The United Nations Economic and Social Survey of Asia and the pacific 2012 adds to the list of institutional reports underscoring the ubiquitous economic woes that Pakistan is mired in. The UN highlights the overall retardation experienced by Pakistan in FY11, with the great floods of 2010 largely affecting real growth numbers. However, even though the GDP growth rate is expected to improve in FY12 to four percent from 2.4 percent in FY11, the UN doesn deem it a satisfactory improvement, as "it still reflects several difficulties being faced by the economy". And what are the difficulties being faced by the economy? Regular readers of this column will vouch for energy shortages being particularly crippling for Pakistans industrial growth, and UNs report acquiesces with them. Energy outages affect the productivity of various economic sectors, with the Planning Commission estimating that the country loses the equivalent of approximately 3-4 percent of potential growth due to power outages. Needless to say, natural gas shortages have taken a further toll on key industries, such as textiles and fertilizers. That the word urgent is used in context of taking measures to address energy shortages shows that the UN deems the predicament to be quite grave. As for the suggested measures, setting up viable new power projects, minimizing transmission and distribution losses and electricity theft, increasing exploration of natural gas, coal and crude oil, setting up infrastructure for energy imports, and incentivising the use of renewable energy sources are a few. The UN is also critical of the erratic movement in commodity prices, which had helped improve Pakistans terms of trade in FY11 when commodity prices were on a bonanza, but the benefits reversed with the decline in commodity prices in FY12. It is argued that the dependence on basic commodities as exports reduces incentives for diversification and industrial development to create productive employment opportunities, particularly when the prices are rallying. Even worse is the impact on the most vulnerable groups of the economy, which anything but benefit from the volatility in food prices. In fact, supply-driven inefficiencies also lead to high food prices in Pakistan, which are a key contributor to the countrys double-digit inflation. The UN suggests improving agricultural productivity by focusing on agricultural value chains such as in processing, transport and distribution. The institution also calls for a knowledge-intensive green revolution and the use of modern technology, new seed varieties, subsidizing inputs such as fertilizers and providing credit to farmers. There is a need to not only make growth more inclusive, but also sustainable by working on the glitches such as energy shortages and food supply inefficiencies besides striving for industrial development and diversification and a structural transformation of the economy.
===================================================== Pakistans key economic data for FY11 ===================================================== Real GDP growth rate (%) 2.4 Inflation (%) 13.9 Gross domestic savings rate (% of GDP) 5.5 Gross domestic investment rate (% of GDP) 13.4 Budget balance (% of GDP) -6.6 =====================================================
Source: UN Economic and social survey of Asian and the Pacific
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