‘Violence may scupper development’

ISLAMABAD: Spiralling terrorist violence in Pakistan threatens to scupper government plans to boost development with an unprecedented hike in public sector spending, unveiled in the latest budget, analysts said on Sunday.

“While the development allocation is the highest ever, the current wave of terrorism is also unprecedented in Karachi which is the hub of economic activity,” analyst Shahid Siddiqui said. Finance Minister Shaukat Aziz, presenting the Rs 903 billion budget in parliament on Saturday, pledged a 26 percent increase in development spending to Rs 202 billion, claiming that it would create more than a million jobs.

“It is the highest ever in the history of Pakistan. It will create job opportunities and help economic activity,” the minister said, targeting a growth rate of 6.6 percent.

Economists hailed the Keynesian infrastructure building programme laid out in the fiscal 2004-5 budget but warned the government’s key goal of poverty reduction cannot be achieved without stemming terrorist violence. “Unless law and order improves and terrorist activity is brought to an end, there will be no foreign and private investment and the government will not achieve its growth and development targets,” Mr Siddiqui said.

The Public Sector Development Programme concentrates on infrastructure projects, including building dams, irrigation canals, highways and housing and construction projects. “Growth and investment will depend upon the political stability and peace within and without,” analyst Imtiaz Alam said. “Peace is yet to come to our land and the country is threatened with terrorist violence.”

The head of the Social Development Policy Institute, Qaiser Bengali said, “It is a good omen that for the first time development budget exceeds the defence budget.”

In the outgoing fiscal year the government had earmarked Rs 160 billion each for defence and public development budget. Defence expenditure has been raised to Rs 181 billion or $3.1 billion. This comes despite a thawing of relations with India. “We are fully aware of our defence needs and we cannot overlook them while still trying to be moderate,” Shaukat Aziz said. Economists disputed Mr Aziz’s claim that the poverty had been reduced by 4.2 percent last year. The central State Bank of Pakistan in its report for the year 2003 said poverty increased to 32 percent over past 15 years.

However the finance minister claimed that a survey conducted by the government indicated a decrease in poverty by 4.2 percent, saying the benefits of economic reforms had started to trickle down to the masses.

“This is unbelievable. There is no magic wand which could reduce poverty that much in just one year,” said economist Masood Qazi. “According to the government’s own statistics unemployment has grown to 8.3 percent until recently from about six percent in 1999. Then how can they substantiate their claim on poverty reduction? It may need another 10 to 12 years to achieve this if they keep spending on development appropriately and wisely.”

The minister said the country was gaining “economic sovereignty as a result of far reaching economic reforms introduced over the past four years”. He declared that when the current three-year $1.5 billion loan package with the International Monetary Fund (IMF) ends this year, “we will not go about begging any more from financial institutions”. afp

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