Economic ground realities

Far harsher than the finance ministry’s positive spin to a dismal situation

According to finance minister Ishaq Dar, the economy is on the upsurge. The GDP (gross domestic product) growth in the first quarter of the financial year is above 5 percent, inflation is back to single digits and fiscal deficit has been significantly reduced.

The economic performance and governance can be judged from three points of view. Firstly, how the government rates its performance; secondly, what is the stark reality on the ground and thirdly, how the people perceive their government to be performing. Unfortunately there is little empirical evidence to support the sanguine picture being painted by the prime minister and his economic team.

Take the government claim of growth rate of 5.2 per cent from July to September last year. Independent economists as well as the IMF have expressed skepticism about the veracity of these figures.

The Pakistan Bureau of Statistics (PBS) itself has emphasized the experimental basis of the quarterly estimates of the GDP released for the first time. The last IMF missions also drastically scaled down the quarterly growth rate to 3.1 percent.

The newly-minted Institute of Policy Reforms (IPR) headed by Dr. Hafeez Pasha and spearheaded by former commerce minister Hamayun Akhtar Khan has expressed skepticism in its maiden report on the growth figures. Apart from questioning the methodology of computing it, according to IPR projections, it is unlikely that the GDP growth rate of five percent could be sustained. Probably it will be in the range of 3.5 to 4 percent.

The nation should not be kept in the dark or hoodwinked about the real state of the economy

Unsurprisingly the State Bank of Pakistan (SPB) has endorsed the spurious claims of the government regarding growth. It is indeed a pity the manner in which the autonomy and independence of the Central Bank was encroached upon by the previous government.

Unfortunately the present government has fared not much better on this count. The SBP governor Yaseen Anwar was forced to resign for not seeing eye-to-eye with the finance ministry over monetary policy.

He was perceived as Zardari’s man who flooded the market with US dollars in order to keep the rupee stable. Ostensibly that created difficulties for the new government when the rupee went for a free fall vis-a-vis the dollar.

According to insiders a new deputy governor has been ushered in. Reportedly he was running a nursing home in London. Ostensibly he is an expert on Islamic banking but his real job description is to follow the diktats of the finance ministry in letter and spirit.

Previous governors Salim Raza and Shahid Hafeez Kardar – both eminent persons in their respective fields – were forced to resign by Zardari for showing independence. Tall claims about following merit and respecting institutions have been unfortunately thrown to the winds at the altar of expediency by his successor government.

It was rumoured that a thoroughly professional Pakistani banker based in Singapore was being inducted as the new governor of the Central Bank. Apparently he called on Mr Dar recently. Anticipating his imminent arrival even there was talk of drastically revising upwards the compensation package for him.

Apparently finding him to be too much of a professional and ‘English medium’, his appointment ran into difficulties and has been put on hold till the budget. Meanwhile the bank will do with an officiating governor.

Obviously there are big challenges ahead – terrorism being the primary one – that militates against growth and investment. But a roadmap and the will to lead by example is still lacking.

There was a lot of hullabaloo about following a strict merit policy in appointing heads and boards of government-controlled entities. It was correctly pointed out the PPP government had mostly packed these institutions with cronies. With a lot of fanfare posts were advertised and lists prepared meticulously of prospective members of the boards.

However, the whole exercise has come to naught. Despite the PML-N now more than nine months in the government, ad hocism still reigns. According to an insider, the files that contained the proposed appointments conveniently got lost in the labyrinthine corridors of power instead of reaching the prime minister’s desk.

There was another theory much in currency in the federal capital that Sharif after the retirement of the meddlesome CJP will take decisions. With the exception of Shujaat Azeem, his adviser on aviation who was thrown out by Iftikhar Chaudhry for possessing dual nationality and having been court martialed previously, most appointments are still pending. He was reinstated as soon as the CJP retired.

Ishaq Dar has also claimed that inflation has been brought down to single digit. According to him it was in double digits during the tenure of the PPP government. Actually statistical and empirical evidence supports the opposite to be true.

Both the IMF and the SBP have projected double-digit inflation. One does not have to be a rocket scientist to predict the trend of rising prices. With fuel and electricity rates going up and the exchange rate unstable, inflation is bound to go up. Any salaried class person, and the vast sea of humanity slightly above or close to poverty line, is quite painfully aware of this stark reality.

Despite the PML-N now more than nine months in the government, ad hocism still reigns. According to an insider, the files that contained the proposed appointments conveniently got lost in the labyrinthine corridors of power instead of reaching the prime minister’s desk.

The finance minister should be given brownie points for working very hard and diligently to put the economy back on track and giving a positive spin to a dismal situation. According to him forex reserves will exceed $10 billion by the end of the year. Obviously he is relying upon external infusions of the coalition support reimbursement, the 3G auctions and proceeds from privatization.

Bringing the fiscal deficit within limits and introducing a modicum of financial discipline are also commendable achievements. Nonetheless the nation should not be kept in the dark or hoodwinked about the real state of the economy.

Obviously there are big challenges ahead – terrorism being the primary one – that militates against growth and investment. But a roadmap and the will to lead by example is still lacking.

For example the prime minister hailing a 777 Boeing plane for a visit to Turkey and the president commandeering another 777 to visit China almost at the same time cannot be justified. The vast VVIP fleet including those for the COAS and the ISI chief comprising of state of the art planes ranging from Airbus 310 to Gulfstream G4 should be put to good use. But that entails taking smaller delegations on junkets paid by the state.

Sidebar:

The irrepressible Interior Minister Nisar Ali Khan has come up with another gem. According to him, majority of the Taliban are patriotic Pakistanis. They are incurring their wrath on the Pakistani nation merely because they are angry with Musharraf.

It’s not funny at all for thousands of innocent Pakistanis and members of the security forces who have perished at the hands of the terrorists. Obviously Nisar is willing to go to any length to appease the Taliban at the expense of the Pakistani state.