Eid spending

According to a section of the press, total Eid spending crossed the one trillion rupee mark - a boost of around 15 percent. The comparable religious holiday of Christmas is also traditionally marked by a massive rise in private consumption; for example, in Britain 14 billion pounds were spent in December 2017 and more than 460 billion dollars in the US with an average family spending around 700 dollars on gifts and consumer items as estimated by the National Retail Foundation. In other words, holidays marked by exchange of gifts, enhanced expenditure on higher priced consumer food items and entertainment centres, including movie theatres, do fuel private consumption expenditures which would have a salutary impact on a recession-ridden economy though in a booming economy the impact could well be higher inflation.
However, Eidul Fitr follows the month of Ramazan, during which consumer item sales are spiked in any event, while on Eid day the tradition is not to exchange gifts but to give eidee (cash) to those younger which is in nine out of 10 cases promptly spent after Eid day. In other words, in most Pakistani households but especially in lower middle to poor households, the focus is not on a significant rise in manufactured items but on edible items and low end entertainment centres that include a visit to the zoo and/or a movie theatre. Thus the bulk of the increase in spending is on edibles, which may or may not be operating within the legal economy but rather within the parallel undocumented economy which, in turn, provides at best a rough estimate based on perceptions, rather than on irrefutable data. Be that as it may, however, there is no challenge to the fact that spending during Eid escalated considerably. This is particularly worrisome in a country where consumption, or not saving for the future which can finance higher investment in infrastructure from domestic sources instead of borrowing from the domestic or the external market, is a source of serious concern to successive governments.
Pakistan's total private sector consumption was 28.244 trillion rupees in 2017-18 as per the provisional estimates according to the Economic Survey 2017-18 with total Gross Domestic Product (GDP) at market prices estimated at 34.39 trillion rupees which is a whopping 81 percent of the total Gross Domestic Product for the year. If one adds government consumption of 4.256 trillion rupees, total spending or consumption (private as well as public) is as high as nearly 95 percent of GDP - a statistic that leaves little for private and public savings. Thus the capacity of Pakistani households to save for future or emergent needs as well as for the government to be able to tap the country's savings to meet its infrastructure improvement needs - social and physical - from domestic savings, which is at no cost, is severely compromised. This partly explains the steady rise in reliance by the PML-N government on foreign borrowing as well as from the domestic marketplace in recent years, partly because the former government was using borrowed funds not only for budget support, mainly current as opposed to development expenditure, but also for shoring up the depleting foreign exchange reserves.
To conclude, it is imperative that the next elected government focuses on increasing savings which would require a well thought out strategy not limited to raising the rate of return on national saving schemes, as in the past, but on raising employment opportunities as well as incomes at a faster pace in the private sector relative to the rate of inflation. Asad Umer, the proposed finance minister for the Pakistan Tehreek-e-Insaf, is on record as having stated that a PTI government would raise bank deposits by 50 percent; but one would hope that it wouldn't achieve this laudatory objective by printing more currency.