ISLAMABAD: Realistic projections for the current year indicate that GDP growth will be negative 4 percent against downward revised government projection of 0.3 percent, inflation is underestimated given the 6 percent different between wholesale price index of 34 percent and consumer price index of 28.23 percent (July-April 2023) and unemployment of more than 10 percent that accounts for widening poverty.
This was stated by Dr Hafeez Pasha, an academician and former finance minister, while speaking at “Paisa Bolta Hai” with Anjum Ibrahim.
Pasha said that the PBS statement was seen by him and his students in detail and found countless mistakes, and this time mistakes are higher as opposed to those of the previous years. He added that when government is stating that GDP growth would be around 0.3 percent, surprisingly it is totally different from what the Ministry of Finance in a careful document prepared for Paris Conference stated that GDP growth might be negative by 4-6 percent (four to six) during 2022-23 fiscal year because of flood.
Pasha also pointed out distortions in the 0.3 percent by giving examples that accurate decline in major crops was not reported by the PBS as cotton production was affected by 40 percent due to flood besides damage to rice and other crops. He also mentioned about the USDA special report on Pakistan flood situation stated that as a result of that as per their (Pasha) estimate the agriculture sector is negative by 6 (six) percent. Additionally, he said that positive growth was shown in electricity, gas and transport sectors, whereas, there has been a decline in power generation by 15 to 20 per cent in the last few months whereas as per OCAC, consumption of petrol and diesel was declined by 15-20 per cent.
When asked about the World Bank, the ADB, and the IMF growth projections which are close to the government number, the former finance minister said that the IMF outlook calculation was based on data of a few months back and its other indicators are predated, whereas, in the last few months, import and supply shortages, especially after floods, led to reduction in production and a significant increase in inflation. This was not fully reflected in the Fund’s outlook.
He added that inflation is considerably high as compared to the government’s projection and this was evident from the gap between the WPI and the CPI. He said that most important relationship in inflation is between WPI and CPI and at this point in time, the WPI touched 34 per cent, whereas, the government is giving CPI at 28.23 per cent for July-April. This is the one gap while another gap is that there is only 5.6 per cent increase in the house rent which constitutes 20 per cent weightage in CPI. He suggested that instead of a Minister, PBS Statistic Council chairman should be expert from the private sector.
About unemployment, he said as per his team’s projection unemployment is at historic high in the country with result 7.5 million people unemployed. After COVID, rate of unemployment was 7.5 to eight per cent and now after flood and negative GDP growth rate, the unemployment rate historically high and may be more than double digits. He said that the poverty gap was estimated at Rs1,800 billion in 2022-23 and the BISP is only 20-22 per cent.
The former finance minister said that the government has stated $30 billion loss to the economy due to flood during the Paris Conference and on the basis of these losses $10 billion commitments were made. Now after the publication 0.3 per cent GDP, the loss is only $4 billion and what would be the status of pledges when those countries who have made commitments would know that Pakistan had exaggerated the flood losses.
The former finance minister said that after the end of January, the government has taken some good measures and as a result, the 9th review preceded further but these good measures were not sustained. He added that after March 2023, the government again started controlling the dollar and now the gap of Rs40 between interbank at Rs285 and open market at Rs325 is simply unsustainable. Public financing targets have been exceeded badly and budgeted fiscal deficit for the ongoing fiscal year at 4.9 per cent would reach at 7.5 per cent consequent to extra expenditure and loss in revenue of more than Rs2 trillion.
Pasha emphasized the current expenditure could be reduced by Rs2 trillion through working on two areas, SOEs, and removal of duplication in federal legislative-11 functions and concurrent lists after the 17th constitution amendment. He said that SOEs have become a black hole with limitless losses, limitless loans and subsides, as well as, grants, which alone could save Rs1,800 billion by controlling them. He said that persisting duplication in functions of federal legislative-11 and concurrent lists after the 17th constitution amendment and as a result there are 45 units that are required to be merged. He also proposed retirement age from 60 to 63 years would also provide breathing space by deferring liabilities for the next three years and pension fund should be created for both civil and military.
When asked by the host of the programme, Anjum Ibrahim that lot of people save money in the National Saving Centres but their entire saving from CDNS is taken by the government to finance ever increasing budget deficit and would it not be better, if the industrial sector is given access to the saving to convert them into investment, employment and high output. Pasha said absolutely, this would be very good but added that in the presence of monopoly of the banks and “elite capture”, it is very difficult to break this cartel. He emphasized the need to create secondary capital market and use for financing investment, particularly, using some money in microfinance.
Copyright Business Recorder, 2023