Quick recipe required for growth

Staff Report

ISLAMABAD: It was quick and fast swing bowling in cricket in the 1980s and 1990s. The captain bowler did the same with the economy as a cost-push approach was injected into demand-side management policies. The Pakistan Tehreek-e-Insaf (PTI) may or may not be well aware of its social and economic implications.
Consequently, the rupee dropped sharply with an exorbitant hike in interest rate, which took inflation suddenly to sharply higher levels. Action against widespread corruption started at the same time but such a harsh approach could not be handled by a $300-billion economy.The sale of plots and cars as well as bank savings of people have plunged, hitting the income flow hard for the middle class, which had enjoyed a decade-long expansion earlier.A big question is how to give a push to investment flow in the country. Millions of people have a big amount of spare money and are not spending it. This underlines the need for putting in place a framework where the money quickly changes hands. It will enrich the economy and create wealth in the country. But is it so simple?
Now, the dollar is worth Rs154 and $21 billion worth of remittances, which Pakistan received in fiscal year 2018-19, is equal to Rs3,234 billion in 2019-20. In FY19, when the exchange rate stood at Rs121 per dollar in the beginning but went up to Rs162 in June 2019, the remittances of $21 billion were equal to Rs2,943 billion.
The difference in remittance flow between FY19 and FY20 in rupee terms may reach up to Rs290-300 billion. There is a huge opportunity for the government to convert such huge remittances into productive investments as the money is going into the real estate, imported cars, etc.
Investors and traders have hoarded most of the money but the amount should be converted into an opportunity.
Pakistan’s private consumption expenditure is likely to drop to $232 billion by the end of 2019 from the previous high of $260 billion which came at the end of 2018.
According to the Economic Survey 2018-19, the consumption growth was recorded at 11.9% in FY19 compared to 10.2% growth in the previous year. As a percentage of GDP, it increased to 94.8% compared to last year’s 94.2%. Consumption has remained above 90% of GDP in recent years.In order to run the economy at a better pace, the government needs to come up with a viable strategy to ensure that spenders do not get harmed when the wheel of economy is pushed.
The wheel has been jammed for the past many months, forcing the government to consider different options, which also resulted in an agreement with traders on relaxing the CNIC condition for bulk product buyers and wholesale traders.
Two front runners of the economy are housing and auto industries and they need government support, with laws conducive for business, better financing regimes, a supportive banking sector and facilitating state agencies.All these factors will support not only these industries but also the overall economy by helping it achieve better growth.

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