MABAD - Seeking elimination of the Federal Government's role in market, Deputy Chairman Planning Commission Nadeem-ul Haq Tuesday said that reform of the governance was essential to attain the growth of the economy.
"Poor quality of the governance had reduced the productivity and increased cost of doing. Therefore there is dire need to reform the governance, and market needs to be seriously mainstreamed for addressing growth problems," he said, while addressing the 26th Annual General Meeting and Conference on Fiscal Decentralisation: Empowering the Provinces, Strengthening the Federation organised by Pakistan Society of Development Economists.
He further said that macroeconomic stability of the country remained elusive during the last few years. Despite efforts, the fiscal deficit remained beyond the levels that would be considered sustainable. Not only the debt grew rapidly, but also the State Bank of Pakistan's financing was resulting in inflation, which, he feared, to go beyond 15 per cent, he added.
He was of the view that to become a middle-income country, Pakistan needed a sustained growth of about 8 per cent while national growth remained volatile averaging about 5 per cent per annum over the last 20 years.
Speaking on the occasion, Dr Rashid Amjad, President Pakistan Society of Development Economists (PSDE), highlighted the need for active policy responses to serious economic challenges country is facing currently. He said that economy has been growing at an average of around 2 to 2.5 per cent for the last three years while inflation is around 15 per cent, which leads the economy into deep stagflation. For a sustainable growth and to become competitive in international market, macroeconomic stability is prerequisite, he said and added that faster growth in China, India, and Bangladesh showed "we are losing our competitiveness."
Dr Amjad further highlighted the importance of the 7th NFC Award and 18th Amendment and said it was the need of the hour to implement it in its true spirit. Later eminent economist, Dr Hafiz A Pasha in his remarks said that fiscal deficit of the country could increase by three per cent than the target rate due to non-imposition of Reform General Sales Tax, 50 per cent increase in salaries of the government's employees and floods.
Hina Rabbani Khar, Minister of State for Finance and Economic Affairs, in her speech pointed towards the inconsistencies in establishing the local government system. She said, "We still lack political will to enforce local government system. It is imperative to implement the system and increase its outreach to grassroots level. We must take steps in unfavourable conditions, no matter how painful they are." Implementing fiscal discipline is a must but it is a long process without any shortcuts. In this connection 18th amendment is a right step in right direction, which will surely bears its results in next two decades, she added. Dr Anwar Shah of the World Bank in his lecture highlighted the importance of devolution of power in a Federation. He argued that the recent fiscal crisis and ever growing concerns with corruption had further heightened the need for the govt to downsize the role of the state/provinces and reconstituting these as provincial councils of local govts to perform inter-local functions and coordination. These economic imperatives calling for an hourglass model of federalism are at odds with the political realties in countries conforming to the traditional dual federalism model.