Pakistani's economic planners must feel encouraged by the Asian Development Bank's latest analysis of that country's economy.
The Asian Development Bank (ADB) said the country's overall economic growth rate should match the government's expected target of 6.5 per cent, while growth in such key sectors as agriculture, services and manufacturing is likely to remain on track. The only relatively alarming situation comes on inflation, with expectations of the annual inflation rate increasing to 6.5 per cent up from 5 per cent.
Such numbers seem to indicate that all is well in a country which claims to have undergone a bold economic recovery. Prime Minister Shaukat Aziz, whose five-year stint as finance minister until July of this year stands him in good stead, is not short of visitors bearing kudos for Pakistan's economic picture.
Yet, the upturn leaves behind a set of unresolved and potentially difficult challenges. The list of challenges is led by anxieties over continued widespread poverty. Almost a third of the population lives below the poverty line.
Other recent concerns include a widening trade deficit, driven up mainly by higher costs for imported machinery and oil. Pakistan's policy planners are quick to note that in any economic upturn, a widening trade deficit with a higher import bill is inevitable.
Confronted with what many would term a mixed economic picture, how should Pakistani planners proceed? There is no single answer to that riddle.
On one hand, an upturn in some of the key macroeconomic trends is bound to help the economy. In sharp contrast to the decade of the 1990s, when Pakistan faced recurring balance of payment crises, its position now is qualitatively different, as the country is on a path of relative stability.
Its ability to sustain itself on this path must depend on Pakistan successfully overcoming challenges such as poverty. Pakistanis would commend their government for ensuring that some of the country's recent economic growth trickles down to society's grassroots.
To make this transition, the government has to embark on a three pronged reform plan:
First, the government has to work aggressively to revive corporate confidence. This will shrink the distance some business leaders feel from state decision-makers. Reducing this gap must be central to any strategy to improve the business environment across Pakistan.
Second, there has to be a vigorous attempt to improve the country's social services. Their dilapidated condition is at the heart of increasing impoverishment across Pakistan. Once Pakistanis enjoy improved healthcare and educational opportunities, their ability to move up the social ladder is bound to improve.
Last, but not least, Pakistan's relatively improved economic future cannot be sustained without moves to tackle the country's recurring political uncertainty. For far too long, Pakistanis have watched one government after another fall victim to political intrigues.
Indeed, the frequent and premature change of prime ministers is bound to keep on weakening long-term economic confidence, despite periodic kudos in documents such as the ADB's latest report.
The writer is a Pakistan-based journalist.
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