Why growth is con­strained

The Pak Banker - - NATIONAL -

Re­forms to fa­cil­i­tate pri­vate in­vest­ment and sav­ings will need to be sup­ported by com­ple­men­tary government in­vest­ments in phys­i­cal and so­cial in­fra­struc­ture. How­ever, the fi­nanc­ing of in­fra­struc­ture, ed­u­ca­tion, health, etc. will re­quire sig­nif­i­cantly large re­sources. Un­for­tu­nately, our re­source-gen­er­a­tion record has been too abysmal to fund such spend­ing. We have one of the low­est tax-to-GDP ra­tios and even among de­vel­op­ing coun­tries we rank at the bot­tom in terms of the pro­por­tion of pop­u­la­tion reg­is­tered as taxp ay­ers - less than five per cent of house­hold pop­u­la­tion.

More­over, th­ese lim­ited re­sources are de­ployed on the ba­sis of skewed pri­or­i­ties (for ex­am­ple on roads whereas the ma­jor con­straint to growth is avail­abil­ity of en­ergy at af­ford­able prices). And the is­sue here is not just the cre­ation of more as­sets - schools, hos­pi­tals, etc. but en­sur­ing that there are ad­e­quate bud­getary al­lo­ca­tions for doc­tors, nurses, teach­ers and medicines, etc to keep th­ese fa­cil­i­ties func­tional, and pro­vide de­cent ser­vices.

Fu­ture eco­nomic growth will also face a slow­ing down of de­mand in our tra­di­tional ex­port mar­kets of Europe and the US, who are strug­gling with their own prob­lems. To over­come this de­mand in­suf­fi­ciency for our prod­ucts, we will have to look to­wards the East, es­pe­cially our neigh­bours, with young con­sumers and grow­ing mar­kets, as op­posed to ag­ing pop­u­la­tions and con­tract­ing West­ern mar­kets. It is not quite clear how well pre­pared any of the po­lit­i­cal par­ties is to ad­dress th­ese chal­lenges.

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