View from Islamabad: Country's growth needs to recover sharply
When General Pervez Musharraf, Pakistan's military ruler, this week formally inaugurated plans to raise the height of the 'Mangla' dam - the world's second largest earth filled dam, cement analysts across Karachi's stock market were buoyed by some optimism.
The project for the first time ever involves a major engineering venture in several years, with inputs required ranging from concrete to reinforced steel.
The 'Mangla' dam venture in the latest in a series of undertakings promised by General Musharraf's government to begin long overdue developmental projects such as the construction of the 'Gwadar' port in southern Pakistan and plans to begin work on a network of dams in other parts of the country.
Ahead of next week's elections, General Musharraf is obviously up against criticism from several opponents who are quick to denounce claims of success which underpin the official message.
That Pakistan's liquid foreign currency reserves are now more than $8 billion is yet another example of how an important element to the government's economic success falls in the face of harsh criticism.
For students of Pakistan's recent economic history, its difficult to loose sight of a series of balance of payment crisis in the 90s which forced the country to borrow on exorbitant interest rates. Pakistan is indeed out of the proverbial woods as far as dealing with the consequences of a tough balance of payments situation was concerned.
Indeed, the country's outlook has been helped by the rapid strengthening of the rupee of the past year which for the first time has given some comfort to businesses.
Yet, consolidating the economic gains of the recent past remains contingent on two vital factors.
First, with economic growth as suppressed as it has been these past few years, partly as a consequence of a widespread drought, Pakistanis for the first time ever have found themselves squeezed.
Unlike the 80s when annual economic growth of over 6 per cent of GDP provided a robust edge to the economy, the 90s have see growth rates falling to a rate which is just marginally over the annual population growth.
As a result, government expenditure on developmental projects has fallen and domestic businesses have found their demand reduced significantly.
Unless Pakistan's growth begins to recover sharply, the recent economic gains may well fizzle as an inconsequential development in the country's history.
Second, long-term economic certainty for businesses depends in part on macro economic stability, but also on a sharp improvement in the operational environment. This week, Pakistani taxpayers paid their annual dues with the yearly deadline approaching them.
Many Pakistanis in the months ahead would find themselves at a loss when confronting the question, exactly what do they gain for the taxes that they pay. There are no easy answers to such a question confronting many of those who find themselves in the category of large taxpayers, though still not getting the state to take care of their basic needs such as affordable accommodation, education or health care.
Unless economic gains make sense for mainstream Pakistan, their significance would continue to be undervalued in the eyes of the public.
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