Are we saving enough?

Struggling sustainability and bleak macro-economic outlook has set the alarm bells ringing. One important yet neglected way to look at it is bringing the genuine savings to the table. The adjusted net savings or the genuine savings are basically savings in an economy after taking into account investments in human capital, depletion of natural recourses and damage caused by pollution. Besides being the lowest at 9.4 percent compared to the South Asian average of 20.1 percent in CY10, the genuine savings rate for Pakistan has always remained below its immediate peers. Savings as a percentage of GNI has averaged in at 10.3 percent for the past 20 years with not much erratic movement. Marshalling empirical studies show a striking link between the adjusted net savings rate and sustainability of the economy; and Pakistan is no outlier. In addition, the latest Inclusive Wealth Report 2012 by UNU-IHDP and UNEP highlights the fact that the wealth of a country and hence its sustainability also depend on the countrys relationship with other countries (trading partners). The finding of Inclusive Wealth Report 2012 indicates that rich economies use more resources from consumption or import perspective. This suggests that low middle-income economies incur a more production- or export-based depletion of resources. However, on individual basis, things are different. Pakistan is a net resources importer where its production minus consumption-based depletion stand at negative $1,092 million, thus reducing its genuine savings. These findings are largely due to Pakistans heavy reliance on imported oil and petroleum products and floundering textile exports. When it comes to global sustainability, there exists empirical evidence that Pakistans contribution to sustainability on a global level is well below the global average per capita resource depletion. These conclusions show some contradiction to the long held propositions that resources tend to flow from poor countries to rich with a rising magnitude. Moreover, it is an established fact that many under developed countries exhibit decreased contribution to the global sustainability, and it includes not only other South Asian countries but also emerging India.