Apr 21 - 27, 2008

The federal cabinet, in its meeting held in Islamabad last week with Prime Minister Yusuf Raza Gilani in the chair, approved an emergency rescue package fro bringing Pakistan out of the acute financial crisis being faced by the country.

Earlier the Federal Minister Mr. Ishaq Dar briefed the cabinet about "the pathetic economic conditions we have inherited from the previous government" on which Mr. Dar accused of hiding the facts and fudging figures to befool the nation. Lifting the lid on the can of the previous economic lapses the new finance minister presented an economic picture that is both grim and frightening to be honest, the Musharraf regime's deliberate neglect of the main purpose of economic growth increasing the welfare of the people and the direction of the polices towards further enriching the already rich small section of the population was evident to general public at large and not only the economists and well in formed. It could not have been remained hidden when even the middle classes began funding it hard to make both ends meet.

In the detailed fact sheet presented to the media later Ishaq Dar revealed that real GDP growth will remain at 6 percent instead of the target of 7.2 percent set by the last government for the 2007-08 financial year. He also said inflation would soar to 10 percent instead of 6.5 percent and revenue collection would be 990 billion rather than the amount of 1025 billion projected by the outgoing government. Worst of all, Dar warned the fiscal deficit of 4 percent of the GDP projected by the last government would grow to an alarming 9.5 percent of GDP if immediate measures were not taken. He added that if it grew to that level, it would become "almost unmanageable". The new government has indicated it may seek an oil facility from Saudi Arabia to lower the deficit.

The scenario presented by Dar is a bleak one. He has warned that to try and stabilize the situation, a further raise in oil prices and enhanced taxation will be required. But worse still is the emerging proof that the country's previous managers concocted figures to cover up mismanagement and a worsening economic situation. In other words citizens were lied to and truths about the country's economic state kept hidden in order to give a false impression of progress and success.

Briefing the media or the cabinet decisions Ishaq Dar who was accompanying Information minister, Sherry Rehman, told media men that the cabinet took serious notice of the previous government's wrong decisions and gave a go ahead signal to an emergency fighting back programme to pull Pakistan out of fiscal mess by implementing a new strategy based on materializing $2.5 billion on war footing from various sources to plug in current account deficit. He said firefighting business to correct the economy and putting in place a comprehensive fiscal discipline was already under way.

He said the new government will bring down inflation to keep the prices of essential items within the common man buying power besides lessening reliance on borrowing from the SBP. He said the new government will also focus on increasing tax to GDP ratio, push up exports and encourage foreign direct investment (FDI) to take the economy on the strong footing.

He said Shaukat Aziz government intentionally presented overestimated figures in the last budget to show good performance to cheat the masses and get the people votes in the February 18, elections. It listed tempering of wheat production figures, ill timed export at low months at 100 percent more rates and fudging of 2007-08, budget figures.

He said that the cabinet decided to take the matter of fudged budgetary projection and other wrong decision of the previous government to the Parliament to fix responsibility and hold those accountable who were responsible of creating fiscal crisis and passing on the buck to the elected government.

He said the Parliament will form a committee of the House to summon any body to whom its members will consider was needed for questioning. He avoided nominating anybody including former Prime Minister Shaukat Aziz for the fiscal crises and passing on the buck to the elected government.

He said the Parliament will form a committee of the House to summon any body to whom its members will consider was needed for questioning. However, he showed confidence that the parliamentary committee will hold the responsible accountable for wrong decisions to damage Pakistan's economy.

The Finance minister added that previous government's performance economic front in the first 8 months was extremely dismal. It missed all major targets. Agriculture growth was 3.8 percent of GDP against its target of 5 percent, large scale manufacturing 7.5 against 8.8 percent, manufacturing and other sectors were 7.1 and 6.8 percent, showing less growth than estimated in the last budget. He said Shaukat Aziz borrowed massively from the State Bank of Pakistan which fuel inflation to give new heights to price hike and make the common man life miserable.

Revenue collection was short of target. The Federal Board of Revenue (FBR) collected Rs 535 billion as on March 31, showing shot fall of Rs 33.5 billion and apprehended less revenue collection of Rs 35 billion by June 30.

He said Shaukat Aziz government allocated only Rs 52 billion for power subsidy but it cost Rs 52 billion for power subsidy but it cost Rs 123.5 billion to the national kitty in first 8 months of 2007-08. Oil subsidy was projected at Rs 15 billion and it in actual terms cost Rs 138.5 billion.

He said the new elected government has inherited sick economy with poor fiscal discipline, but being the people's representative it can not just sit and wait for passing on the time and keeping its balance sheet clean and adored that instead of doing nothing the new government has taken the challenge of correcting the economy upfront and started a number of corrected measures.

He said the new government was focusing on bringing home $2.5 billion in next two months to keep current account deficit at an acceptable level.

He said as on March 31, current account deficit stood at $8.5 billion and if corrective measures had not been taken it could have gone over $ 10 billion by June 30. He said the pervious governments during 1999 to 2007 added $5 billion in Pakistan's external debt. He said the government will give top priority to agriculture and manufacturing sectors in the policy making for their better performance for economic growth.

It will however, not out place to mention that almost similar charges (fudging and hiding facts) were made by the Musharraf regime against the former PML (N) government with Ishaq Dar as Finance Minster when he took over in 1999. The sad reality is that fudging of figures by governments for short-terms political gains has become increasingly widespread, often with alarming consequences. The allegation that fudged figures on wheat yield contributed to the "atta" crisis seen early this year falls within this category of dangerous acts of deception. It is also known that statistics related to literacy, population growth and health have also been tampered with to show the government in a more positive light than is truly the case.

However, the suffering public has no stomach for listening to the failings of former rulers because of which the present government, unfortunately, finds itself in the soup. The people, impatient at their plight, would rather expect the new leadership to address their problems in the quickest possible manner. The oil subsidies might have gone up to a whopping Rs 153.6 billion, but increasing the prices of petroleum products, which has been bitterly opposed by the people in the past and which the new set-up intends doing, would further push up the inflation rate. In case it becomes simply imperative, a system of providing relief to the needy sections of society must be on the cards at the same time. The authorities would have to think of gauging the performance of the existing economic team and effecting changes whenever necessary since those who have created this huge mess could not possibly be expected to clear it.