News reports ahead of the last budget before the next vote betray sobering times for the government as the entire production-export machinery, along with its support structures, stands paralysed. Aptma’s concern that not only will the projected $16 billion export target be missed, but also last year’s $14 billion number, is serious. (The final expected figure is nearer $12 billion). So much for Dr Sheikh’s boasts at our pre-budget seminar shortly before the last budget presentation. And so much for the ‘growing out of the downturn’ mantra.
Immediately following the last budget, we expected serious activity in manufacturing and industry, to build the capacity of incorporating value addition in our unimpressive export mix. Not only was no such concern ever evident, but the current base of production was also not protected. Three quarters of the outgoing fiscal saw 40 per cent of the textile sector’s production capacity compromised. The special concession at the EU, gained after throwing in everything including the kitchen sink, and the MFN status to India, will also likely go begging – there isn’t enough production capacity to cater to new markets.
There’s more. All the time the power crisis was brewing – resulting in rioting mobs now – the government has been guilty of choking industry’s other precious lifeline – credit. Islamabad’s ridiculous borrowing in the money market kept risk averse banks from lending to the private sector, compounding the production problem by engineering a destructive liquidity crunch. The result is obvious – exports have dropped, employment is chronically low, growth will definitely be mute and state bank’s printing presses will keep inflation high. That all these are likely to come together around election time is enough debate about the free market’s performance under a parliamentary democracy setup.
