A baffling economy by Farhan Bokhari



WITHIN days of the new budget getting rolled out amid much fanfare, questions over key numbers have revived an uncomfortable truth ó that Pakistanís economic trends continue to raise baffling questions.

The immediate challenge to the official team led by Finance Minister Ishaq Dar comes from the Karachi-based Social Policy and Development Centre (SPDC). In sharp contrast to official proclamations, a team of SPDC economists led by former minister Hafeez Pasha claimed a significantly lower economic growth rate, a higher incidence of poverty, a higher budget deficit and the risk of a higher future drawdown on official foreign reserves.

Though the claims and counter claims need to be closely scrutinised, Pakistan has been reminded of two equally powerful realities.

On the one hand, itís incumbent upon the government of Prime Minister Nawaz Sharif to publicly and convincingly defend its numbers, given the widespread popular scepticism over successive governments having been far from truthful over key economic parameters.

This is especially vital as the present-day rulers face large performance gaps in areas like forcing affluent Pakistanis to pay their taxes, or choosing the right spending priorities for a country of 200 million. But keeping quiet in the face of compelling challenges will further undermine the weak official credibility.

The gap between the rulers and grass-roots realities has widened.
On the other hand, Pakistanís key institutions responsible for giving a much-needed reality check, over time have been forced to quit their independence. In Islamabad, figures compiled by the main statistics agency were once taken as the gospel truth. But years after the federal compiler of statistics began succumbing to orders from key officials to turn the numbers positively on matters like poverty, the official take on the economy remains in doubt. As Pakistanís successive rulers tightened controls to only seek a Ďsub achaaí (all is well) outcome, the gap between those in power and grass-root realities has widened.

Meanwhile, the debate on the sanctity of key parameters cannot be carried out in isolation from the consequences of a long delay in updating Pakistanís population-related figures. The last census was due to be held in 2008 but still remains on hold. Without an accurate population figure, economic policymaking will remain out of sync with Pakistanís realities.

The challenge at the centre of the numbers debate is also driven by the workings of the ruling structure, where short-term priorities have often taken precedence over long-term interests. Presenting the budget in a meaningful manner has essentially become no more than an accounting exercise, detached from the kind of medium- to long-term assessment which once drove economic policy.

Itís therefore hardly surprising that the word Ďhuman developmentí, coined by the late Dr Mahbubul Haq, one of Pakistanís most illustrious economists, effectively seems to have been replaced by Ďconcrete-driven developmentí as the new catchphrase.

At a time when more than half of Pakistanís population seems to have lost out in the past year in view of one of the worst crises to ever afflict the agriculture sector, the push for more fancy roads, bus and train services continues unabated. In spite of budgetary allocations for social causes, notably education and healthcare, there is no evidence as yet of a planned massive push to reform the quality of such essential services.

A related and timely case in point is also the future of the China-Pakistan Economic Corridor or CPEC, often dubbed as a game changer for future generations. Along with the game change must come compelling questions about not only the direct economic cost of the projects involved but also their impact on Pakistanís future budgetary allocations.

Too often in the past, successive governments have sought to hoodwink mainstream Pakistanis by substituting the word Ďassistanceí for what was no more than money in the shape of hard or soft loans that eventually had to be paid back with interest.

The challenge is to come clean on the price tag of $46 billion often bandied about for CPEC. As planned spending of such a proportion has never been undertaken in Pakistanís history, it is important for policymakers to roll out detailed financial information about the projects involved. The debt that Pakistan will accumulate in the process must be publicly disclosed to the last cent, and the cost of servicing that debt must also be public knowledge.

In tandem with that information must be a convincing answer to questions over exactly how Pakistan, saddled with CPEC-related liabilities, intends to manage its repayments in future. On the face of it such a massively ambitious financial commitment must require a significant if not a major overhaul of Pakistanís eroding revenue tax collection system. Is someone in Islamabad finally going to explain exactly how the country plans to manage the CPEC-related financial liabilities without taking the country to the cleaners after an unprecedented spend, spend, spend spree?