National
Political instability has hit Pakistan economy: WTO
By Sushma Ramachandran
NEW DELHI, JAN. 31. The World Trade Organisation (WTO) has noted that political instability and weak governance have had an adverse effect on Pakistan's economy along with structural problems such as direct State intervention and protectionist policies.
While stressing the importance of continuing the country's Comprehensive Economic Revival Programme, it said that the economic slowdown of the last seven years had social consequences and led to a rise in incidence of poverty.
In a report on trade policies and practices of Pakistan, the WTO secretariat pointed out that with population growing, the country's real GDP per capita dropped gradually below its early 1990s level. Nearly one third of the population, especially in rural areas, was below the poverty line compared with one-fifth a decade ago.
On the brighter side, the report says there are signs that the economy may be improving including a rise in the local stock market. These developments are perhaps partly due to the perceived improvement in Pakistan's prospects of obtaining substantial debt relief from its international creditors. Such relief will reduce the cost of servicing the country's large foreign debt. This will also help to tackle the current fiscal imbalance and provide more scope for the Government to deal with social problems and the presence of three million refugees.
Significantly, the report does not dwell much on the impact of refugees from Afghanistan and the consequent problems faced by the Pakistan economy. There is also no comment on Pakistan not providing most favoured nation status to India as is mandated under WTO rules.
In fact, the report says ``Pakistan's trade policies have been based on the principles of multilateralism and non- discrimination''. As for Pakistan's role in the SAARC Preferential Trading Arrangements (SAPTA), it observes that its commitments have remained ``limited''. This is attributed to concern about proliferation of regional trade agreements and initiatives.
The WTO report emphasises that Pakistan's long-term economic growth depends largely on the continued implementation of the revival programme especially in reduction of direct State intervention in the economy and improvements in the tax base. This is also dependent on Pakistan's success in diversifying its exports which in turn depend on its trading willingness to keep markets open despite the present global economic slowdown.
Referring to the fiscal imbalance in the South Asian country's economy, the report says net public debt reached an estimated 92.6 per cent of GDP in 2000-01, of which over half involves external liabilities.
It notes that economic growth in the country has moderated relative to that in the period prior to the last trade policy review in 1995. After accelerating in 1993-96, real GDP growth fell from five per cent in 1995-96 to 1.2 per cent in 1996-97 and 1997-98 and has since fluctuated around four per cent.
Natural factors including a severe drought, financial imbalances, especially fiscal and structural weaknesses, are cited as important elements in this reduced economic performance.
Trade policy reviews are an exercise mandated in the WTO agreements in which member countries' trade and related policies are examined and evaluated at regular intervals. For the review, the WTO secretariat prepares a detailed report while a policy statement is submitted by the member country concerned.
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