It seems pretty clear what the first priority, for the federal government, in terms of economic problems it needs to address, is going to be. It is going to be the issue of achieving macroeconomic stability. The fiscal and foreign exchange deficits are reaching a point where they could, by themselves, be enough to wreck anything else that might be happening in the economy. One cannot talk of poverty alleviation, rural development and even medium term growth without worrying about short-term macroeconomic stability. It is true though that the federal government cannot afford to focus exclusively on the issues of short-term macroeconomic stability as i) there are many other pressing economic problems, ii) achieving macroeconomic stability is dependent on getting a number of other things right, and iii) how macroeconomic stability is achieved will have profound impact on the short and medium term growth prospects of the country. Achieving macroeconomic stability is easy. All the government needs to do is to cut down expenditure to match its revenues and to block imports so that they do not outstrip exports by much. This will do away with both deficits that seem to be causing the current troubles. But this is obviously not an option. Expenditures need to be cut and revenues raised, but these have to be done in a way that they do not derail the economic process by too much, do not hurt growth and production, do not increase poverty and/or unemployment and do not limit future prospects and, in fact, they have to be done in a way that we are able to achieve sustainable growth in the future. This is the real challenge and this is what the federal government has to face. Furthermore, there are other objectives that the federal government has to worry about. It is not sufficient that federal policies do not contribute to increasing poverty or unemployment, they have to actually work in the other direction: they have to reduce poverty and unemployment. Inflation has to be brought under control and the relatively poorer sections of the society have to be actively helped to increase their capacity to cope with the onslaught of inflation that they have been facing for sometime now. So the federal government has its work cut out. The hope is that they will i) not focus exclusively on the short-term, and ii) chart out a sustainable and realistic path for the country for the next few years. So far the federal government has not given any signal that they are working on these issues. Tight monetary policy from the State Bank will only go that far. It is the fiscal and planning side, in control of the Ministry of Finance and the Planning Commission, that have to step up to the plate. So far, the government has just been focusing on trying to beg and borrow money. Again that could be a short-term relief measure, but it will not be sufficient to create macro stability and it will not be sustainable. We look forward to seeing a more coherent, articulate, realistic and worked out plan from the government over the next couple of months. Whatever the federation does, one thing is clear: there is not going to be a whole lot that they are going to be able to do for the poorer segments of the society in the next few years. The focus on stability and the short run is going to be the driving force for sometime. But the agenda for the provincial governments can be very different. The provincial governments have little or no say or control over the macroeconomic factors and/or policy of the country. They have little or no input into federal fiscal policy, monetary policy of the country and policies related to international/national debt and exports/imports as well. Provincial mandate, by our constitution as well as in practice, is restricted to control over policies in the areas of local taxation, agriculture, local services, health, education, social services and local infrastructure provision. But i) this is where the real battle against poverty, and on issues related to human development is, and ii) the scope of policy influence is large enough if a provincial government really wants to make a difference in the life of citizens. Given the fiscal financial situation in the country, provinces too might not have resources to play around with, but they do have the ability to reprioritise their expenditure and to work, through the areas mentioned above, to create growth opportunities and reduce poverty within their territory. For the Punjab, statistics clearly show that i) most of the poverty in the province is still rural, ii) the South and West of the province are much worse off, iii) the quality of all services, whether privately provided or state provided, is much worse in the South, and in general iv) quality of provision in the areas of health, education, and social services, vital for growth and sustainability, especially in the intergenerational sense, is poor, and v) quality of infrastructure provision is also quite poor across the province, barring a few urban areas. It should not be difficult to work out the agenda for growth and poverty reduction, for the province, from even these basic facts. If the government is interested in tackling the issue of existing poverty, and if it wants to provide relief to those facing the current adverse economic conditions it has to focus on the rural poor. This group is not very educated, does not have access to land, and does not have technical skills that would allow them to work in areas other than agriculture. If the government is interested in reaching them, in a way that builds up their potential and ability to make a life for themselves, it has to provide the rural poor access to land. Land reform has been taken off the agenda by most governments and for quite sometime, but there is no escape from the conclusion that if we need to reach the rural poor, and of the current generation, and in a way that is not just in the form of cash or conditional grants, it has to be through giving them access to land. Tenancy has gone down in most of Punjab, and this has aggravated the problem. Rural poor have no option but to become daily wage earners and/or migrants to urban areas. But with no skills to talk of, they can not do much even in urban areas. To keep them where they are (existing urban services cannot bear the pressure), we need to somehow increase their access to land. If we cannot have a conventional land reform programme, and it seems that we cannot, we have to come up with innovative solutions for creating access to land. These could be in the form of land funds and so on. Secondly, though it is not the case that livestock ownership removes poverty at the poorer end of the scale, it does help in reducing the impact of poverty. But without proper extension services livestock ownership cannot expand much. The provincial government has to develop a better mechanism of delivering extension services. Apart from these two ways of reaching the rural poor, given the circumstances, the provincial government can do little for the existing poor. For intergenerational effects, provision of quality health and education services have to be a must for rural areas. Whether the government does it itself or in some form of partnership with the private sector are issues of detail. But in terms of priorities and policy decisions, government has to first acknowledge the importance of these sectors. How this is to be done can then be worked on. Urban areas provide more choice to the provincial governments. Reviving important industries, creating cities as hubs for growth, providing quality infrastructure to encourage investments from within the country and outside, and trying out partnerships with the private sector for delivery of vital services and infrastructure in the urban areas are all options that can be explored fairly effectively. Revival of industry and/or of cities depends a lot on the macroeconomic situation of the country as well. But the provincial government should definitely get its act together, and then as the federal government is able to control the situation the province would be ready to bounce back. Given the gravity of the economic situation the federal government is going to be busy dealing with macroeconomic stability issues of the country for sometime. And though one hopes they do not focus on that exclusively and forget about medium to long-term sustainability issues and about issues related to poverty and human development, it is likely that that will happen. But the provincial governments can do a lot here. They have the Constitutional authority to work in areas that could help people in coping with poverty and deprivation. Agriculture, access to land and livestock areas could help reduce poverty in rural areas: the hubs of poverty in Pakistan. Provision of health, education and other social services could create sustainability and appropriate intergenerational impacts. But this will require significant work on the part of the provincial governments. Right interventions have to be developed and implemented. And rather quickly as well. One hopes that the political situation remains stable enough for the provinces to focus on the real issues at hand. The writer is an associate professor and head of the Department of Economics, LUMS and senior economic analyst E-mail: faisal@nation.com.pk