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The Economic Survey 2011-12 begins with the claim that "the government remained focused on maintaining macroeconomic stability, growth, mobilising domestic resources and increasing exports, balanced regional development and providing safety nets for the vulnerable groups." Are these claims legitimate is a question that begs an answer. Maintaining macroeconomic stability requires a budget deficit that is sustainable.

The Survey gives a provisional budget deficit estimate of 5 percent (July-March) and contrasts it favourably with last year''s deficit of 5.5 percent. There are few takers for the current year''s 5 percent estimate given that it takes account of (i) 800 million dollars from auction of 3 G licenses in the current year that is now not possible, (ii) another 800 million dollars remittance of the remaining amount due by Etisalat which remains dicey, and (iii) showing a tax revenue target that is unlikely to be met, until and unless the Federal Board of Revenue indulges in its usual practice of compelling large tax payers to pay the July-September tax before 30 June - a practice that is currently under investigation by the Federal Tax Ombudsman. Sources in the Finance Ministry as well as a recent statement by the Governor of the State Bank of Pakistan gave a more realistic deficit of 8 percent.

Growth the Finance Minister stated is around 3.7 percent - a rate that was possible after the base year change approved in 2006 was reverted back to 1999-2000, the worst performing year in the country''s history by the Finance Minister. Be that as it may growth rates for the ongoing year in past Surveys have been revised downwards in the subsequent year''s survey for example last year''s survey gave a growth rate for 2009-10 as 3.8 percent which was revised downward in this year''s survey to 3.1 percent.

Mobilising domestic resources is a claim that is evident given the almost 13 billion dollar rise in domestic debt in the first nine months of the current fiscal year - well in excess of the 4 billion dollars budgeted foreign inflows that never materialised. Thus public debt rose from 55.5 percent of GDP last year to 58.2 percent of GDP. This would have massive repercussions on the rate of inflation and erode the rupee value both domestically and internationally.

Increasing exports this year were outpaced by imports due to the rise in the international price of oil resulting in a widening trade imbalance. Additionally our exports this year are likely to suffer due to a decline in the international price of our major export item cotton and related products. The Survey also noted a decline in major manufacturing output of cotton yarn, cloth, fertiliser, cement, soda ash, attributable no doubt to a rise in load shedding.

The claim of balanced regional development is inexplicable given that it is not substantiated in the Survey. There are of course claims that Punjab is suffering greater load shedding than other provinces. However output in Sindh has been negatively impacted through periodic stoppages linked to politics in the country''s financial capital Karachi, law and order in Balochistan continues to be ignored resulting in inability to exploit the natural resources the province possesses in abundance and Khyber Pukhtoonkhwa remains in the grip of the Taliban insurgency with Punjab''s South restive due to uneven development activity. In this context it would have been appropriate for the Survey to not only include a chapter on the cost of the war on terror, an omission that was deliberate under the mistaken belief that if it does not appear in the Survey foreign and local investors would remain blithely ignorant of the true state of affairs, but also on the cost of sectarian and ethnic conflict within the country.

Also omitted was the poverty estimates though the safety nets for the vulnerable groups through the Benazir Income Support Programme (BISP) had its own chapter. BISP has been carried out as per the poverty score card mechanism proposed by the World Bank. True, that the amount is not sufficient to meet the needs of the growing number of poor and the fact that it is asset based with no income component (a serious flaw that needs to be rectified) yet it is a programme that is good but needs further development.

To conclude there is little room for complacency in spite of some favourable statistics, notably high remittance inflows. However what is gratifying is that even though the claims made in the beginning of the Survey are not accurate yet the claims do show that the government is fully cognisant of the areas that need its attention. The only hope is that these areas receive the attention they deserve in this year''s budget.

Copyright Business Recorder, 2012


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