The recently released World Bank-International Monetary Fund (IMF) report has warned South Asian countries about the possibility of failure in meeting the Millennium Development Goals (MDGs). That the goals are ambitious and consist of a time frame that forces countries to make considerable efforts to achieve the targets cannot be denied - efforts that may not always bear fruit in some countries, given their unique economic and political dimensions.
In the context of Pakistan, a new government now in place is forced to deal with a multiplicity of grave issues on an emergency basis. Some of these issues are of a nature that no democratically elected government can ignore and include the wheat crisis as well as a high rate of inflation.
The supporters of the former government have correctly pointed out that global food prices are on the rise and are unlikely to witness a decline in the near future. The implications of this phenomenon are becoming all too clear. According to Sir John Holmes, UN under-secretary general for humanitarian affairs and emergency relief co-ordinator, rising food prices could spark riots world-wide and threaten political stability as has been witnessed in Egypt and other parts of the developing world.
This is relevant in the case of Pakistan as well. However, this analysis ignores the most pressing issue facing the poor and average income earner of this country: availability of wheat, a staple, at any cost. Thus the provincial governments are forced to not only untangle the unholy alliance between the millers and officials of the food department as alleged by several experts, but also to deal with legal issues related to hoarding.
Decisions in this regard are already being taken and one would hope that intra-provincial harmony, the hallmark of the newly elected government, would set the pace for an amicable solution of this issue. In addition, lack of electricity is yet another problem that the government has to grapple with. Decisions in this regard with respect to supporting increased IPP activity as a means of meeting the energy shortage have already been taken during the first meeting of the Economic Co-ordination Committee and include incentives in the form of tax concessions.
A long term solution would entail construction of dams, however it is early yet for this option and the new government needs to devise its own energy strategy. The State Bank Governor during the ECC meeting suggested the standard normal prescription touted by international financial institutions: cut the budget deficit by getting rid of all subsidies. This advice is in conformity with basic economic theory and no economist is likely to challenge it.
However a political government cannot be expected to slash subsidies at one go without ensuring that the common man is able to at least make ends meet. In this context, the statement by Ishaq Dar, the Finance Minister, was relevant: reforms will take place but will be staggered. With such serious problems being faced by the newly elected government, it is not likely that achieving MDGs will be a short term goal.
What is also relevant is that the achievement of the MDGs has been rendered all the more difficult in the context of the ongoing global financial crisis whose impacts are no longer confined to the developed world. According to an IMF report dated 8 April 2008, the US mortgage crisis may approach $1 trillion, citing a "collective failure," to predict the breadth of the crisis.
Unfortunately, the forecast predicts that the crisis is far from over and a credit crunch is expected, given that the banks and securities firms have posted only $232 billion in asset write-downs and credit losses. This crisis will negatively impact on the ability of the developing world, including Pakistan, to meet its MDG targets.