According to a Business Recorder exclusive, the most disturbing component of the Annual Plan 2017-18 is the projected widening of the current account deficit to 10.4 billion dollars in 2017-18 against the ten-month (July-April) 2016-17 current account deficit of 7.2 billion dollars uploaded on the State Bank of Pakistan (SBP) website. However, considering that the current account deficit for the first ten months of 2015-16 was 2.37 billion dollars while for the entire year (July-June) was 3.39 billion dollars or a difference of around 1.02 billion dollars therefore one may assume that at worst the total current account deficit for the ongoing year would be in excess of 8 billion dollars or a whopping 42 percent rise from the comparable period of last year. Export decline, the Annual Plan persisted in maintaining in line with the claim made repeatedly by Finance Minister Ishaq Dar, is due to global slump in oil prices, though it failed to note that the salutary effects of this decline on lower imports was not evident mainly because of an over-valued rupee, and decline in commodity prices, though no mention was made of the delayed refunds due to what has become the standing operating procedures of the Federal Board of Revenue (FBR) in an effort to overstate revenue collections. Be that as it may, workers' remittances have certainly declined due to the recession and deep political turmoil in Middle Eastern countries and this decline is expected to persist.

Total investment and total savings in economic terms form an identity. Annual Plan envisages 15.8 percent of GDP as total investment while national savings are estimated at 13.1 percent of GDP or a difference of 2.7 percent. For 2017-18 the total investment as a percentage of GDP is estimated at 17.2 (with the bulk accounted for by government investment rise to 15.6 percent of GDP as opposed to 14.2 percent in the current year) while national savings are projected at 14.6 percent of GDP (difference of 1.5 percent of GDP from the current year) with a 2.6 percent of GDP differential between savings and investment.

It is unclear how a savings rise would be possible given that the rate of inflation will rise in the forthcoming year, "slightly picking up" as per the Annual Plan and with lower interest rates on national savings scheme courtesy the Finance Minister. Investment rise is attributed to availability of energy, cheap finance, besides improved law and order and political stability (desired objectives which have yet to be evident on the ground). The China Pakistan Economic Corridor (CPEC) would support overall investment as noted in the Plan and at present there is little clarity in the mode of financing of the CPEC other than that sovereign guarantees are being provided that have sent ripples of unease within the multilateral donors who question providing such guarantees for public-private partnership. And while the Chinese companies are from the private sector yet it is the Chinese government that is identifying which company would undertake what project.

Another disturbing element of the Annual Plan is its contention that "fiscal policy during 2017-18 will focus on spurring economic growth through mobilizing more revenues, increasing public expenditure efficiency and switching to targeted subsidies while prioritizing development spending." Speaking from an economic theory perspective, a fiscal policy that spurs growth would not initially mobilize greater revenue however in Pakistan's case the bulk of the tax revenue would continue to be generated from indirect taxes, which has obvious negative repercussions on the purchasing power of consumers, with a consequent impact on demand. This, in turn, would reduce savings and further increase our reliance on borrowing - domestic and foreign. The rise in stocks - from 510 billion rupees in the current year to 575 billion rupees projected for next year - reflects a lower demand.

And finally, the Plan is silent on government borrowing though total external resources inflow is noted - an item that neither reveals how much is being borrowed to pay off existing loans, at what rate and nor does it highlight that during the second quarter of the current year reliance on commercial bank borrowing from abroad at a very high rate with very short amortization period accounted for net outflows instead of inflows. The government envisages a whopping 951 billion rupee inflow next fiscal year (to repeat this does not indicate actual borrowing or at what rate from abroad) which is higher than the 866 billion rupee provisional estimates for the current year. Needless to add, in an effort to curtail the deficit the Finance Minister, who has been the trail blazer in procuring very short-term loans from foreign banks, may further raise reliance on this very expensive source of funding.

Business Recorder seeks to avoid making any comment on the projected GDP growth rate or its components as the controversy over their manipulation is sustained mainly because of the refusal of the Pakistan Bureau of Statistics, under the administrative control of the Ministry of Finance, to meet with those who challenge their data on the basis of lack of rationalization with other government departments data as well as credible industry sources.

And finally, it is relevant to note an item that appears on the SBP website notably errors and omissions July-April of negative 495 million dollars - a figure that should be a source of concern to the economic managers of the country.

Sadly, the Annual Plan is compiled by the Ministry of Planning Development and Reforms and not the Finance Ministry and this newspaper is hopeful that while the Ishaq Dar led Ministry of Finance dismisses all concerns relating to the economy as hogwash and anti-state yet one would have hoped that Ahsan Iqbal, the long term visionary of the PML-N, may have had the courage to raise red flags that may have led to some flawed policy revisits. As matters stand today there will be few takers for the country not going on a Fund programme next year which ever forms the next government.

Copyright Business Recorder, 2017