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The title does not bear a glitch; the critique is on the Economic Survey and not the economy. After all to be positive and productive, criticism requires a credible subject, and economic data of any developing nation, at least, is at best, guesswork. Irrespective of the accuracy and authenticity of estimates, there is a consensus that Pakistan has a sizeable Black Economy. Conservatively speaking, even at 30% of GDP the related impact on statistical data is expected to be material, beyond that all economic assumptions rely upon imaginativeness.

The good thing about having a black economy is that it acts as a shock absorber against global crises, which is probably why the country has not seen a recession since 1953. Admittedly, relying on data deemed earlier as guesswork is contradictory; however other supporting indicators at least lend credence to the assertion that the country has not seen a recession for decades. In spite of persistent provocation by the electronic media for a revolution, why do the masses continue to quietly suffer backbreaking inflation? Definitely private philanthropy is the primary source of support for the "have not"; howbeit the balance is funded by the undocumented businesses. An observation, the populace might have absorbed price bombshells till now, but load shedding riots appear to have the potential of becoming unmanageable as the government continues to procrastinate.

Regardless, the Economic Survey is definitely imaginative enough to even create doubts about the country being surveyed. At this stage a confession is in order, the scanning of the Survey was limited to the Executive Summary only and therefore the likelihood that a thorough reading of the entire document might have identified omissions having a material affect upon the contents hereafter, cannot be ignored.

Anyway, the highlight of the scan was the comment that efforts of the Cabinet and ECC have yielded results and inflation has declined for the third consecutive year! Obviously no one in the government has recently bought bananas or they wouldn't have pegged food inflation at 11%. The pundits in a condescending tone will observe that this has to do with the basket; someone sure got the wrong eggs in that basket!

Perhaps the most entertaining comment is linking the "bullish" trend in the stock market, pursuant to withdrawal of USD 176 million by foreign investors, to restoration of domestic confidence! The opposition, boringly, on the other hand may like to associate the markets minuscule increase to the depreciation of the rupee; unfortunately the inversely proportional relationship appears highly believable.

There are intermediate flashes of brilliance in the summary; for instance proving that Pakistan has performed better through comparison with China as far as stock markets go and the West as far as GDP growth goes. Problematically the comparison eludes sensibility. Perhaps a regional comparison might have been palatable but looking at India alone, the result was probably undesirable. What is remarkable is the 24% jump in tax collection. With businesses struggling due to power shortages and hardly any tax enhancing legislation this increase, disproportionate with GDP growth, appears anomalous begging a detailed independent analysis. Positive administrative initiatives permanently plugging leakages need to be appropriately rewarded and definitely continued; on the other hand target oriented hasty actions will only fuel tax evasion and should therefore be contained.

Keeping in view the tone of the Survey, the Government not taking credit for budgetary "saving" due to reduction in debt servicing was a surprise. Perhaps there were concerns regarding an over zealous NAB. After all, isn't it a general principal that loan defaulters are persecuted and eventually prosecuted?

The problem with creating a positive external fa├žade is that eventually the conductor himself starts believing it to be true. Even when discussing Pakistan Railway, Circular debt, National Highway Authority and Power, the Survey focuses on achievements, PIA is altogether missing! Consequently this illusionary state begets inaction or misadventure. If everything is hunky dory why not continue to subsidise railways and PIA and why not increase circular debt, all that may be the reason for the GDP growth!

Personally, being averse to free markets, one can relate to subsidies and protecting domestic industry. Nonetheless subsidies need to be targeted. Subsidising power for the poor requires that the rich pay a premium on the same. Discounted fuel is necessary for public transport but such a subsidy needs to be factored into fuel supplies for private vehicles. Criticising subsidies to railway without taking cognisance of the related impact on social and demographic impacts is irrational. But in all this we seem to be losing sight of fundamental issues. Consider the table 1.





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2006 2007 2008 2009 2010 2011 2012

upto April

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Balance of trade USD billion (8.4) (9.7) (15) (12.6) (11.5) (10.5) (12.6)

Home remittance USD billion 4.6 5.5 6.5 7.8 8.9 11.2 10.9

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(Source SBP Archives)There can be two possibilities, either remittance has constantly been increasing or government's policies have simply ensured documentation, in either case the credit vests with overseas Pakistanis. Whatever the explanation, the crux of the matter is that fortunately these hard-earned dollars of overseas Pakistanis were available to finance the trade deficit. In substance remittances are revenues from exporting HR and as such should be part of the trade equation in any case. The question is what would have been done if this crucial stream of foreign currency had not materialised out of thin air?

Contracted debt and begged for aid or curtailed wants and consequently imports!

Let the nation decide. Imagine if Pakistan by choice had pursued an austerity policy during this period, which Europe is contemplating today by necessity, would we be subservient to unreasonable conditions precedent of our creditors? Here is hoping that this article at the very least acts as a catalyst for the leadership to consider a different solution. In the meantime let's scan and reflect upon next year's budget. At the top of the mind one wonders what terrible crime property owners of Islamabad have committed.

Copyright Business Recorder, 2012


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