Bangladesh could be an economic powerhouse in 2030 if it grows at the same rate as in the past, says former advisor to the World Bank Abid Hasan
Abid Hasan, a former adviser to the World Bank for the Pakistan Program, has praised Bangladesh's economic growth while highlighting how Pakistan has gone around the world with a "begging bowl" with a possibility of taking aid from Bangladesh in a decade.
"It was unthinkable, 20 years back, that Bangladesh's GDP per-capita in 2020 would be almost twice that of Pakistan. Bangladesh could be an economic powerhouse in 2030 if it grows at the same rate as in the past," he said in an article titled "Aid from Bangladesh."
The article appeared on The News on Monday, also reads, "If Pakistan continues its dismal performance, it is in the realm of possibility that we could be seeking aid from Bangladesh in 2030."
Abid Hasan, former Member of Pakistan Economic Advisory Committee and Federal Board of Revenue Tax Reforms Group, said if they continue with a 'business as usual” policy, they could end up taking aid from Bangladesh in a decade.
In order to establish an economically strong Pakistan, it is incumbent on the PTI to reach out to all political parties to develop a national consensus on the fundamental reforms necessary to accelerate inclusive growth and at the same time lower debt, said the former WB adviser.
At the beginning of his article, Hasan said every government in Pakistan, including the current one, has gone around the world with a begging bowl.
"We're now drowning in debt and stuck in an anemic growth orbit, and will continue to be this way since no government has pursued the deep reforms necessary to establish an economically strong Pakistan," he mentioned.
Hasan said Pakistan's poor performance is their own fault, but their leaders conveniently blame their enemies and the IMF and the World Bank.
There is no doubt that the IMF/WB have often peddled "poorly thought out and one-size-fits-all" policies and bad loans but the deep hole that Pakistan is in is largely its own doing.
While corruption and the economic impact of terrorism have a role in the mess, for the most part the poor performance is a result of pursuing irresponsible, inappropriate and unpredictable policies, and half-hearted reforms.
The two most glaring examples of reckless policies were: excessive overspending by the government, financed by domestic and foreign debt; and imports far exceeding exports leading to unsustainable external debt.
He said Bangladesh's successful journey is a good example, given the similarity in terms of religion, poor work ethics, messy politics, bad governance, weak public administration, high corruption, elite capture etc.
"In just two decades, Bangladesh has overtaken Pakistan on key economic indicators. Over the last 20 years, Bangladesh's GDP per-capita increased 500 %, two and a half times that of Pakistan. How did Bangladesh become a miracle story and Pakistan a disaster tale?"
The socio-economic development story of any country is complex and unique to that country.
Bangladesh encouraged savings over consumption. Its savings rate is around 30% of GDP, compared to 15-20% for Pakistan.
Pakistan's irresponsible and impulsive policies encouraged public spending and import consumption way beyond what the country could afford.
In 2000, Pakistan's exports were 50% more than Bangladesh.
Since then, Bangladesh's exports increased 700%, almost three and half times that of Pakistan.
Bangladesh’s exports twice that of Pakistan
In 2020, Bangladesh's exports were almost twice that of Pakistan.
"Because of imprudent import and exchange rate policies, we have been foolishly incurring foreign commercial loans, deposits and bonds, at high interest rates, to finance unnecessary imports. A stark example of this bad policy was when we imported $3 billion of cars and phones and raised an equivalent number of Eurobonds," he said.
For most of the past two decades, Bangladesh's fiscal deficit was around 3% of GDP, while Pakistan's fiscal deficits were twice as high.
Over 20 years, Pakistan's cumulative per-capita government spending was $4000, while Bangladesh was half of that.
Despite our per-capita spending being twice that of Bangladesh, our economic and human development indicators are worse than Bangladesh.
"We spent double for worse outcomes! Government spending in Pakistan has been reckless, based on the uninformed belief that higher spending leads to growth," Hasan said.
As a result of irresponsible fiscal and trade policies: (i) Pakistan's public debt is now close to 600% of government revenues, twice that of Bangladesh; (ii) bank lending to the private sector is 200% in Bangladesh and 80% in Pakistan. Credit to the private sector is very restricted in Pakistan because of excessive government borrowings; and (iii) our external debt is 400% of exports, four times that of Bangladesh, Hasan said.
Revenues in rupees, liabilities in foreign currency
Pakistan's FDI policies mostly encouraged investment in the service sector, where revenues are in rupees while liabilities in foreign currency. In comparison, Bangladesh aggressively promoted FDI in export manufacturing.
Bangladesh's economic miracle also benefited from separation of religion from state, elimination of unelected institutions' role in politics, and their leaders' single-minded focus on Bangladesh, he said.
"It will hurt our national ego, but the only sure way for Pakistan to accelerate growth and reduce debt, and avoid seeking aid from Bangladesh, is to emulate Bangladesh. There is no shortcut to success, except to follow prudent fiscal and monetary policies," the article reads.