It is a wonder that the State Bank of Pakistan (SBP) and the Ministry of Finance keep reiterating that the economy is doing well and all indicators are up. If one looks at the situation sector wise, the numbers don’t add up. Pakistani industry has been facing negative growth besides constant decline in exports mainly due to debt-based policies of the government. Rather than an expansion, we are seeing a slow contraction in our national output. GDP rates will of course go up, as GDP measures foreign investment in Pakistan. However we are growing because of Chinese money, not because we are making our own.
Indicators support the claims of a stagnant export sector. Pakistan is ranked by the World Bank’s “Doing Business 2016” at 138th among 189 countries. Bureaucratic corruption, delays in getting utilities connected, and the non-availability of electricity make it hard for domestic businesses to thrive. This is unfortunate because we have a very large and diverse consumer base that is increasingly patriotic. The demand for local good is at an all time high, but the supply is missing. Even the continuous devaluation of rupee, manipulated by the finance ministry itself, is not helping the national exports.
On Friday the SBP stated that the external account improved due to robust growth in workers’ remittances and a sharp decline in global oil prices. As a result, the country’s foreign exchange reserves reached an all-time high level of $18.7 billion by end-June 2015 sufficient to finance around five months of the import bill. Though the SBP meant this positively, implicit in the statement is the problem of the Pakistani economy. None of the growth that is reflected in the numbers is produced by Pakistan itself. Additionally, the money that we are making is being used to foot the import bill, so that the government can say that its sheets are balancing. The SBP also said that the improvement in the external account significantly diluted the global risk perception for Pakistan. It would be better if the SBP was able to announce an actual fall in risk perception.
The government has been going all out to increase taxes so that it can increase its revenue, to the extent that it has created a narrative that it has deficits because people don’t pay taxes. Rather than making sure that existing taxes are collected, the government is increasing taxes on those who are already paying. Without growth in local industry, there is less wealth to tax. The taxes will only cut into people’s incomes and savings, causing a contraction in local demand and local investment.
