We have no jobs because the state has no money

Published: March 20, 2013
SHARES
Email

It is not the government’s job to be involved everywhere; they need to just be enablers. PHOTO: PPI

It is not the government’s job to be involved everywhere; they need to just be enablers. PHOTO: PPI It is not the government’s job to be involved everywhere; they need to just be enablers. PHOTO: REUTERS

‘Pakistan is in economic dire straits!’

I hear this statement all the time.

All sorts of conversations, political and otherwise, agree that the economic condition of Pakistan has become worse, but here we are still surviving and still managing.

So, how messed up is our economy exactly?

Read below to find out!

1. Our budget deficit

Our budget deficit – that is the difference between what we have and what we spend – stands at 8.5%, when it should be close to about 4%.

Simply put, we are spending way more than we are earning and because of this, we end up borrowing. When the government borrows money, it is taking away money that could have been used by businesses to invest and expand their industries.

Essentially, the government reduces the amount of money that can be borrowed by private businesses just because the government spent more than it had. And because there is less money to be borrowed by private businesses, the cost of borrowing goes up, all because our government spent more than it earned.

2. Low foreign private investments

These investments were a mere $0.7 billion $2 billion in 2009 – 10.

In simple words, people do not want to invest in our country anymore because we do not have the economic stability or the political stability to provide them with an investment-friendly climate.

This hits home harder, given that our local businesses are already having difficulties expanding due to the instability in the country.

3. GDP growth rate has been stagnant at around 3% for the last five years

We have about three million people entering the job market per year, but based on Planning Commission estimates, we are creating only 700,000 jobs a year for them.

So our economy is struggling, our government spends more money than it earns and it borrows the rest. That leaves less money to be borrowed by businesses, which could have used that money to expand their businesses. This means business is unable to produce new jobs, all the while about three million people enter the job market every year.

Simply put, we are training people for jobs that do not exist, in an economy where businesses are not expanding.

Unemployment is rising and will keep rising till our economy starts growing at about 7% per annum, and even then it is going to be an uphill task.

4. Public debt has increased at an average of 21.6% per year for the last five years as compared to 6.6% per year from 2000 to 2007

Our external debt stands at around $66 billion out of which $20 billion were accumulated in just the last five years.

While in 60 years of existence our total public debt stood at Rs4.8 trillion, Rs8 trillion have been added to that debt in the last five years. Our current public debt is Rs12.8 trillion.

In effect, we borrowed twice the amount of our total public debt in the last five years alone and now we owe money not just to foreign institutions but to local ones as well. And to pay back these loans, because our government is not collecting enough taxes, they are printing money. Because they print more money each month, the value of rupee keeps falling as a result the US dollar which was about Rs60 in 2007 stands at about Rs100 right now.

So, this is the state our economy is in right now.

It is crucial to understand the magnitude of our problems and realise that empty slogans and theoretical plans are not going to fix it. We need three things and even then it will take us years to stabilise our economy from the quagmire it’s currently in.

As a start we need;

Increase tax collections

The tax base needs to expand so that the government has more money coming in. This would reduce our budget deficit.

Reduce government spending

While we seem obsessed with the idea of a welfare state, the only issue is that our state is broke. We need to go on a serious austerity drive and stop the national joke where by the PM gets to throw away Rs30 billion on his constituency alone – that too just three weeks before elections. Stuff like this needs to go.

Government to become an enabler

The government’s job is to enable private businesses to grow and help create an environment where people launch new business and foreign investment flows in.

It is not the government’s job to be involved everywhere; they need to just be enablers.

This would help with reducing the government spending as the government simply focuses on governing rather than bailing out politicised state enterprises.

Read more by Adnan here or follow him on Twitter @adnanrasool

Adnan.rasool

Adnan Khalid Rasool

Currently the Deputy Executive Director Center for Enterprise, Trade and Development, Adnan is also a political analyst working mainly on electoral politics and political campaign management. He tweets at @adnanrasool

The views expressed by the writer and the reader comments do not necessarily reflect the views and policies of The Express Tribune.

  • Samreen

    *sigh!!!
    That’s all i can say…but a very good article for a layman like me in economics and finance etc.Recommend

  • http://hbansari.blogspot.com HBA

    A very nice and useful blog Mr.Adnan, you made economics easy to understand for general public :-)
    (Embarrassing) Facts and Figures you mentioned show the performance of polititions and are enough to make their followers quiet but we must remember where there Illiterate people govern same statistics’ll be the result.Recommend

  • http://nawazsharif.blogspot.com Badar Shahbaz

    Great Content.I have appreciate with getting lot of good and reliable information with your post…….
    Thanks for sharing such kind of nice and wonderful collection…..Recommend

  • http://nawazsharif.blogspot.com Ali aftaab

    Nice article Adnan RasoolRecommend

  • http://nawazsharif.blogspot.com Nasir Iqbal

    Great Piece Of Work ……

    Good Work GuyRecommend

  • http://blogs.tribune.com.pk/story/16335/we-have-no-jobs-because-the-state-has-no-money/ Adnan Rasool

    @HBA:
    Honestly what scares me is the fact that people do not understand the gravity of the situation we are in…. unfortunately the Government has put whosoever comes next in a very very tough situation.. Recommend

  • http://hbansari.blogspot.com HBA

    @AdnanRasool
    Exactly! But i caaan’t understand Despite empty slogans,theoritical plans they attract millions of Sheeps, so Strange!
    but there’s a Hope,let’s have a glance at what you wrote. You said “Our state is Broke”
    I liked that Broke word because “Broke” is temporary whereas “Poor” is eternal. Recommend

  • Falcon

    Adnan-
    While I agree with the rest of the article, I disagree that Pakistan should not be striving to be a welfare state in the long run. A welfare state does not mean spending recklessly, it means spending on human capital more than non-human assets. So, if we were to cut defense spending incrementally and stop the bleeding of our government sponsored enterprises (PIA, Railways, etc) which are costing close to PKR. 500 Bn in loss to nation’s ex-chequer, and start taxing our extractive elite, we will have enough money to spend on health and education, which is usually the first priority of any welfare state. I think PTI has put out a good economic vision in this regard detailing how they plan to achieve their welfare goals.Recommend

  • Crank Shaft

    Agreed on everything except for the austerity bit. We need to divert spending to more effective and efficient uses but outright austerity would just hurt our economy too much. Developing countries always need fiscal stimuli.Recommend

  • http://localhost:8080 Sir King Kong Bunty

    Kudos! Very nicely put for the general public.Recommend

  • Parvez

    We are the way we are because of our leadership and not because of our countries fundamentals.Recommend

  • http://[email protected] viv

    @Ali aftaab:
    there’s nothing nice in it…the author wants pak to ride on austerity drive by reducing spending. it will further decrease employment and actually fuel unemployment and fundamentalism…when u ppl spend half budget on defence and kashmir and not on internal security and business environment…this thing is giong to happen.Recommend

  • gp65

    Well written. One point I would like to make. When it comes to expense reduction, one cannot go away from the fact that about 90% of tax generated goes towards debt repayment and defense expenses. This is a surefire way to budget deficits. Reducing wasteful foreign junkets by ministers has a good signalling effect but it is unclear how the budget can be balanced without addressing the elephant in the room.Recommend

  • http://logicmonkey.wordpress.com/ Logic Monkey

    I am glad someone explained how messed up our economy is at this point.. the public needs to realize the ditch that we are in… and remember that PPP/PMLQ/ANP/MQM got us here.. it was these guys who have literally pillaged the economy for 5 years.. Recommend

  • Umer Ashraf

    Sir,
    I have been your student in 2012 in UMT. Now i am working in dubai and glad to read your such informative article.
    After reading this article i am remembering my uni days…..when we got punished from you by submitting late final project.
    Wish you all the best sir, Recommend

  • Rambino

    The state has no money because Pakistan’s tax collection rate is abysmally low. What the elites do not plunder from this money – and from the international aid – gets eaten up by the army and debt payments. How is there ever going to be enough money to build infrastructure, improve education and invest in healthcare i.e. things that might create jobs? It is no wonder that so many people need to take bribes in order to eke out a living. The sooner the aid stops, the sooner Pakistan will be forced to come up with more sustainable ways of funding itself. The transition will be painful, but this is no way to continue. Recommend