Fiscal discipline stressed for higher growth

Showing deep concern that the country is faced with various challenges, Planning Commission Deputy Chairman Dr Nadeem-ul-Haque has said that the chronic fiscal problem is continually destabilising the macro-economy and inability to achieve sustained high growth rates. Delivering inaugural lecture at the three-day 26th Annual General Meeting and Conference of the Pakistan Society of Development Economists (PSDE) here on Tuesday, he said that for resolution of the problem the government would need to limit its size besides reviewing budgetary and expenditure control processes and quality of public service delivery. In his lecture titled “Can Pakistan Grow Faster”, he said that “even IMF concedes in its reports that our fiscal problem may lie in the micro-structures of governance or our lack of quality fiscal institutions.”

Mr Haque, who is also the Chancellor of Pakistan Institute of Development Economics (PIDE), went on to say that the country`s growth strategy had been put on the backburner owing to continued preoccupation with the crisis. Emphasising that there was a need for a longer term focus to economic policy, he said that the medium-term was almost missing from our policy and debate. “We need to understand what constrains our growth and then figure out the reforms that could remove these constraints. In this regard, such an exercise has started in the Planning Commission,” he said. The government has expanded its role into markets through inefficient public sector enterprises and poor regulation to slow down exchange, innovation and entrepreneurship. Poor quality governance has reduced productivity and increased transaction costs everywhere, he said. He was of the view that reform of governance and markets needed to be very seriously mainstreamed for addressing both the macro and the growth problems. He said: “This reform must seek to modernise our outmoded systems of incentives, management, human capital, procedures and technology in the running of the government.”

In addition, this reform must seek to reduce the size of government eliminating agencies that are involved in the market, he added. “For growth, we have to move beyond sector policies, PSDPs, ADPs, acronyms and metaphors. We need to think beyond `brick and mortar` with a whole new intellectual endeavour has to take place,” Mr Haque said. He said that growth remained volatile averaging about five per cent per annum over the last 20 years. For Pakistan to become a middle income country it needs sustained growth of about eight per cent. PIDE President Dr Rashid Amjad said that the theme of the conference addressed critical issues that arise out of the new economic arrangements stemming from the 18th Amendment and the Seventh NFC Award. Dr Anwar Shah of the World Bank highlighted the importance of devolution of power in a federation and argued that the recent fiscal crisis and ever growing concerns with corruption have further heightened the need for the government to downsize the role of the state, provinces and reconstituting these as provincial councils of local governments to perform inter-local functions and coordination. Minister of State for Finance and Economic Affairs Ms. Hina Rabbani Khar in her speech pointed towards the inconsistencies in establishing the local government system, and said that “we are still lacking political will to enforce local government system. It is imperative to implement the system and increase its outreach to gross root level. – Dawn