All about planning and ratings

Don't worry if plan A fails, there are 25 more letters in the alphabet. - Anonymous
Recently, shuffling through my "To read books and documents", I came across Pakistan's Annual Plan 2018-19 issued by the Planning Commission in April 2018, whence it was under the stewardship of the previous government; my first thoughts were that I was really getting behind on my reading. My second reaction, after reading the foreword authored by the Deputy Chairman, was that probably I had the wrong plan or was in the wrong country!
If the agriculture sector has already been revived, the industry is performing strongly, private sector credit has picked up, energy supplies have been enhanced, and there is macroeconomic and political stability, the economic fate of the country should not be clinging on for dear life to an amnesty scheme; currently being cheered on by all the pillars of government! Notwithstanding that a tax amnesty, to begin with, mocks honest citizens and probably flirts with constitutional limits, we cannot even get them right! If the belief, that most of the money held abroad by Pakistanis is linked with corruption, is correct, and there is now an urgency to bring all that money home, then excluding PEPs from the amnesty is a mysterious plan!
If the macroeconomic and growth targets set in the Plan were realistic and achievable, why is it that the rupee is bottoming out just two months later, and the State is starting to have nightmares about the pounds of flesh Shylock will demand in the garb of structural adjustments this time around? Admittedly, the Plan makes the growth target for 2018-19 of 6.2% subject to favourable weather, continuation of prudent economic policies, revived agricultural sector, and pick-up of private sector credit and planned execution of early harvest projects under CPEC. Except hadn't the agriculture sector already revived and private sector credit up? Also exactly which prudent economic policies do we want to continue with? And finally, additional debt is all we seem to be harvesting out of CPEC till now.
The Plan envisages the size of the federal PSDP at Rs 1030 billion and that of provincial ADPs at Rs 1,013 billion, but fails to identify that all of the development outlay will be financed by debt. And why was that particular piece of information necessary? Because it reinforces the need to ensure that only projects having a positive net present value are pursued; a condition generally neglected in all plans in Pakistan.
The Plan is confident to address all the multifarious challenges faced by school and college education, including low enrolment and completion rate, quality of education, outdated curriculum and examination standards inconsistent with job market, out of a paltry allocation of Rs 135 billion earmarked for all social sectors. Albeit credit should be given for finally coming clean and admitting that the education sector is plagued by serious hurdles, contrary to political claims made over the last decade.
Highly curious is the Plan's claim that 3.66 million Pakistani workers went abroad for jobs. While the Plan does not clarify the period during which that happened, and how many came back and whether this was an increase or a decrease from a past comparable period, but if this was good news, should not workers' remittances have increased significantly. And frankly I have always been sceptical about the claims that unemployment has always been around 6% in Pakistan.
We have not even crossed the second page of the Plan's executive summary and seem to be losing interest; time to move on. And guess what, Moody's just recently changed the outlook on Pakistan's rating to negative; seriously I have a feeling that they are related to Modi!
Moody's believe that Pakistan vulnerability to external risk has heightened and that although goods exports have picked up since beginning 2018 and assumed to continue to grow strongly, this will not be enough to narrow the trade gap! I have forever in my columns maintained that the only indicator relevant, and hence needed to be carefully monitored and managed, for a developing economy like Pakistan, is the trade balance; even if exports double but the trade gap remains constant, all would have been in vain! Policies which don't meet objectives are a dangerous waste of time for developing economies.
Moody's also believes that GDP growth will drop to 5.2% over the next two fiscal years, and that inflation will rise to 7%. They go on to rather diplomatically warn that growth could be even more lower and inflation higher, my view much higher, in case the rupee is depreciated further, policy rate is increased by the Central Bank, fiscal tightening occurs and regulatory duties are increased. And we all know that is happening!
Oh yeah; Moody's predicts that the foreign amnesty scheme might bag US$ 2-3billion by 30 June 2018; and will only have a modest impact on foreign exchange inflows! Seriously, if the government wants more dollars, they perhaps need not only to extend the deadline, but rehash the scheme vis-à-vis who can walk through the door.
Rather depressive reading for the weekend I guess; where is the dustbin when you need one!
Let us move on to Plan B; wait, hang on, aren't we already on Plan Z!
(The writer is a chartered accountant based in Islamabad. Email: [email protected])