AIRLINK 66.80 Increased By ▲ 2.21 (3.42%)
BOP 5.67 Increased By ▲ 0.07 (1.25%)
CNERGY 4.63 Decreased By ▼ -0.09 (-1.91%)
DFML 22.32 Increased By ▲ 1.56 (7.51%)
DGKC 69.76 Decreased By ▼ -1.64 (-2.3%)
FCCL 19.62 Decreased By ▼ -0.33 (-1.65%)
FFBL 30.20 Decreased By ▼ -0.25 (-0.82%)
FFL 9.90 Decreased By ▼ -0.15 (-1.49%)
GGL 10.05 No Change ▼ 0.00 (0%)
HBL 115.70 Increased By ▲ 4.70 (4.23%)
HUBC 130.51 Decreased By ▼ -0.33 (-0.25%)
HUMNL 6.74 Decreased By ▼ -0.11 (-1.61%)
KEL 4.35 Decreased By ▼ -0.04 (-0.91%)
KOSM 4.80 Increased By ▲ 0.46 (10.6%)
MLCF 37.19 Decreased By ▼ -0.56 (-1.48%)
OGDC 133.55 Decreased By ▼ -0.30 (-0.22%)
PAEL 22.60 Increased By ▲ 0.03 (0.13%)
PIAA 26.70 Decreased By ▼ -0.85 (-3.09%)
PIBTL 6.25 Decreased By ▼ -0.06 (-0.95%)
PPL 113.95 Decreased By ▼ -1.00 (-0.87%)
PRL 27.15 Decreased By ▼ -0.07 (-0.26%)
PTC 16.13 Decreased By ▼ -0.37 (-2.24%)
SEARL 59.70 Decreased By ▼ -1.00 (-1.65%)
SNGP 66.50 Increased By ▲ 1.35 (2.07%)
SSGC 11.21 Decreased By ▼ -0.14 (-1.23%)
TELE 8.94 Decreased By ▼ -0.03 (-0.33%)
TPLP 11.34 Increased By ▲ 0.09 (0.8%)
TRG 69.36 Increased By ▲ 0.31 (0.45%)
UNITY 23.45 Increased By ▲ 0.01 (0.04%)
WTL 1.36 Decreased By ▼ -0.03 (-2.16%)
BR100 7,312 Decreased By -12.8 (-0.17%)
BR30 24,106 Increased By 48.2 (0.2%)
KSE100 70,484 Decreased By -60.9 (-0.09%)
KSE30 23,203 Increased By 11.5 (0.05%)

The federal budget for the year 2021-22 is being framed by Shaukat Tarin during whose earlier tenure as the federal minister for finance, revenue and economic affairs (Oct. 2008-February 2010) the landmark 7th National Finance Commission Award was signed reducing the share of the federal government in the divisible pool by 10 percent and introducing at the same time a multiple indicator criteria for distribution of the divisible pool among the provinces in place of earlier criteria that was solely based on population.

Thus Pakistan became a truly federal entity in December 2009 and the four federating units took the first tentative step towards financial autonomy. Though Tarin was not in the cabinet when Benazir Income Support Programme (BISP) was launched in July 2008 and the historic 18th Constitutional Amendment was passed by Parliament in May 2010, his intellectual concurrence with the two historic developments, it is believed, is implied because of his definitive contribution to the culmination of the 7th NFC Award.

Reassuring, isn’t it?

What is, however, extremely puzzling is the decision of Prime Minister Imran Khan to show the door to finance minister Dr Hafeez Sheikh who, it transpires, if the National Accounting Committee (NAC) is to be believed, had authored and implemented the policies over the last two years that are supposed to have yielded an implausible growth rate of 3.94% of the GDP despite Covid-19 and the overall depressive economic environment all around. A person of such fantastic talents need not have been lost just because he lost a Senate election.

But an eminent economist of international repute, Dr Hafiz A. Pasha while analysing the government’s claim regarding the seemingly unbelievable growth rate pointed out that the government had admitted 22.996pc decline in growth of energy sector (electricity, gas etc.), while estimating massive growth in industrial sector which could not have happened without energy. According to him, the agriculture sector, which was immensely disturbed last year due to meagre cotton production, suddenly picked growth during the current fiscal year at a time when transport and communication sectors registered a declining trend. Besides, the wholesale and retail sectors had continued to be in trouble.

Another eminent economist, Dr Pervaiz Tahir too, termed 3.94pc growth rate unrealistic and said independent operation of the Pakistan Bureau of Statistics (PBS) was the only way forward to get a transparent projection of the growth. He said if growth in various sectors, agriculture, industrial etc., was admitted, there should have been about 3pc growth rate at the most. “But it jumped to around 4pc and I think one percent has been added forcibly,” he said.

Could it be that, with time slipping out fast as next election is drawing closer, political capital of the PM diminishing due mainly to failure of his government in keeping prices of essentials from going through the ceiling which had manifested in the loss of all the by-elections the PTI had contested lately, the revelations on almost daily basis of corruption scandals allegedly indulged in by people close to him and the emergence of serious factionalism within the party led by Jahangir Tareen had had a deleterious impact on his equanimity and out of desperation he had tried to gamble his way out of the tight corner by projecting questionable economic data?

But let us not speculate. Let us take the claimed data on its face value and await the next year’s projected achievements as per the budgetary estimates of next fiscal year and see how they fare against the base founded on the claimed data.

All the three ‘elected’ governments since 2008 have gone to the IMF to have the national economy avert certain default. As a consequence, the three governments have had to pursue an identical economic policy designed by identical IMF conditionalities. Even the military-led government of President General Musharraf (retd) had entered into not one but two Fund programmes. And all the first four had only resulted in further deterioration of the national economy.

In the 1990s, successive governments in Pakistan used to vow to turn Pakistan into an ‘economic tiger’ like the ones that had sprouted all over East Asia during the 1980s. Since around 2000 and lately, successive governments in Pakistan have been heard vowing to emulate China’s economic “miracle”. And occasionally we also express our determination to outpace India on the economic front.

That we could neither become an economic tiger nor emulate the economic successes achieved by China or India reflected the bright daylight that has continued to exist between our desire for the moon and our capacity to reach it. More than the capacity the actual reason for such a state of affairs was our policy of handing over the commanding heights of our economy to the private sector which as a class has continued to evade taxes, pilfer utilities and deny legitimate contractual rights to its employees.

The Asian Tigers could not have become the export powerhouses they are without extensive government interventions during the two decades since the 1980s. The Chinese “miracle” could not have been possible without the nation as a whole sacrificing to its bones — from cradle to grave — to create assets worth trillions of dollars.

We knew India went the import substitution way from day one using mixed economy with a predominant public sector and vast amounts of savings. We continued on the dole path making fun of India’s Ambassador car (as we raced around in gleaming Japanese cars exported to us in lieu of war reparations) and what is called the Indian rate of growth (2-3%). In a nutshell, all three economies before opening up to their respective private sectors were being underpinned by extensive public sector.

It’s well known that without reallocation of resources where they are needed the most for establishing an equitable society, it is not possible to arrest the rot of expanding inequality. And for sustained reallocation of resources, intervention of the state has been found to be necessary, even essential. But before that happens, we need to unlearn all that we have been taught by the infamous Washington Consensus, its trickle- down theory and privatization mantra.

There is no guarantee that if we devalue the rupee, our exports would automatically increase. Of course, the move would certainly make our exports reasonably competitive price-wise in the world markets against exports of similar goods and of comparative quality from other countries.

We need to have adequate supplies of exportable surpluses of goods in demand in global markets to use the rupee’s exchange rate to maximize our export earnings. And that is perhaps where we have consistently failed. We have exportable surpluses in a couple of commodities that do not fetch us any significant amount of export earnings and our value-added exportable surpluses not only are limited to a few items but the value addition itself has remained too nominal.

While a realistic exchange rate of the rupee does not guarantee an automatic spurt in exports, it would certainly discourage unnecessary imports, which in turn would hopefully encourage conservation and efficient use of expensive imports.

Currently, we enjoy a number of comparative advantages: 1) We are an agricultural country; 2) We are a market of over 200 million consumers; 3) Pakistan is located at the crossings of trade routes from Casablanca in Africa to Kashgar in West China’s Xinjiang Uyghur autonomous region and from Thailand in Southeast Asia to Turkey beyond the Middle East; 4) China and Pakistan are engaged in building a 3,000km economic corridor connecting Kashgar in China to the port of Gwadar. And one cannot also rule out the possibility — in a couple of years — of overland transit trade route through Pakistan linking India with Afghanistan and beyond to Central Asia.

These advantages can be exploited to the maximum if we become a warehouse/trans-shipment economy rather than continue to hanker for an industrial economy. This would require a well-thought-out trade policy that would allow almost free-of-duty entry of raw materials, intermediaries and equipment in knock-down condition to be warehoused in Pakistan and then forwarded to final destinations after the required value addition. Such a regime would also require letting the rupee appreciate/depreciate on its own.

Such a policy would also attract FDI in avenues in which it would be more economical for foreign exporters to fabricate inside Pakistan items that are in demand in the country and also to export the surpluses to the four corners from the ‘hub’. This will also facilitate the transfer of technology and open avenues for training of skilled manpower. Transfer of appropriate technologies would also open the way for Pakistan to graduate from being an agricultural country to a leading high quality processed food exporter.

Copyright Business Recorder, 2021


Comments are closed.