Rising poverty and unemployment continue to challenge consumption, which leading bankers consider crucial for economic growth.

“Pakistan’s poverty index is 40 per cent (historically 20pc), much higher than India and Bangladesh’s 15pc to 20pc. Another 20pc borderline segment lives with very compressed income levels,” former State Bank governor Salim Raza was quoted as saying in ‘Road to Sustainability 2024’, a report by AF Ferguson & Co In his view, “The corresponding lack of purchasing power may create major domestic demand challenges.”

The consumption-led economic growth fuelled by debt-driven imports lacked sustainability for want of required dollar earnings and government revenues owing to low productivity. To improve the macroeconomic imbalances that were created, measures were taken to curb domestic demand. Now, it is feared that lowered consumption may pose a risk to economic recovery.

Some of the reforms could deprive people of their traditional source of livelihood, such as the promotion of corporate farming in the country.

Poverty runs rampant as the centre stalls delegation of financial control while dolling out potentially harmful development reforms

Farmers’ organisations are protesting against acquisition and their ejection from lands traditionally cultivated by small peasants whose productivity and livelihood could be improved by the revival of agricultural cooperatives.

The Human Rights Commission of Pakistan (HRCP) has strongly opposed the Gilgit-Baltistan Land Reforms Bill 2024 which, the HRCP says, seeks to centralise control over private, commercial and ancestral land in the guise of ‘reforms’ for development. According to the HRCP, the appropriation of land by vested interests will further marginalise people and stoke unrest.

A multi-party conference held on Nov 17 highlighted the severe socio-economic challenges faced by Balochistan, which, it was stated, was the country’s most underdeveloped province, with 70pc of its population living below the poverty line. The conference demanded recognition of the rights of locals over Balochistan’s natural resources to put the province on the path to development.

HRCP opposes Gilgit-Baltistan Land Reforms Bill 2024 claiming it seeks to centralise control over private, commercial and ancestral land in the guise of development reforms

Though the International Monetary Fund (IMF) and Pakistan have agreed to “transferring greater social and development responsibilities to provinces”, they have not touched on the issue of empowering the third tier of government to provide the essential needs of the common citizens and communities.

“We must focus on structural adjustment in the short-medium term with a clear roadmap for meaningful economic growth,” says National Bank of Pakistan President Rehmat Ali Hasnie. His view is shared by other leading bankers, as recorded in the Ferguson report. Experts note that the capacity of the state to meet the essential needs of citizens and their aspirations in a sluggish economy is becoming weaker day by day.

Owing to financial constraints, a Senate Panel was recently informed by the Planning Ministry that the Public Sector Development Programme is being revised downwards under IMF instructions. The Fund has asked the authorities to avoid funding non-essential projects and ensure that 100pc of federal financing is not provided to the provincial projects.

On the one hand, the Federal Board of Revenue is facing a shortfall of Rs190 billion in the tax revenue target set for four months of the current fiscal year. On the other, some influential lobbies have secured exemptions on their tax liabilities worth around Rs4 trillion. Dysfunctional administration and loss-making state enterprises account for the heavy drain of national resources.

Citing financial constraints as the reason, Khyber Pakhtunkhwa Chief Minister Ali Amin Gandapur informed local body representatives recently that the province is unable to allocate development funds to the third tier of government. The meeting was called to discuss amendments to the Tehsil Local Government Rules of Business 2022, proposed by local body members and other issues agitating them.

Mayor of Mardan City Himayatullah Mayar recalled that the government was bound by the Khyber Pakhtunkhwa Local Government Act, 2013, to allocate 20pc of the funds from the Annual Development Programme for local body development schemes.

Mr Mayar complained that the provincial government had not released a single penny out of our cumulative share of Rs94bn since the allocations in two phases of elections held in Dec 2021 and March 2022, respectively.

Mr Gandapur has requested Prime Minister Shehbaz Sharif to hold regular quarterly meetings of the Council of Common Interests (CCI), the last of which was held in January. The province has also been pressing to update the 7th National Finance Commission award.

Empowering the local governments effectively and transparently can go a long way in extracting Pakistan from its economic difficulties, freeing up fiscal space at the centre, and democratising the country, says an opinion piece published in Business Recorder.

The mobilisation of local resources is much easier as the perceived benefits are visible, says Dr Ishrat Husain. He notes that the present culture of concentrating authority in power centres has reduced its productive potential to no small extent.

Meaningful empowerment of the local government system, he says, would, in the long run, promote greater trust, cohesion and harmony in our society.

Published in Dawn, The Business and Finance Weekly, November 25th, 2024