Economic slowdown national security challenge?

It is good to note that the present government has accorded priority to the rehabilitation of the economy. Terming slow growth a national security challenge, Khusro Bakhtiar, Federal Minister for Planning and Development at the annual general meeting organised by the Pakistan Institute of Development Economies (PIDE) stated that the government will make all-out efforts to put the economy on the right track and focus on strengthening economic fundamentals and devise an investment strategy for efficient resource allocation. Blaming the past government, he said that "over the past five years, global crude prices reduced to record low levels, but the economic managers in Pakistan failed to take the advantage. We have to make painful decisions and in the short run inflation will go up." Defending the PTI government's policies, he claimed that during the first 100 days of the present government, inflation had gone up from 5 percent to only 6 percent. Value-addition is needed for Pakistani exports and the first-ever special economic zone will be inaugurated in the first quarter of next year. Quantum of consumption in Pakistan is 90 percent of GDP, the highest among the emerging economies, compared to 74 percent in Bangladesh. India and China are sustainably growing at 8 percent and 7 percent per annum, respectively, while Pakistan is growing merely at 4 percent. Another serious challenge is our saving rate, which is just 10 percent of GDP compared to 30 percent in India while private sector investment is only 10 percent of GDP which is the lowest in the region. Country's economy is based on imports and that is the principal reason behind alarming rise in current account deficit. Pakistan and China will sign an industrial cooperation framework during the Joint Cooperative Committee on CPEC scheduled on 30th December, 2018. The framework agreement would help move forward with relocation of Chinese industries and large-scale investment in Pakistan. Industrial Parks would be developed in SEZs with local resources to promote investment and help import substitution for balancing the Pakistan-China trade.
We feel that most of the observations made by Federal Minister Khusro Bakhtiar at the annual meeting of PIDE make ample sense and are quite convincing. He is right in saying that crude prices were quite low in the last few years but PML(N) government failed to take the advantage of lower prices. In our view, if Pakistan had continued to devalue the rupee as per market requirements and taken the right measures to contain the trade deficit over the past few years, instead of relying on foreign borrowings, external sector crisis could have been avoided and the present government would have been spared the trouble to run from pillar to post to ensure solvency of the country. Khusro Bakhtiar also concentrated his attention on low saving and investment rates which have been a big hurdle in raising the growth rate and promoting employment in the country. It may, however, be noted that low saving and investment rates in the economy cannot be blamed on past governments but is a perennial problem of the economy mainly caused by low per capita income and lack of will to save by the majority of population. Our consumption tendencies are so much entrenched that we fail to appreciate the merits of savings. In a meeting of business community on 13th December 2018, the Prime Minister emphasised that he is not against the creation of wealth and making money and would take all the necessary measures himself to facilitate them in this connection. We feel that such utterances on a regular basis by the top functionaries of the government will send the right message that accumulation of wealth through legal means is not a crime but a blessing for the economy. The Minister was also right for initiating holistic reforms which were necessary for the economy to stabilise and grow.
However, there are certain remarks in minister's speech which are required to be contested. For instance, he has tried to justify the recent increase in inflation on the ground that when PPP came into power, it inherited 14.1 percent inflation which within first few months soared to over 21 percent. Similarly, PML(N) government inherited nearly 5 percent inflation and took it to 8 percent within first 100 days while PTI government inherited 5 percent inflation which has just crossed 6 percent. Such a trend in inflation over the last decade or so may be just a coincidence but cannot be made the basis of the continuity of this trend in the recent past. In fact, inflation is caused by a host of factors and no government would like to perpetuate such a trend in its tenure. Secondly, the present government, like the previous government, seems to be depending, almost exclusively, on the continued assistance of China. It is never wise to keep all the eggs in one basket and China, at some point of time, can change its policies and preferences. Lastly, we fail to understand the logic of linking slow growth with national security challenge which is always a much more serious issue than macroeconomic numbers.