EDITORIAL: One day prior to tabling the budget 2023-24 in parliament, the Economic Survey 2022-23, as is the tradition, was unveiled by the Federal Finance Minister.
As expected, the blame for the current severe economic impasse, defined as missing all annual targets (referred to as “huge macroeconomic imbalances”), was placed squarely on the policies of the previous administration, the devastating summer 2022 floods, supply disruptions due to the ongoing Russia-Ukraine war, political uncertainty, and the delay in the resumption of the International Monetary Fund (IMF) Programme.
There was no reference to the fact that shortfall in all annual targets/imbalances have continued to widen since the fall of the PTI administration on 9 April 2022, a disturbing trend that has gathered momentum since 27 September after Ishaq Dar took oath as the federal finance minister for the fourth time.
Economic Survey 2022-23 data is therefore even more out of synch with the current ground realities this year than in past years because the prevailing economic impasse has clearly worsened since March 2023 (April for limited data), the cut-off month for data inclusion in the Survey. Passing on the buck, the government’s customary approach, to policies of 14 months ago, requires a re-evaluation on five major economic indicators.
First, there is a discrepancy between the 30 billion dollar losses attributed to floods and the 0.29 percent GDP growth rate in the country premised on a claim of 1.5 percent growth in agriculture this year with contraction of 2.9 percent in industrial sector; a contraction probably understated as large-scale manufacturing growth was negative 8.1 percent July-April this year, registering an untenable high of negative 25 percent in March (a trend that is likely to have worsened since) as per the Economic Update and Outlook May 2023.
Second, core inflation figure cited in briefing to the media was an average of 18 percent (urban and rural); however, a look at the Pakistan Bureau of Statistics data reveals that in May, urban was 20 and rural 26.9 percent or an average of 23.45 percent, in April the average was 22.2 percent, in March 20.85 percent. Consumer price index which despite the control of the external value of the rupee was 38 percent in May, 36.4 percent in April, 35.4 percent in March, 31.5 percent in February or a steady escalation from the 23.2 percent that was inherited in September 2022 against 12.7 percent in February 2022 (the month before the PTI administration’s unfunded relief package began to be implemented).
Third, the Survey maintains that the country registered the highest-ever public debt in June 2022 of 49.2 trillion rupees – a claim that ignores the fact that end March 2022 domestic debt was 28.07 trillion rupees, which stood at 37.24 trillion rupees end-April 2023 (more up-to-date data is not available and it has almost certainly risen since) or an unprecedented rise of 33 percent in ten months which is a major factor fuelling inflation.
External debt stood at 129.18 billion dollars end-March 2022 which has declined to 125.7 billion dollars end March this year - a decline sourced to the still pending IMF ninth review without which multilaterals/bilaterals do not have the necessary comfort level in terms of Pakistan staying the reform course to extend loans to it.
Fourth, massive energy sector circular debt of 2.4 trillion rupees in June 2022 has been contained at 2.5 trillion rupees as per the Survey.
However, Minister for Power Khurram Dastgir informed the Senate in August last year that circular debt of 214 billion rupees and another 86 billion rupees subsequently was retired – a retirement that necessitated borrowing/providing sovereign guarantees with the associated interest payable through raising tariffs on the hapless consumers.
Fifth, the report claims import compression was to prevent hemorrhage of dwindling foreign exchange reserves but fails to mention that: (i) reserves have continued to decline from the 10.08 billion dollars on 8 April 2022 to the 26 May 2023 4.09 billion dollars; (ii) currency manipulation since October last year with a brief period of abandonment (27 January till early March) led to a major reduction in remittance inflows of 3.4 billion dollars July-April this year compared to the year before, a major factor in plummeting reserves; (iii) merchandise trade deficit contracted by around 10 billion dollars as imports fell sharply (from negative 39.272 billion dollars July-April 2022 to negative 23.7 billion dollars July-April 2023 as per the Pakistan Bureau of Statistics); however, what is extremely disturbing is the fact that the trade imbalance is again on the rise – from negative 25.791 billion dollars July-May 2023 against negative 23.7 billion dollars July-April 2023; and (iv) current account deficit has fallen sharply during the first ten months of the year – from negative 13.7 billion dollars last year to negative 3.25 billion dollars in the ten months of the current year.
This accounts for a dramatic reduction in new borrowing, a key component of the current account balance – from 13.472 billion dollars July-April 2022 to 2.9 billion dollars in the comparable period of 2023 as per the State bank of Pakistan website.
Copyright Business Recorder, 2023