- The downward growth estimate revision reflects hard times ahead
In its ‘2020 Global Economic Prospects’ of the World Bank, it postulates 2.4 percent GDP growth for FY2020 for Pakistan. This is 0.3 percent lower than its estimate in June 2019. The fact that the revision is downward reflects a problem of macroeconomic management rather than anything else. More precisely, the revised estimate is the result of monetary tightening, which has been imposed because of IMF conditionalities, and which are estimated by the World Bank to continue to persist for at least two years more.
It should be noted that the June estimate of 2.7 percent was anaemic. Pakistan has a high population growth rate. That means that any growth figure must have two percent (the population growth revealed in the 2017 census) subtracted. That means that a growth rate which would be respectable in an industrialised European country, should be cause for consternation in Pakistan. Among other things, it means that the Pakistan Tehreek- e-Insaaf (PTI) government will come nowhere near fulfilling the boasts that 2020 will be a year of carrying out its promises. Just to take one benchmark, there will be none of the massive job creation that is needed to provide employment to the youth bulge as it enters the job market. This is a serious issue for this government, for the PTI targeted precisely this youth bulge in the 2018 election campaign which brought it to power. Anaemic growth also means that defence spending cannot grow except at the expense of social-sector spending. At a time when the regional challenges are so pressing, it would be difficult to rein defence spending.
The Prime Minister’s initial reluctance to obtain an IMF package now stands justified. That package was predicted widely to be unconcerned with growth, and its conditionalities designed to make it easier to service foreign debt. Interest rates are going to remain high, and growth low, for the near future, and the ordinary man will not see any relief for the next couple of years. He may not even then, but the strict following of the IMF conditionalities guarantees it for at least two or three fiscal years more.
