PERFORMANCE OF THE ECONOMY
Pakistan's leading indicators have improved dramatically in the last three years
From SHAMIM AHMED RIZVI,
Jan 13 - 19, 2003
In its "Pakistan Country update" released in Islamabad recently the World Bank has given high marks to the recent performance of the economy, which has by now gained a good measure of overall macroeconomic stability in sharp contrast to the deteriorating situation of a few years ago. Budget deficit has fallen and inflation rate is below 5 per cent. Public expenditure on development has begun to rise as a percentage of GDP, while spending on interest and defence has fallen. External sector has shown spectacular improvement. Remittances from abroad have zoomed markedly, exports have begun to grow after years of stagnation, current account deficit has turned into surplus, the rupee has appreciated against the currencies of Pakistan's major trading partners, and Debt Reduction Strategy, stipulating a fall in both external and domestic debt as percentage of GDP is ahead of schedule. All these factors together with increased aid disbursements and substantial debt reduction received post-September 11 have resulted in improvement in the credit-worthiness of the country.
This is an affirmation of what Advisor on Finance and Economic affairs and other member of his team have been claiming and endorsed off and on by the international organisations specially the donor agencies. The Dow Jones Newswires report said that most of Pakistan's leading indicators have improved dramatically in the last three years. It said: "Inflation of around three per cent is at a two-decade low, enabling the central bank to significantly loosen the monetary reins. Boosted by strong remittance inflows and foreign development aid, the Pakistan rupee has gained 8.5 per cent against the dollar over the past year. Meanwhile, foreign reserves are at a record $8 billion (they hit $8.3 billion last week) a three-fold increase from the level three years ago when Musharraf seized power".
The report said the government expects the economy to expand 4.5 per cent in the current financial year to June 30, 2003 up from 2.6 per cent last year. "In the next fiscal year the government is penciling growth of around 5 per cent", the report said. The IMF projects growth of 4.6 per cent in the current fiscal year and 5 per cent in the next, while the Asian Development Bank is forecasting 4.5 per cent and 5 per cent respectively.
From all these economic indicators and facts and figures, it appears that we are prospering but realities on the ground negate this statistical prosperity and strongly suggest that the masses are getting poorer.
This is a fact that despite all rhetoric and tall claims of improvement in economy, the fixed income group, salaried class and the commonman has received no relief. Instead they have been burdened with constant periodical dozen of hike in the prices of utilities with its adverse effects on cost of living. Electricity tariff has been raised by over half of dozen times and gas and petroleum products on over dozen accessions since this government took over in 1999.
The economic managers of the country claim that the rate of inflation has been brought under firm control. Independent estimates and people belonging to the middle class, however, tell a totally different tale. When the rate of inflation was projected by the government at a small 3 (three) per cent, the price of electricity, gas and oil increased by staggering 46 per cent (worked out on the basis of change in actual rates charged between 1999 and 2002) in last three years since October 1999. And the price of three items in the food basket: onion, gram and banana went up by about 30 per cent over the same period. Prices of flour and pulses, however, have, not changed much. Even if one assumes the level of consumption of utilities were static at 1999 level, this segment of household budget alone must have increased by about the same rate as its cost more than 40 per cent. Ignoring the increasing costs of other expenses such as of healthcare and education, the disposable income in the hands of people, would still decline.
Sensing the mood of the masses, the elected government have started some — though still cosmetic — moves to provide some relief to commonman. Last month they gave a taken relief of 12 paisas permit to electric consumers. After the cabinet meeting last week, Prime Minister Zafarullah Jamali announced setting up of two committees on relief packages for commonman and farming community.
The committee on relief package to the commonman would comprise Minister for Food and Agriculture and the Prime Minister's Advisor on Finance while the other committee for farming community would have Federal Ministers for Food and Agriculture, Industries, Commerce, Labour and Manpower and Prime Minister's Advisor on Finance.
Briefing newsmen, a government spokesman said the committee on relief package is the sequel of earlier relief package announced by the Prime Minister in the maiden meeting of the Federal Cabinet. The second committee would consider proposals for offering relief to the farming community, like reduction in the existing mark-up rate on loans by the 'Zarai Taraqiati Bank'. The relief package committees would ensure that balance between the quantum of relief to the farmers and demand of the consumers was duly addressed. Let us hope these committees come out with some real relief packages and not confine their recommendation to more cosmetic measures.