Pakistan - News and Discussion 6

[Naresh]

[center]<b>What’s really happening?</b>[/center]

Speakers at The Nation’s traditional pre-budget seminars present an interesting theme, at least since the ’99 military takeover. Regardless of the faces, almost each year independent stakeholders including economists, industrialists, etc, take jabs at the sitting government for its faulty policies, while the government’s boys insist ‘everything in the garden is green’.

Considering both parties are invited because of their apparent understanding of the economic situation, how much sense does it make for two views regarding the same thing to be almost exactly opposite? And these are not laymen analyses, they come from highly educated professionals, successful entrepreneurs/industrialists or those charged with handling the economy. So, why the divergence?

It is important to note that the annual budget document is more than just a sheet of statistics. In addition to being an important stocktaking of the economic situation, it incorporates the economic/financial direction of the country with the overall political vision. Its foremost task is to ensure the economy is kept in balance. It also shows how much the government is on-target. Also, it bears little reminding that it concerns everybody down to the last man. And when bigwigs cannot agree on how things are going, ordinary people with little or no value-added education have little or no chance of being any wiser.

One simple fact cannot be disputed. Two converse views regarding the same thing cannot be true at the same time. At least one has to be false or worse, fabricated. But with the over-emphasis on technical rhetoric among stakeholders (especially the finance ministry) serving more to confuse than impress, it is little surprise that a final verdict remains elusive. Perhaps a reorientation of the litmus-criterion is in order. The important question is, who should be believed with regard to how the economy is going? Whose verdict should be final?

Ironically, whereas “second generation reforms are paving the way for sustained multi-dimensional high GDP growth for the medium term” and “failure to address lingering infrastructural deficiencies has disrupted the takeoff stage” might leave a little to be explained, the man on the street’s take is much more clear. The word is of prices that don’t stop rising and incomes that don’t budge (except civil servants and army men). This means that a vast majority that depends on wages is experiencing what economic jargon dubs an uncomfortable decrease in purchasing power and savings.

The point is simple. If the common man is listened to more than he is made to listen, identification and subsequent removal of bottlenecks and problems would become that much quicker. It would also help differentiate between who is genuinely concerned and who is not, especially among notable personalities that tell us how we are doing. If the vast majority of the people the policies are designed for are complaining of choking under highest-in-a-decade inflation and facing an increasing inability to make ends meet sitting on their sticky wages, things cannot be all that rosy, can they?

Therefore, the final verdict should be that of the people. It makes economic and also democratic sense. Now, assuming the people – on whom the effect of economic policies must ultimately show – are right, then common sense would dictate that those harbouring converse views regarding the same economic situation must be wrong. Since in our case that turns out to be the government, matters become uncomfortable.

It is important to note that if, going by our assumption, those in charge of steering the economy are not only not in tune with the real state of affairs, but take it to be something quite different, then their policies would also not target the right areas. Resultantly, main problems would remain unresolved, which in turn would impact the economy adversely. Now, consider the on ground situation. After making impressive gains, bolstering the foreign exchange reserves, increasing tax revenues and achieving an eight per cent plus GDP growth rate for only the fifth time in the country’s history, the economy is showing signs of tearing at the seams, with most important indicators registering very disturbing trends. They are also embarrassing the economic managers’ predicting prowess.

<b>Even half way through the fiscal year, the economic situation had become precarious, with the finance ministry’s mid year review bringing bad news from almost all quarters. The government had to revise estimates for under pressure FE reserves, slowing down large scale manufacturing sector and inflation that is still nowhere near being reigned in. Even worse, the current account and trade deficits have ballooned out of proportion, with the latter set to record the largest margin in Pakistani history.</b> Meanwhile, the World Bank and ADB have expressed concerns about the overall growth rate coming down from the projected seven per cent to a more realistic 6.3-6.5 per cent. They have also noted that appreciable as the increased tax earnings are, they are not nearly enough for a country the size of Pakistan.

If the highest offices still claim the economy has never been better, they will excuse the common man for taking it with a pinch of salt. Even with people’s economic sufferings visibly increasing, and in no small way, the economic managers’ ability to employ the proverbial spin and keep things confused in rhetoric is worthy of appreciation in itself. To make matters much worse, the government has been found facilitating fraud by helping cover up hoarding and subsequently artificial price hike by powerful bigwigs, that too in items of necessary everyday consumption.

With budget time approaching, stocktaking of the economic situation is in order. <b>Indian finance Minister P Chidambaram made a pertinent remark at the time of their last budget, that the entire purpose of the budget exercise ought to be poverty alleviation. By that standard, Pakistan’s prized ‘second generation economic reforms’ have been an utter failure.</b> The economic gains have not trickled down from the upper class and the only government efforts that are seen amount to maintaining this trend. Interestingly, the final verdict does belong to the people. <b>To give the Indian example again, the poor, neglected and left out of the good times segments of society have been known to exercise their right and know who not to vote for.</b>

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