Lagarde's address

Managing Director of the International Monetary Fund (IMF), Christine Lagarde, in her keynote address to a select gathering of a State Bank of Pakistan (SBP) event titled "Emerging markets in the global world" was extremely impressive in her analysis. She invoked statements of Pakistan's indisputable Greats - Mohammad Ali Jinnah and Allama Iqbal - and urged Pakistan's authorities to follow their exhortations. "With faith, discipline and selfless devotion to duty, there is nothing worthwhile you cannot achieve," a quote from Jinnah and "be aware of your own worth, use all of your power to achieve it. Create an ocean from a dewdrop. Do not beg for light from the moon, obtain it from the spark within you," from Iqbal. These are undoubtedly quotes that have not been the guiding principles of our successive governments, including the incumbent; and one would hope that Lagarde's reference reminds various seats of power in this country as well as the public that we can achieve heights only if we heed the teachings of Jinnah and Iqbal.

Flanked by the federal Finance Minister and the Governor State Bank of Pakistan, who focused on their own accomplishments in terms of meeting the conditions supported by the recently completed IMF programme - which have been challenged by independent economists as premised on flawed data - Lagarde did not hesitate from presenting a convincing thesis on the state of Pakistan's economy. She mentioned two global transitions, one with a negative and the other with a positive impact on Pakistan. China's transition from manufacturing to services, from investment to consumption and exports to domestic services would imply a slower growth which in turn would lower Pakistan's exports to China which currently account for 20 percent of all trade. She added that to take advantage of the space created by China in moving away from labour intensive output would require "Pakistan to retool its economy and train its people to realise this advantage." That retooling is certainly not evident in today's Pakistan.

And the second global transition was the decline in oil and commodity prices which created fiscal space for the current government but Lagarde pointed out that this slowed growth in many of the commodity (oil) exporters, including the Gulf states which account for nearly a two-thirds of Pakistan's total remittances. Needless to add, the country's oil import bill has declined during the past three years, however, total imports have not declined and with a decline in exports and remittances the challenges facing the economy are expected to rise, not decline, in months to come.

Her advice to the authorities was threefold. First, reinforce Pakistan's economic resilience, at this point she referred to Quaid's earlier quote, and as repeatedly pointed out by Business Recorder but largely ignored by the government, Lagarde noted that "public debt remains high, at about 19 trillion rupees. This debt needs to be serviced, and at current levels, the interest bill is larger than Pakistan's entire development budget. To place debt on a downward trajectory action is needed on both revenue and expenditure." She also pointed out that losses of public sector enterprises are more than a two-thirds of what is spent on the Benazir Income Support Programme.

Secondly, growth must be raised and here she pointed out clearly how much our statistics, doctored though they maybe, differ from those of emerging markets: private investment is only 10 percent of GDP in Pakistan whereas in emerging markets it is as high as 18 percent while our exports are only 10 percent of GDP which in emerging markets are four times as high. The way forward Lagarde advised was through improving the business climate and while the government has formulated a plan for this, under the recently completed Fund-supported programme, yet unfortunately the country's business community remains largely unexcited by the situation on ground.

And finally, Lagarde suggested making growth inclusive and gave a disturbing figure of "one out of every 12 children in the world that does not attend school lives in Pakistan." She advised bolstering public investment in education from 2.5 percent of GDP to emerging markets average of 4 percent of GDP. And referred to access to education being a key concern for Pakistani citizens - a view shared in her meeting with Pakistan's best brand ambassador for education as well as for the country itself Malala Yousafzai.

Christine Lagarde in her capacity as the MD of IMF understandably also praised the successful completion of the programme and ended her speech as follows: "Pakistan has made significant economic progress... the spark to continue transforming Pakistan's economy into a dynamic, vibrant and integrated emerging market that is able to create sustainable jobs and prosperity for all exists among Pakistan's people and policymakers. We look forward to working with all of you to make it happen" - a refrain evident in the beginning of her speech as well when she stated "Pakistan needs to rely on the strength of its own policies to generate more growth and jobs." This exhortation is reminiscent of a much quoted Shakespearean proverb: "The fault, dear Brutus, is not in our stars, But in ourselves, that we are underlings."

(Julius Caesar (I, II, 140-141)