NOW don’t get me wrong. It’s not my job to take away the punch bowl just as the party gets going, if you’ll excuse the metaphor given the circumstances obtaining in the country.

But somebody has to be in their senses if things are not to go pear-shaped earlier than expected. Even as the rest of the country sinks into confusion, it’s no secret that a party is breaking out amongst the trading community. The economy appears to be on a rebound, buoyed by rising reserves and a strengthening currency.

However, another section of the business community is in the doldrums. Textile representatives were back in their familiar role of lamenting the lack of gas or power supply to their plants, as the IPPs are warning of further cuts with receivables crossing Rs300 billion.

So the trade deficit is rising, but its negative impact is mitigated by stronger remittances, and financial inflows that have helped plug the gap. Is this it? Time to declare triumph? Last week the IMF shied away from flagging any weaknesses or vulnerabilities in the government’s turnaround story. This week the State Bank followed suit.

Somebody has to be in their senses if things are not to go pear-shaped sooner than expected.

Its opening words speak of “[r]ecent gains in confidence”, with optimistic language sprinkled across the document. It opens by noting a positive outlook on inflation, even after acknowledging past volatility, going on to underscore similar optimism on GDP, saying the growth rate is likely to be higher than anticipated, with industrial sector output leading the way. It notes increases in private sector credit off-take, “almost two and half times more” than the corresponding period last year.

It papers over potential external sector problems that it had flagged in its previous announcement, saying the current account deficit “seems quite manageable at this point in time”. Only a few weeks ago, the same State Bank was telling us that plugging a hole in the external account using “one-off inflows” was not the way forward. One wonders what changed between then and now to shift the focus to “this point in time” only.

The announcement seems to be written by more than one person. It is littered with throwaway phrases. My favorite is the line that tells us that the trade deficit is up because of the “gap between imports and exports”. It appears to be wrestling with itself in parts, trying to build a case for an interest rate cut in one place, but leaving the rate unchanged in another.

This disjointedness appears to show that powerful interests are exerting their pull on the bank’s pronouncements, although an outright rate cut was avoided. The new governor would be well advised to settle into the saddle quickly and bring some coherence to the bank’s pronouncements.

But now comes the budget, with a very high revenue target of Rs2.81 trillion. By most accounts this is ambitious, given they’ve had to twice revise this year’s target downward to Rs2.2tr.

Given the air of optimism the government has been breathing, and the validation its story has received from the State Bank as well as the IMF, might it be the case that the party is in fact yet to begin?

We know development spending isn’t going to be brought down slightly, and defence is set to rise, because as the additional secretary sent by the security establishment to answer the questions of the combined parliamentary committee reportedly told them, new purchases of military hardware need to be made urgently. Apparently, Pakistan’s defence spending is lagging behind “the region”, to include India, China and Turkey, he said.

Turkey? We’re in an arms race with them? And since when did they move into our region? And why are we competing with China in defence spending? And when did Bangladesh, Sri Lanka, Nepal and Bhutan move out of our region? If we place them on the list, can our defence expenditures really be said to be lagging behind our neighbours in the region?

Looks like somebody else has their eyes on the bulging reserves and shrinking fiscal deficit. The defence budget is supposedly programmed to rise by 10pc, a figure that it has tracked for the past five years, to Rs700 billion.

There was a time when we could talk of a ‘peace dividend’. Back in the early 1990s, as the Cold War ended and the Soviet troops left Afghanistan and at least two successive Indian prime ministers wanted to talk of peace. Some did talk about capping, and even rolling back defence spending in that environment.

But it’s hard to make the case for it now, with war continuing all around us. Instead, the committees have very reasonably stopped at asking for greater transparency, and greater say in drawing up the threat assessment upon which all defence spending is ultimately built.

It is a good thing that the additional secretary from the defence ministry made the journey to the parliamentary committees to answer some questions, even if he found the whole experience a little vexing. It would be good to build on this strength by allowing greater parliamentary say in the formulation of the defence budget. If all parties play their role, there is no reason why the improving fundamentals in the economy cannot be sustained a lot longer.

The writer is a business journalist and 2013-2014 Pakistan Scholar at the Woodrow Wilson Centre, Washington D.C.

khurram.husain@gmail.com

Twitter: @khurramhusain

Published in Dawn, May 22nd, 2014