India is growing at 8% per year.
In late 2007 two problems emerged in Pakistan’s economy that likely cost Musharraf the 2008 election. First was electricity shortage with load-shedding affecting major cities, and the second was inflation, which accelerated from 3% to 7% in late 2007. The PPP government vowed to rectify both these issues, but in the last two years load-shedding remains widespread, while inflation galloped up to 20% last year and still came in at 12% this year. Investment rates also declined from over 22% of GDP in 2007 to 16.6%. Meanwhile, development spending declined from a high of 4.9% of GDP in 2007 to 4.1% of GDP. National debt held steady at 54% of GDP, down from the 100% level it was at in 1999.
Pakistan does continue to develop slowly. Literacy rate reached 57%, with 69% for males and 45% for females. Gross enrollment rates in primary schooling is around 91% now, which suggests that literacy rates will continue to rise. The total number of students in colleges and universities has reached 1.4 million, compared with 450,000 back in 2000. Pakistan still drastically underfunds education, spending only 2.1% of GDP on education compared with 3.3% in India. Life expectancy reached 66.5 years in 2008, compared with 63.7 in India, but infant mortality is still 65 per 1000 births, and under age five mortality is 95 per 1000, compared to 30 and 79 in India. This means that every year almost 400,000 Pakistani children below age five are dying, an unacceptable number.
Poverty rate in Pakistan is measured using an absolute level of extreme poverty so severe as to result in malnutrition. This is the World Bank definition used globally of 1.25 dollar per day income in PPP terms. By this very low standard, poverty rate in Pakistan is around 23%, much lower than the 58% in 1990. India by contrast had a 50% poverty rate in 1990, but was still at 41% in 2005 based on World Bank data. This reflects much less income inequality in Pakistan, whereas in India the benefits of two decades of growth have gone mostly to the upper sections of society.
Sixty-three years ago the experiment of Pakistan was begun. Despite many ups and downs, including coups, civil wars, terrorism, and a nuclear-armed and hostile giant of a neighbor, the country has made remarkable progress. Just consider that in the early 1960s there were only 2000 doctors in the country, and now there are 140,000, with another 20,000 working abroad. The female literacy rate was only 18% in 1980, and now is getting close to 50% of a population that has more than doubled. In 2000 there were four million vehicles on the road, and now there are 10 million. Electrical generating capacity currently is 20 gigawatts, which is about 20% too low, but far higher than the 1.2 gigawatts that powered the country in the early 1970s. There were only 100,000 phones in Pakistan in the 1960’, and even in 2000 it was a mere three million, but the cell phone revolution has put 100 million phones into service.
Pakistan has a long way to go. It needs to spend 4% of GDP on education and 1% on health. Every child must be getting a proper education. Infant mortality needs to be cut in half. Economic growth needs to be accelerated to 7% and kept there for three decades to make Pakistan a developed nation.
The scourge of religious extremism must be defeated, and a stable democratic government that provides good governance must be instituted. It is a bit amusing that after hammering Musharraf as being the source of all evil, the economic difficulties of the current government have resulted in their appointing as the new Finance Minister Abdul Hafeez Shaikh, who was one of the core members of the economic team of the Musharraf era, when he served as head of the Privatization Commission. I guess the Musharraf era wasn’t so terrible after all.
Comments can reach me at Nali@socal.rr.com.