PAKISTAN it seems has been practising what can only be described as ‘Designer Economy’ since people in designer suits took over the finance, the economic and the commerce ministries following the October 1999 military takeover.

With their glib talking and suave demeanour these civilian ‘babus’ of the military rulers have succeeded painting a dream-like facade on the country’s nightmarish state of the economy.

Here are some latest facts. The IMF has agreed to allow the government to revise downward its revenue target for the year by about Rs12 billion. Export growth in the first seven months of the year have stagnated at 1.3 per cent while imports declined by as much as 10 per cent. Gross Domestic Product (GDP) growth for the year is now being projected at a paltry 2.6 per cent against a target of 4 per cent. What has made the IMF agree to revise downward the revenue target in a country which ,if one went by Fund’s own certificate, has been doing wonderfully on the reforms front? The massive decline in the growth of imports is a direct reflection of complete stoppage of investment. Why has that happened, if as the government’s designer economists as well as their friends in the multilateral donor agencies are right in their claims that between the to of them they have taken Pakistan’s economy out of pits and put it on the ‘take-off’ mode? And to top it all if the official managers were actually managing the economy on the right lines why is that even in the third year of their management the country was going to achieve a growth rate of only 2.6 per cent and that too when the whole world is coming to our help?

Foreign Exchange Reserves (FER) have gone up to nearly $5 billion half of which belong to commercial banks and of the remaining half at least about 90 per cent has been bought from the open market. So, in effect these reserves which reached such high levels for the first time in the fiscal history of Pakistan, do not reflect the robustness of the economy but the intellectual bankruptcy of the official economic managers who under pressure from the IMF to meet the FER target went out to buy dollars instead of trying to earn them. And like what they did in Argentina ( establish a parity between the peso and the dollar) the IMF officials did not think that it was a bad economic policy to buy FE rather than earn it to meet one of its conditionalities. How flexible can you get!! This is not the first time that the Fund has passed on such half-baked policy prescriptions to Pakistan. Throughout the 1980s (when Pakistan was getting cheap dollars by the billions) the Fund kept on pressurising the government in Islamabad to lift its foreign exchange controls. The then government did not. But the democratic government that followed was taken in by this advise and it lifted the controls and private dollars started coming in. The Fund while advising the government to lift the FE controls did not warn it against regarding the incoming dollars as part of its FER ( as it has not stopped the present government from showing the purchased dollars as part of its FER). And by the time the end came, the country was burdened with almost 10 billion dollars of debt carrying very heavy rates. Very few people know it but it was not anybody in the Nawaz government who could be held directly responsible for freezing the Foreign Currency Accounts(FCAs). It was actually the Fund which had advised a down and out government to use the opportunity offered by the nuclear test to freeze the FCA and get out from under the burden. The Fund was the happiest at the development.

Also, throughout the 1980s when the then government was borrowing for budgetary purposes from the nationalized banks the costly deposits (carrying high rates 14 to 18) of pensioners and widows and other such indigent savers at 0.5 to 1.5 per cent rates the Fund was advising the government to give up this dangerous practice and borrow at market rates so that the distortions that had crept up in the banking sector and the crowding out of the private sector would stop. The then government did not follow the advise for obvious reasons. But the democratic government that followed implemented the advise in letter and spirit with retrospective effect as a result of which the domestic debt shot up manifolds and by the time the current military government took over it had gone beyond 3 trillion rupees. But the Fund or the Bank has not tried to clarify the situation whenever the military government and its minions for their own personal reasons blamed the democratic governments for indulging in such ‘crass’ borrowing.

The multilateral donors during General Zia’s ten years had kept asking the then government to bring down the rate of population growth from 3 per cent down to 2 per cent and improve the rate of literacy from 37 per cent to at least 45 per cent. The military government did nothing about it. It was again the democratic governments which by the time they completed their allotted ten years reduced the rate of population growth from 3 to 2.2 per cent between 1988 to 1999 and improved the rate of literacy from 37 per cent to 47 per cent in the same period. But the donors have never given the democratic governments any credit for this achievement. In fact in private conversation they are heard to bad mouth the democratic governments in much worse terms than the minions of the military government. In fact if the social indicators improved so dramatically in the ten years between 1988 and 1999 then in those democratic days the borrowed resources were actually being invested in the right sectors and the governance too was certainly not as bad as the multilateral donors and the official economic managers of this government would like one to believe.

The multilateral donors have been touting the present government in Pakistan as the ultimate champions of reforms. But it has not come out with the truth behind this perception. The economic room which appears to have emerged on the scene in the country in the last three years is the direct result of the three debt rescheduling this country was allowed by the Paris Club since 1998-99. And these debt reschedulings, one of which was obtained in early 1999 by the dismissed democratic government were allowed to Pakistan by the lenders not because things were on the upswing here but because we were facing an imminent default situation and the world perhaps did not want to see a country going down and creating unnecessary problems for other countries in the region as was experienced in east Asia during the East Asian banking crisis in 1997. The glib talking authors of the designer economy are using this doled out economic room to create the false impression that by dint of their extraordinary economic management prowess they have succeeded in saving the country from going bust. But then if they are so fantastic then why are exports and imports going down, revenue stagnating and the overall growth has come to a standstill?