UN economic growth projection

The United Nations in its latest report titled "World Economic Situation and Prospects" has projected Pakistan's growth rate at 2.1 percent for 2020 - 0.3 percent lower than the International Monetary Fund's and the World Bank's and 0.7 percent less than projected by the Asian Development Bank's (though the difference may be in the timing of the projections). For those who may marvel at three multilaterals employing qualified economists at extremely competitive salaries coming up with not only the same projections but also supporting the same prescriptions for country after country, it is necessary to point out that multilaterals not only routinely engage in: (i) harmonization with the objective of forestalling any duplication of efforts but which unfortunately more often than not also accounts for a narrow approach to the reform agenda dictated by whichever agency is declared the lead agency in any sector; and (ii) the susceptibility to the political/foreign affairs agenda of their major donors that include the US, its allies Europe and Japan.

Additionally, policies/strategies of multilaterals reflect the thinking in Western political circles that include procurement policies - consultants and other items - biased in favour of the major donor countries. Be that as it may, while not undermining some of the evolving issues, for example, the negative impact of climate change on productivity and quality of life that have become key issues of multilaterals, one would hope that the developing world takes cognizance of the fact that there are numerous alternate economic theories/econometric models that would enable the achievement of salutary objectives; and tweaking policies based on results is a common enough suggestion by economists because economic models assume several factors remaining the same, ceterus paribus, and that condition is rarely met in the real interconnected global economy.

As can be ascertained, the UN's assessment is considerably more realistic on several accounts particularly with respect to two statements. First, the report states that "State Bank of Pakistan is balancing a stronger commitment to inflation target with a managed depreciation of the currency" (managed as the rupee remains undervalued - 4 percent in November as per SBP website) "but this is complicated by increases in energy tariffs that have been imposed as part of the fiscal reform package;" or in other words, the left hand, read SBP, is at odds with what the right hand, read Ministry of Finance, is doing. Business Recorder, however, has repeatedly pointed out that inflation in Pakistan today is linked to a "managed" rupee given its impact on domestic transport costs of goods and people with a commensurate impact on their income.

And secondly, the report notes that the economy of Pakistan is expected to recover slightly from 2021 onward as increased government revenues from a tax hike (not widening the tax net) allow expanded public investment. It is unclear what the agreement on budget deficit has been, though the first IMF review report dated December 2019 noted a projected deficit of 7.6 percent (as opposed to the budgeted agreed deficit of 7.2 percent given that last year's deficit was understated by a whopping 1.7 percent of the GDP by the Ministry of Finance in May 2019 when negotiations with the IMF were ongoing).

It is within this context that we have consistently urged the Prime Minister to take cognizance of the policies being implemented by his economic team, assess their socio-economic implications and widen the circle of economic advisors to enable him to make an independent assessment of the efficacy of the policies in place and determine which policy requires some tweaking.