Economic and Social Survey of Asia 2008 launched
* The survey predicts economy to remain strong in 2008
By Ijaz Kakakhel
ISLAMABAD: At launching the Economic and Social Survey of Asia and the Pacific 2008 the renowned economist, Dr Sarfraz Khan Qureshi, on Thursday said the government has to curtail wasteful expenditures otherwise it would again fall in to clutches of the IMF and World Bank (WB).
The government has to reduce the budget deficit to the minimum level and the resources so saved should be diverted towards economic development of the country, he maintained. The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) launched its flagship publication today in more than 20 capitals in the region, and in New York and Geneva.
Director of the Innovative Development Strategies Sarfraz Khan Qureshi presented and explained salient features of the Survey.
Pakistans economy is expected to remain strong in 2008, growing at 6.5 percent, despite political uncertainties and disturbances, the ESCAP reported. Growth would be close to the 7 percent expansion recorded in 2007 and the 6.6 percent in 2006. The sustained growth also highlights the impact of economic reforms and policies over recent years. In just a few years, sound macroeconomic policies have transformed Pakistans consumption-led growth impetus to one in which investment-led growth can assume a more important role, ESCAP said.
In 2007, the agricultural sector recovered strongly, growing by 5 percent from just 1.6 percent in 2006, while the manufacturing sectors growth continued at 8.4 percent in 2007, marginally down from the 10 percent recorded in 2006. A major driver of growth was investment. In 2007, investment in real terms increased by over 20 percent, ESCAP said.
While Pakistans inflation rate was 7.8 percent in 2007, the main concerns lay in higher food prices, which rose by 10.3 percent with its effect felt most strongly by people living on low and fixed incomes. Inflation in 2008 is expected to remain high, close to last years levels.
The inflation was fuelled by global increases in some commodity prices, higher utility tariffs, and by local supply- and demand-driven factors, ESCAP said. They survey revealed development expenditure has been taking an increasing share of overall expenditure in recent years. But the central governments budget deficit in 2007 has remained steady at 4.2 percent of GDP. Concerns were evident over a sharp slowing in the growth of Pakistans exports and imports in 2007. The rates of growth for exports fell 3.4 percent while for imports the growth rate dropped by 6.9 percent.
A widening trade deficit was partly covered by remittances from migrant workers, which in 2007 rose to a record amount of $5.5 billion. At the same time, the current account deficit is expected to further widen in 2008.
ESCAP says the current account deficit is to remain an issue for both Pakistan and other South Asian countries due to higher oil prices and the impact on the textiles trade with the lifting of quota restrictions on Chinese exports over 2008. To reduce the risk of depending too heavily on a single sector, export diversification should remain an important part of government strategies, ESCAP said.
ESCAP says that for most South Asian nations, including Pakistan, public debt remains a serious problem with domestic public debt now accounting for a larger component of total public debt. In Pakistan, public debt growth during the 1990s was unprecedented. A credible debt reduction strategy and fast economic growth cut the public debt burden from 84 percent of GDP in 2000 to 57 percent by 2006, ESCAP said.
Pakistan successfully reduced its external debt burden through rescheduling, a debt swap for social spending, debt cancellation and the prepayment of expensive debt. As a result the debt service ratio has declined substantially over the years 2000 to 2006 though some 30 percent of government revenues remain allocated to debt servicing.
The ESCAP noted that steps were needed by policy makers to contain public debt, especially promoting economic growth. Also, as budget deficits are a major cause of public debt, every effort should be made to maintain a primary surplus in the budget.
It also called for the strengthening of the tax administration, improving the efficiency of the tax systems including simpler tax systems, with fewer exemptions, less discretion and better compliance. Also, given the needs of the poor, the challenge for governments is to contain wasteful public spending and orient it toward priority sectors, ESCAP added.
ESCAP, in a wider view of the Asia Pacific region, said efforts to reduce poverty especially in the rural areas required the promotion of productivity in the agriculture sector. The policy focus needs to be on revitalising agriculture. This, ESCAP said, requires connecting the poor to markets through improvements to rural infrastructure, the availability and management of water, agricultural technology, increasing the capacity to adapt technologies and speeding up diversification and commercialisation.
ESCAP says improving land distribution and access to credit and extension are also important, as well as making macroeconomic policy friendlier to agriculture, all enabling the poor to make a dent on poverty by themselves.
This years issue marks the 60th anniversary of the Survey, first published in Shanghai in May 1948, which examines the most critical issues, challenges and risks in Asia and the Pacific in the months ahead, and explores critical long-term development issues relevant to all developing countries in the region.
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