There has been a sustained challenge by independent economists and analysts to the growth estimates during the Sharif administration's third time tenure for two major reasons. First, independent economists/analysts were made extremely wary after the Pakistan Bureau of Statistics (PBS) downgraded the growth rate in 2013-14, the first full year of Dar holding the finance portfolio, from two years ago - a downgrade that is inexplicable. And, secondly, there is a significant lack of rationalisation between the data compiled by the PBS and other government departments as well as extremely credible industry sources. Repeated requests for a face-to-face meeting with the PBS officials since the first year of the Sharif administration's tenure was verbally agreed to by none other than the Finance Minister during a post-budget press conference is awaited to this day. The multilaterals continue to unfortunately accept government data at face value in their reports, however, their numerous caveats clearly reveal that they remain unconvinced which, in turn, prompted a former Governor of the State Bank of Pakistan Shahid H. Kardar in an Aaj TV programme to accuse the IMF of 'intellectual dishonesty'.
The caveat by the IMF as noted in the press release uploaded on its website after the Article IV consultations, however, revealed that the Fund staff appreciated the government efforts towards reform during the three years that the country was under its programme, in effect supporting its own handling of the programme, but carried on with the do-more mantra: "After three years of reforms, Pakistan has strengthened its macroeconomic resilience and economic outlook, providing an opportunity to build on recent progress with structural reforms and set the economy on a higher growth path. However, a number of challenges in the fiscal, external, and energy sectors could affect the hard-won stability gains in the period ahead. In this context, the mission calls for strong efforts with respect to fiscal consolidation and the implementation of key structural reforms, and vigilance in managing the country's external position."
This sentiment was echoed by the World Bank in its latest report with reference to the "significant downside risks" clearly and unambiguously reveals that confidence in the government's progress in the much-needed structural reforms is not that high especially considering that "the upcoming national election in 2018 may affect the reform momentum and macroeconomic policy orientation for Pakistan."
Additionally, if one looks at the components of growth, a recent report indicates that the agricultural sector is unlikely to grow by the projected 3.8 percent rate. At best, the rate of growth is unlikely to be higher than 2.5 percent according to sources in the relevant ministry due mainly to:
(i) lower than projected wheat and cotton crop because of adverse weather conditions; and (ii) sugarcane rendered more profitable led to some shift in the area under cultivation of cotton to cane.
Industrial growth too - both large-scale manufacturing and small-scale - are unlikely to meet the budgeted targets because: (i) projected growth of some sub-sectors including sugar is unlikely as it has reached capacity as per the State Bank of Pakistan report; (ii) the higher credit to the private sector has a caveat notably around 50 percent or so was used to retire past debt which belies government claims of a growth rate of over 8 percent for the past three years; and (iii) the doubling of small-scale manufacturing during the PPP-led coalition government in the most recent Economic Survey 2015-16 (for example, from 5.1 percent stipulated in the 2012-13 Survey upgraded to 8.5 percent in the 2015-16 Survey) is inexplicable.
To conclude, private estimates of the growth rate for the current year is expected to be no more than 3.8 to 4 percent - a growth rate that should prompt a set of macroeconomic policy decisions that are distinct from a growth rate of over 5 percent that naturally require a different set of policies. In short, the data manipulation is compromising the capacity of the Finance Ministry to take informed policy decisions.
Copyright Business Recorder, 2017