Death of An Economy

My topic deals with Pakistan, its relationship with the IMF and World Bank, and its internal businesss that be causing unemployment, p everyplacety, economical crisis and hunger. I sh exclusively be analyzing the mooring using the neo-classical theory, as it is what the economists of the Pakistan g everywherenance activity and the IMF atomic way out 18 using to alleviate the economic derangement of the pastoral.Situated in the sub-continent, Pakistan is a pocket-sized-income country, with great promise for reaping. Unfortunately, it is held back from reaching middle-income status by invete roam b otherwises give cargon a rapidly growing tribe, sizable government deficits, a heavy dependence on foreign aid, recurrent governmental instability and cosmic military white plagues. It is to address these fundamental faults in Pakistans scrimping that the IMF has initiated the Structural tolerance Programs (SAPs) in the country. This is discussed in tho detail afterwar ds in the paper.Like all developing countries, Pakistans population is much often than non employed in the agricultural atomic follow 18a, which accounts for about 48 pct of the tug force. In todays world the Industrial and Service sectors ar the biggishst growing beas of a developed countys economy. Yet Pakistan only employs 39 per cent of its population in Service, and a minute 13 percent in Industry. This is a paltry figure, compared to the employment statistics of a developed country.Pakistan is in any case heavily dependent on a single merchandise crop, cotton. indeed the countrys fortunes rise and fall with the cotton marketplace. It is no question that there are so many poverty stricken good deal in Pakistan. When almost half the population is involved in a precise volatile market, a pack of the time, a lot of pack leave alone be burnt by price fluctuations.The country is in addition subject to the mercy of the weather. Focussing on a major bullion cr op kernel very little diversification. This translates to mass hunger and impregnable times for the agricultural sector whenever the agrarian lands are ravaged by floods, or conversely, by droughts.Even more importantly, Pakistans agricultural sector is marked by swelled landowners, controlling most of the production. Hence, only a minimal amount of the profit from exports goes to the pitiful deal working for the large farmers. It is these plenty who constitute a large portion of Pakistans population. It is similarly these people who are vivacious in abject poverty in the rural regions of the country, devoid of the right to feed their families.This is a great fable of a theme discussed in World Hunger, Twelve Myths. Lappe, Collins, Ros scar and Esparza discuss the usually believed myths about why hunger and poverty exist. In it they clarify this very important point hunger does not exist collectable to a shortage of available food, notwithstanding because of fear and p owerlessness, resulting in the anguish, grief and vexation felt by the hungry and poverty stricken.Pakistan is a classic utilisation of this theory. Based on a feudal system, especially in agriculture, Pakistani society is primarily controlled by feudal over passkeys, (a.k.a. the politicians or relatives of politicians), who own or oversee most of the agrarian land and industrial base. Being taller up the law, due to their political influence, these corrupt people piece of tail literally pay back away with murder. Thus, keeping their laborers subdued and downstairspaid is no hard task. Any iodine who dares to complain is apply as an model for potential future unrest. As a result, the people in their elakhas, (controlled lands), remain destitute in the throes of poverty, unable to help themselves due to their insufficiency of power and the fear of the thekedars, (large landowners).By a lack of power, I refer not to a dearth of physical prowess but to a scarcity of basic hum an rights. These are the same rights that people in developed countries take for granted. The right to vote for whomever one feels like is missing. Instead a lot of villagers are forced to vote for the local anesthetic land owner due to a combination of fear and ignorance a fear of the repercussions of a potential loss by the feudal lord and the ignorance of any means to escape this same overlords wrath. genuinely often there is similarly no choice of candidates. There are very few people willing to risk their own and their families synthetic rubber by running play against their subjugators.All this goes against the very nature of the free market economy that Pakistan is supposed to be running. While the IMF and World Bank are using Neo Classical theory to address the nations problems in the capital, half the country is still cosmos run under the feudal system. Till this system is broken, and the immense lower classes are sceptred there is not a dent that can be make in the co untrys poverty and hunger income tax returns. Rather the problem will continue to grow right under the economists noses.Pakistan is excessively set back by ethnic problems, having numerous groups including Punjabis, Pakhtoons, Sindhis, Balochis and Mujahirs. Speaking diametric languages, the different ethnic groups do not get on very hearty as is witnessed by the numerous clashes betwixt Sindhis and Mujahirs in the violence lacerated city of Karachi. The language bulwark also translates to a lack of mobility of labor, which is a key to economic success under neo-classical theory. Hence the large sparsely populated province of Balochistan is presently under utilized. Due to a lack of available labor, industries are tough to set up. If the language/ethnic barrier could be overcome, the plenteous lands of Balochistan could potentially set about the saviors of Pakistans economy.Pakistan also has a very week industrial base. Being an ex British colony it suffers from a similar problem to the one ailing a way out of the African and South American countries. This issue is that the colonists never bothered grammatical construction up the necessary base for industrialization. While the rest of the world was diligent building this base, greedy colonists who did not care about the country and thusly paid no attention to its development were exploiting countries like Pakistan. Hence Pakistan is for good playing catch up to the rest of the developed world going very little money for social run to help the situation of the poor.The literacy rate in Pakistan is also very low. In 1992, the official literacy rate for the adult population was said to be a low 36 percent. Even more dismal was the statistic that listed 45 women being educated for each man. With this dearth of qualified personnel, there is no room for economic growth as there are no newfangled minds to head the growth. Women are also the primary food producers in Pakistan. If they are not being educated, it means that they are not up to date on the in style(p) production techniques, which in turn translates to inefficiency and the afore reference pointed ignorance. Once again it all ties into the powerlessness that marks the hunger and poverty-stricken. Women represent 54 percent of Pakistans population. If they are not allowed to exercise their rights to an education and to vote, how can the country be expected to progress? It is like asking a man with one leg to run.Like other third world countries, in Pakistan, lacking(p) housing, inadequate sanitation and water supply, and widespread malnutrition contribute to spread of unhealthiness and to high infant, childhood, and maternal mortality. The leading causes of death are gastroenteritis, respiratory infections, innate(p) abnormalities, tuberculosis, malaria, and typhoid fever, all preventable diseases. Unfortunately the poor, uneducated lower classes are not given enough attention by the corrupt officials running th e country, which is resulting in their situation deteriorating stratum by twelvemonth.These, along with other economic and social issues are causing immense hunger and poverty in Pakistan.Presently Pakistan is passing through an unprecedented economic crisis, made worsened by the global recession. The turmoil in domesticated markets and the im residuum between resources and liabilities threatens to roll back the modest levels of economic development and industrialization that Pakistan has achieved so far. Had it not been for a reasonably strong agricultural base, the situation would be much worse.This situation has been caused by a mixture of issues, including the near visual perception of politicians and their persistence in following politically popular, but economically disgraceful policies. An example of this is the detonation of a nuclear bomb a year ago. Simply to show off to India and the rest of the world, as well as to raise their local popularity, the Pakistani governme nt decided to go forrader with an unnecessary test that brought economic sanctions against them and also cost them a lot of their aid from western countries.However, much more important have been the structural reasons underlying this deterioration, all of which have been contributing to the growing feeling of discouragement the hungry and poverty stricken have been experiencing. Before this paper begins finding solutions to the problems at hand, we need to remind ourselves of the key issues.1) One major problem that Pakistan needs to deal with is the fact that its expenses are far more than its revenues. part due to decades of lax fiscal management, but more because of myopic policies in its external relations, the militaristic structure of the state and the narrow vision of its raper elite, Pakistan is Rs 100 billion short of the money to simply keep its exist machinery operational. How is a third world country supposed to develop an pedestal when it is spending more than its net revenues on only two items, debt function and defense? In fact, Rs 18 billion of its defense has to be financed to borrowing. The Pakistani government has not been governing it has simply been acting as a debt-securing agency.2) Lately the government has been touting the fact that it has achieved the IMF imposed budget defect target. What it neglects to mention that it achieved the target through questionable means. Firstly, it drastically reduced its developmental pulmonary tuberculosis from 7.5 per cent of GDP in the early 90s to a paltry 3 per cent, which translates to a cutback of 140 billion in present prices.A cutback of pulmonary tuberculosis of such extent in the governments purchases of esoteric sector goods like cement, pipes and cables and service like engineering explains why a number of cloak-and-dagger sub-sectors are at the point of closing down, operating at a immensely reduced capacity. This is adding to the issues of hunger, poverty and unemployment be ing faced in Pakistan. The government has also reduced the amount it givers to the provinces by Rs 30 billion, transferring some of its debt to the provincial governments. In other dustup the government has done nothing to resolve the issue of structural defect.3) Whats worse is that not only has developmental expenditure been sharply curtailed, but that the scarce resources set aside for understructure whole kit and caboodle have been diverted to less productive enthronizations_like the new motorway and the new Lahore airport. This massive reduction of the public sectors developmental activities is causing a contraction in employment opportunities for Pakistans growing number of middle class educated youth. This is particularly serious in the areas where the private sector is unlikely to locate due to the lack of infrastructure.Thus the rightfully poor areas continue to live in poverty due to the governments inability to provide adequate physical and social infrastructure or c reate an environment for private sector investment. It has also not been able to maintain law and order and is guilty of not living up to its contractual obligations which is further discouraging foreign and domestic investment in the country. The treatment of its foreign currency account holders and IPPs last year illust order this point.4) Pakistan suffers from the typical problems that all third world countries suffer. One of these is massive rot at all levels, estimated at Rs 100 billion a year. This means that a large portion of guinea pig wealth has been stolen from the poor. No wonder, the country is unable to lift itself out of the quagmire of poverty and hunger.5) Tax turning away is another issue that the government needs to address. Successive governments have failed to name a tax culture due to an inequitable structure, which taxes different sources differently. An example of this is provided by the large farmers who, despite now getting higher internationalist pric es for their crop, are unwilling to pay the modest levels of provincial taxes.The political leaders itself does not pay its taxes diligently. Thus, unless companies owned by sitting ministers install posting based systems for tax accounting, it will continue to be difficult to put on retail taxes. Also, the repeated bowing down of the government to shutter-down threats of traders and the repeated refusal of large land-owners to meet their tax obligations is increasing the burden of taxes on the helpless poor, the nonionised sectors, and the honest people foolish enough to pay their taxes. If the rich are not willing to meet their responsibilities, how are the poor supposed to pull round?6) There is the additional problem of a gap of between 5 an 6 per cent of GDP per year between domestic national savings and investments which translates to approximately Rs 150 billion being financed from external borrowing. This further adds to the crippling debt that is allowing the IMF and Wo rld Bank to interfere in the formulation of domestic economic policies.7) The external debt of around US$ 34 billion is more than 50 per cent of GDP, and four times the annual foreign transposition earnings. Pakistan can neither repay nor service this debt. So far I has only postponed the inevitable, default by piling up further debts at abominably high rates.8) Pakistans exports compromise 0.2 per cent of world exports and diversification from a single crop economy has remained an elusive dream. Therefore to commit for exports to be the driving force of economic recovery, as the government is doing, would bespeak an astronomical rise in exports, and the price of cotton. In other words it is impossible.9) The countrys ability to export is also affected by sluggish world trade, which coupled with an over valued currency, is rendering Pakistans exports uncompetitive. With the rise in the price of oil, the gap between import bills and export receipts is widening.10) Until now this g ap has been met with remittances and short-term borrowing. But due to a decline in remittances for a number of reasons and Pakistans declining credit, this is no yearlong an option. It therefore seems that it is impossible to maintain the present levels of growth rates and imports as well as meet debt servicing.11) Public sector industries are also deeply in the red due to over-manning, corruption, and the protection given to large defaulters of utilities. The combined debts of just WAPDA and KESC, (which deal with electricity and gas respectively,) are Rs 91 billion while the loans of 18 public sector enterprises is close to Rs 250 billion.12) The government is offering 15 to 18 per cent interest rates on its saving schemes which is far to high for it to be able to generate high enough returns to service the debt and still have enough left over to finance developmental activities.13) virtually of Pakistans industry faces the issue of veto or nominal growth, while value-added ind ustry is operating at 30% below capacity. The limited growth is due to a lack of comparative advantage, the lack of credit availability and a high interest rate. scorn inflation being well below double digits, interest rates are as high as 15 to 18 per cent on loans This is too high to keep the present economy afloat, permit alone raise it to a maintainable level of growth.14) There is also a lack of confidence in the government by the private sector. How can a government that cannot even handle domestic calmness issues be expected to turn around an economy that is in the throes of a downward spiral? Therefore the private sector has been occupied in short-term trading and currency speculations which do nothing for growth or the welfare of the state.15) An obvious result of this situation is that the disparity between the rich and the poor has grown. The share of the poorest 20 per cent of households has fallen to 7 per cent while the richest 20 per cent are receiving over 45 per cent. The low rate of economic growth and the high rate of inflation over the last few years have left the poor with no buying power resulting in almost a third of the population living below the poverty line. There is also anger amongst the poor about the fact that the incidence of increased taxation has been heaviest for them expenditures on services for them have declined. Social tensions are rising with the growth of the absolute number of poor, illiterate and jobless, as employment opportunities and wages decline due to the stagnating economy. much(prenominal) conditions are hardly conducive to political and social stability, without which growth will remain a distant dream.On top of all of this, Pakistan is plagued by the curse of the IMF and World Bank. Constant defects in the current account of the balance of payments and depleting foreign exchange reserves is causing the extension of credit to become an exercise in haggling and bargaining. Each time there are negotiations along with a string of conditions attached to the loan.The release of credit is then delayed until each and every condition of the IMF has been met. The only way that Pakistan can now secure loans and vital extensions on its debt is to institute the Structural Adjustment Programs that have been drawn up by IMF economists. The problem is that the benefit of these programs is questionable. Most countries have suffered immensely from them. Instead of improving the economy, these programs have been destroying them. Unfortunately, like other countries that have yielded to the them, Pakistan is virtually being taken over by the IMF, along with the World Bank.