In its latest rejoinder to an article titled "Dar's claims and PWC report" MoF informed the author that "international agencies assess the country on the basis of performance and futuristic views are based on their assumptions." This statement however overlooks the objectives of the staff of international agencies, be it a multilateral donor agency like the IMF or be it an international agency like Price Water House Coopers (PWC), who operate on three principles: (i) to ensure that the debtor government would be able to repay its loans extended at market rates with high administrative costs (business class air travel and stay in five star hotels of their staff members), their bread and butter; rating agencies also focus on ability to pay back loans while foreign journals, like their local counterparts, are susceptible to advertisement support. Besides, a report prepared by a foreign journal can be challenged on the basis of available data or information that has not been accessed by the international agency and this is my claim with respect to the PWC report; (ii) multilateral agencies reports are careful not to alienate the debtor government to ensure continued engagement with a member country but nonetheless staff cannot deny the ground realities and hence the harsh truth is more often than not found in footnotes or hidden in the main text. Take the case of the most recent IMF report which maintains that Pakistan's GDP growth was 'favourable' but added that "Directors called on the authorities to allow for greater exchange rate flexibility - rather than relying on administrative measures - to help reduce external imbalances and bolster external buffers." Needless to add an overvalued rupee, a policy inexplicably supported by the Finance Minister, is responsible for declining exports and making imports more attractive. Dar, and the MoF rejoinders' focus on the good bits, however, its the 'bad' bits that require a response and on that Dar is either silent or dismisses the donor agencies' criticism as not accurate; incidentally there is no 'vague' criticism on unprecedented rise in imports in my article, as noted in MoFs rejoinder as the decline in oil prices during the Dar years resulted in savings of over 5 billion dollars; and (iii) waivers are allowed, the MoF argues, only if the Fund Board is satisfied that the programme will be successfully implemented. This writer is sure that the MoF is fully cognizant of the fact that waivers are also allowed (a) for reasons of international considerations and Pakistan as a frontline state on the war on terror has received several waivers based on the US Board member's support; in this context it is relevant to note that during the PPP-led coalition government the then Information Minister Sherry Rehman acknowledged publicly that Pakistan has to seek US State Department assistance prior to getting an IMF/World Bank loan - an admission that may account for Ishaq Dar invariably going to meet officials at the US State Department when he attends the annual meetings of the World Bank/IMF; and (b) it is in the interest of the mission leader to successfully complete a loan as his promotion depends on the loans he successfully completes. In this context Harald Finger was clearly more committed to his career at the Fund than Jeffery Franks, who appeared to be more committed to the implementation of reforms in Pakistan - perhaps because he was nearing retirement.
The MoF rejoinder maintains that the PWC "approach is based on a robust long term economic growth model that focus on how will the global economic order change by 2050 and assumes broadly growth friendly policies." Surely even the MoF must acknowledge that pro-deficit reduction strategy has been in place for the past four years which is the antithesis of pro-growth policies. The budget for 2017-18 could be pro-growth if implemented but then 2018 is an election year.
Data manipulation has been an ongoing concern of Business Recorder as well as independent economists since Dar took over the Finance portfolio; he downgraded the growth rate from two years ago (2011-12) just so he could claim the highest growth was achieved during his first year as the Finance Minister. Economic Survey 2012-13 (prepared during the PPP led coalition government) notes total external debt for 2011 at 29.8 billion dollars, with Economic Survey 2016-17 prepared during Dar's tenure inexplicably giving the figure of 63.8 billion dollars for 2011; and 72.2 billion dollars for 2017. Additionally, data is simply not rationalized either between different sub-sectors or with the data released by other government departments and credible industry sources. Ishaq Dar committed during the post budget press briefing in 2014 that he would provide an opportunity to media and independent economists to interact meaningfully with PBS staff to ensure data integrity. That promise remains unfulfilled to this day - a source of serious concerns.
The MoF rejoinder's clarification on debt and its rise is an exercise in confusion focusing on gross and net debt (and failed to mention the redefinition of debt proposed by a PML-N Senator that allows the government to understate the debt by 2 trillion rupees). Two further clarifications on the rejoinder are in order: multilateral loans constituting 87 percent are not concessional loans but market loans (concessional loans are allocated by donor agencies on the basis of performance and are less than 600 million dollars); and secondly to maintain that loans procured from the commercial banking sector abroad would somehow remove structural bottlenecks is just so much hogwash - such bottlenecks take years to deal with while these loans with a hefty interest are due in months.
The MoF talks of the Prime Minister's various programmes for youth as a launch pad for higher jobs and mentions federal spending of Rs 1 trillion as employment generating policies - the former is a political as opposed to an economic statement and the latter must be seen in the context of 2018 being an election year. Education spending the MoF rejoinder claims has increased to 2.3 percent in 2016 compared to 2.1 percent in 2013 but education is not a federal subject anymore.
And finally, by deliberately assuming that the World Bank's and incidentally also the Fund's concerns with respect to the government abandoning the reforms under the recently completed three year programme is not justified because the government is committed to reform would be easily refuted when subsequent to the elections the country is compelled to go on another IMF programme. To claim without counter argument that "handling of the economy by following IMF prescription in curtailing the deficit at the cost of growth, heavy borrowing and data manipulation is not based on fact" is not a rejoinder or rebuttal simply an affidavit which is testimony under oath without proof and/or other witnesses.
Unfortunately, those who penned the rejoinder did not respond to this writer's last recommendation: "the Economic Advisor has the economic credentials and experience that Dar clearly lacks. As a public servant drawing a salary from the taxes we pay it is incumbent on him to present a true picture of the state of the economy and not put his personal interests, possibility of suspension or transfer, above those of the country; sadly he is vigorously defending flawed data and, as criticism against Dar's policies gathers momentum, routinely engages in writing rebuttals."
Copyright Business Recorder, 2017