Hassan Yousaf Shah

The writer is an independent professional who has worked for different multinational and Multi Lateral organizations including Asian Development Bank. He has been contributing on Economics & Finance, and Regional Foreign policy, since 1997 for different newspapers. You can follow him on twitter @ hyshah1.

Will we ever hear the truth? Will the commoner who is struggling trying to meet day to day expenses, ever get a relief? Has government justified itself by balancing the budget? Will the budget give common man relief and help solve his problems? The economic problems of Pakistan are much deeper than we hear. Talk shows are filled with anchors and analysts who are well versed with the problems and it invariably takes a back seat when it is brought out. The state of affairs of our economy has gone from bad to worst in the recent times. At times is blamed on the economic managers or the minister at the realm of affairs, however, the blame if any should also be equally shared with the Prime Minister, party leadership, provincial chief ministers and the head of state who so ever is running the show.  The following debate is about the upcoming budget, which is expected to cross.

Will the budget reflect the same? Will it tainted as great achievement and glossy words and press conferences show that there were miraculous achievements? Will it every show how much mess needs to be cleaned and that too with a bitter pill.

GDP – WHY WE CANNOT AGREE ON SIMPLE GDP NUMBER

According to industry sources, economist, the GDP figure is contradicting government claims. Despite painting a less than rosy picture, experts are firm on a less GDP growth rate than what is being anticipated by the government circles. Why the difference? There are many reasons for difference starting from change in calculations, to formula variation to even accusations that there could be “number fudging” for the consumption of lending agencies and donors like IMF, World Bank, and now ADB.  In short as per independent economist, the figures are falling shorter than government claims.

Table 1: Comparison of GDP Growth rates for Subsequent Years versus government claims for the year 2013-14

   

FALLING SHORT OF GDP – INTENTIONAL VS

UNINTENTIONAL

What are some of the repercussions for the above GDP “mismatched” figures as shown in above table1.

1.    The shortfall means that there is general slowdown and economic pressure. Government has been revised the GDP figures several times before understanding that the actual GDP may be well below 4%. However, according to some leading experts, the government has been downplaying the figures and some hint of “number fudging” to hide the real economic progress. Actual GDP may be even much lower than government claims.  There has been a lot of noise which according to economic sources, are unexplained. However when contacted ministry sources to verify the above, they denied but did not give a counter statement.  GDP figure is often quoted to donor organizations like IMF, ADB, World Bank and s on, hence if you see from the above table it is often distorted for the consumption of the donor organizations.

2.    Despite a general perception that the present regime is a pro business government , present government failed to uplift economic downturn and rather put the country’s GDP worse than its predecessors PPP government. GDP is a clear indication that the revenue side, inflation, monetary policy and fiscal deficits some of the known economic evils have not let the economy grow. GDP drop is clearly saying that the economy needs a major overhauling and boost. Can the political government and leadership which according to many is pro business, can do something different in 2014-15?  According to industry survey the business and agricultural community alike are perturbed and upset at the way government is handling the taxation, fiscal deficit, and importantly the economy in general. GDP is just a reflection of that sentiment.

3.    Agriculture fell short of posting any positive gains in the GDP contribution. Many cite current government policies. Wheat policy, one sided sugarcane crisis, and on top, cotton falling prices, have eroded farmer confidence in the government.

Table 2: Agricultural growth rates with 2013-14 provided by independent industry sources.

According to ministry sources, apart from sugarcane all other food crops missed their targets. The sugarcane was under crisis because of low international pricing and growers were upset because of unattractive prices offered by the mill owners. Needless to highlight that sugar mills have political patronage and support from many leading political heads and political parties.

Table 3 Showing Industrial Growth

4.    Needless to highlight that the government has been claiming it has brought multiple power projects online and resolved power issue which according to economist should also play some positive note in the budget. Such infrastructure projects should boost the supply side economy and the size and scale of the projects alone should have made the GDP figure up, yet even with the inclusion of such mega scale projects, it seems that the economy is struggling with the economic reality. As per some business houses and to some extent even after analyzing table 1,2, the situation is worse off from PPP tenure.

5.    According to World Bank report which was released only last month, Pakistan has to enhance its outlay in infrastructure development from 3% to 10% if we need to plug the gap between the energy demand and supply requirement. However the only way to overcome this gap is not from internal sources, ie tax, or savings rather it is from external borrowing.

6.    Poor government’s industrial policy may have also led to drop in the industrial output. According to sources, the industry output has been below expectations. Government again has been boosting about the large scale sector growth, but according to some, the figures have been skewed due to few projects. Industrial sector according to government statistics grew by 5.48% against 4.8% set targets.  Critics say that the numbers are distorted because of some large projects which were added and made the growth figure look impressive. When contacted, The Ministry sources declined to offer comment on the above.

However an entirely different picture arose during a recently held national Accounts Committee.  National Accounts committee in one of its meeting disclosed that the large scale investment in the manufacturing dropped by 23.7% and capital injection in the overall manufacturing sector dropped to 21.5%.

 The impact is clearly visible in the GDP which is going to drop further.

The GDP and its growth has been a controversial topic which critics asking for government noT working within a framework or parameter, while on the other side, the government is has an uphill challenge to match the deficits, keep the inflation low and pull this economic troubled country out of troubled waters.