4.2 percent growth target to be missed: Pide

The Pakistan Institute of Development Economic (Pide) has projected that Pakistan is likely to miss growth target of 4.2 percent for the ongoing fiscal year 2011-12 due to serious energy crisis, which continues to inflict a heavy toll on the economy.
According to Pide, the agriculture sector is on the path of recovery after massive flooding of 2010 and 2011, which is expected to achieve growth target of 3.4 percent in current fiscal year 2011-12. Expected agricultural growth could be attributed to increase in the production of rice, sugarcane and cotton.
"Despite this, however, the economy is likely to miss the overall growth target of 4.2 percent in FY12 with the intensification of the energy crisis in the recent months and continued weaknesses in the manufacturing sector," it added. It said that although the large scale manufacturing (LSM) sector had shown a modest recovery, overall economic growth remained far below the potential level.
A combination of factors including weakening exports, shrinking foreign capital inflows including loans and aid, rising petroleum prices, and approaching loan repayments have heightened Pakistan's vulnerability to balance of payment difficulties. It said Pakistan's balance of payment situation had worsened during the ongoing fiscal year with the current account turning from a surplus into a deficit of dollars 1.7 billion during the first quarter of ongoing fiscal year. Though foreign exchange reserves have held up on the back of strong remittances, the rupee has come under severe pressure not least because of fears of a build-up of external account imbalances. This situation is not helped by an uncertain global economic outlook with the US still struggling to recover and the euro zone caught in a fast spreading debt crisis that threatens the very survival of the euro itself.
Sadly, the key problems afflicting the economy including energy crisis and a host of structural impediments that have not been tackled effectively, showing signs of bad-governance.
Moreover, with the election year approaching, pressing economic issues are likely to remain on the backburner dimming hopes of a reversal in economic situation at least in the near term. At the same time, the government may be tempted to adopt populist measures ahead of the elections that could further compound economic difficulties. Pide believes that government still has an opportunity to implement a minimum agenda focused on correcting macroeconomic imbalances, setting the future direction for sustainable economic growth. Pakistan cannot afford to lose time and the cost of policy paralysis would be very high in terms of macroeconomic instability and lost opportunities for growth.
It urged the government to take appropriate measurers for putting the economy on right track, adding that the forthcoming budget should aim at achieving fiscal stability by avoiding politically driven public expenditures, cutting wasteful spending, and channeling resources towards energy, infrastructure and human resource development, the key drivers of economic growth and development.
The government has already approved the Framework of Economic Growth developed by the Planning Commission which lays out a comprehensive strategy for long term competitiveness and growth focusing on governance and institutions, markets, connectivity and cities. By acting on this minimum agenda, the government has a chance to set the stage for lifting the economy out of the current morass.
Looking forward, with the elections approaching, there is considerable uncertainty prevailing about the future course of economic policies, therefore major political parties need to clearly spell out their economic visions along with coherent macroeconomic frameworks and economic policies and programs for accelerating economic growth and development.