Looming recession!

Against the backdrop of no fresh investment by private entrepreneurs and extremely low execution of annual development programmes (ADPs), it is only natural that a country slides into recession. None other than Planning Adviser Prof Wahiduddin Mahmud is wary of a looming economic slowdown. He has given reasons for unfolding such an undesirable economic scenario. Prof Mahmud explains that in the absence of private investment and almost stagnant development expenditure in the public sector, the economy is destined to fall into recession unless the situation gets improved on both fronts. The July-October record low development spending in 14 years, as revealed by the Implementation, Monitoring and Evaluation Division (IMED), corroborates the view. Sure enough, political turmoil, labour unrest, expensive loans that hold back new investment and stubbornly high inflation hardly create the right ambience for economic growth. Already, industries have been forced to run below capacity on account of power and gas crisis and businesses have made their discontent known. Even if factories and industries could run in full gear, the drastic slump in domestic consumer demand would have been a severe disincentive to capacity production, particularly for those productive units not involved with exporting their products.

So far as new investment--domestic or foreign---is concerned, it cannot happen without political stability and other entrepreneurial ecosystems put together to create a desirable destination. The interim government has to repair the malfunctional system first and then make way for an enabling investment environment. A period of little over three months is too short a period even for reevaluation of the randomly finalised projects by the previous regime. Granted that not all the projects the previous government undertook for execution are viable but at least there are some about which there is no dispute. Why not select those for reevaluation of costs and execution on a priority basis in order to get over the deplorable state of development spending?

In fact, the planning adviser has himself felt the urgency of continuing with the ongoing projects. He is in favour of 'policy adjustments in project implementation'. A new directive now emphasises swift execution of ongoing projects by the end of the current fiscal year. The planning adviser will request, through demi official (DO) letters, his cabinet colleagues to accelerate execution of projects under their ministries. That is the least the planning adviser could do. But time is running out fast. There are not even two full quarters of the current fiscal year. Yet if the project execution can be speeded up, the situation can more or less be salvaged.

However, this short-term measure is no substitute for injection of blood into the economy. Although the planning adviser has hinted at increasing allocation for health and education--- especially for educational equipment and scientific research materials, investments there will hardly address the emergency. There is need for creation of a large number of employments in order to augment economic momentum and reining in inflation. In this process, people's purchasing power increases and consumerism gets fuelled. If demand for consumer goods rises at home, the economy is sure to revive. Boosting exports may give a false sense of economic growth as those benefit only the exporters turning them richer and even increasing revenue earning for the government. However, if the general masses are deprived of economic prosperity, gaping inequality is created exposing the hollowness of social progress.