Pakistan’s new rulers will inherit economic mess

March 6th, 2008 - 1:45 pm ICT by admin  

A file-photo of Nawaz Sharif
By Zofeen T. Ebrahim
Karachi, March 6 (IANS) Working as a maid on a salary of Rs.4,000 a month, Perveen Riaz, 45, supplements her husband’s Rs.5,000. “We’re barely able to make ends meet,” said the mother of seven children of whom five go to school. Rashida, who earns the same, is the sole breadwinner for her family of four as her husband is sick. “I toil the whole day, and still my children never sleep with their stomachs full,” she said.

As Pakistan braces for transition from over eight years of military rule to a democratic one, independent economists say the new government has tough times ahead. It will find it difficult to disentangle the economic mess that the Musharraf government leaves behind in its wake.

The Planning Commission’s ambitious expectation of a 7.5-8 percent GDP (gross domestic product) growth in 2007-08 did not happen because of high international prices, inflation and a widening of the country’s current account deficit. According to a report released by the Asian Development Bank Feb 29, GDP growth in 2007-08 will be 6.5 percent.

Rising prices of essential food items, combined with shortages of sugar, oil and flour, a looming power and gas crises, especially in the last one year, is the legacy the new government will have to grapple with.

The caretaker government has already increased the power tariff by nine percent, the price of petrol from Rs.53.70 ($0.89) to Rs.58.70 per litre ($0.97) and the price of diesel from Rs.32.07 to Rs.36.07 per litre. The price of vegetables has already skyrocketed.

Both Perveen and Rashida have their hopes pinned on the new government to tackle the spiralling prices of kitchen items.

“Yesterday, when I went to buy vegetables, I told the shopkeeper he can fleece us now but when Bhutto’s party comes to power he will be put behind (bars) for extorting money from us like this,” said Perveen indignantly.

She was referring to the historic general election held Feb 18 in which the opposition Pakistan People’s Party (PPP) won 87 seats in the National Assembly. Former prime minister Nawaz Sharif’s Pakistan Muslim League-N (PML-N) got 66 seats and the Pakistan Muslim League-Qaid (PML-Q), supporting President Pervez Musharraf, was routed.

The PPP, which in all likelihood will form the new government, did not want to take the unpopular decision of raising the price of oil and demanded the upward revision before it took over.

“We have increased the price to match international prices and to facilitate the new government,” said caretaker Finance Minister Salman Shah.

Kaiser Bengali, a development expert and an economist, said of the many burgeoning problems, “the most immediate problem the new government will face is the gasoline price issue”.

S. Akbar Zaidi, a Karachi-based political economist, agreed. “For their own political gains, the previous government did not raise the price of oil when it shot up in the international market.”

“The rate of inflation is the highest in the last 10 years and consumer prices rose 11.86 percent more than last year. Food inflation at 18.5 percent is extremely high.

“The government will be confronted with a burgeoning current account deficit, reduced exports; then we have very serious gas and power shortages which is impacting our economic activity.”

The impact, he said, will be visible when cuts are made on developmental expenditure.

According to Zaidi, the government will have to take the “unpopular decision of raising the price of oil”. He further said: “It will take this new government at least a year to clean the mess made by military rule in the last one year.”

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