A STORY is being propagated that the economy has suffered massive damage due to the protests in Islamabad, and the floods in Punjab.

Most recently, the finance secretary appeared before the Senate Standing Committee on Finance and Revenue, and complained that the economy, the image of the country, investor sentiment and inflation all had been adversely impacted by both events.

Investors have shelved their plans; the rupee had slid from Rs98 to Rs103 to a dollar; the IMF had delayed its tranche; and inflation would probably be fuelled “on account of supply disruption of commodities due to dharnas and rallies” as well as the recent floods. He also touched on the external trade deficit, although it is far from clear how this might be linked to the floods or the protests.

In short, everything was going fine until the floods and the protests came along and upset the apple cart, we are being told. All of these claims strain credulity.

The story should be received with a large dose of scepticism because there is sufficient evidence that the economy was sputtering long before the floods and the protests descended on us. How have the dharnas contributed to inflation, or to supply bottlenecks, except in the opening days when the government tried to choke all movement in an effort to stop the marches?

Moreover, the Fund as well as the State Bank had flagged the fragile nature of the recovery that the government was boasting of, and as late as July, the central bank was voicing scepticism about the growth story.

The trade deficit was flagged as an issue much earlier in the year, and the value of the currency at Rs98 to a dollar was considered untenable from the very beginning. The build-up in the reserves was a positive sign all of last year, but it had also been underlined as driven by “one-off inflows” early in the year.

The circular debt had returned to its previous levels by July, and the power tariff subsidy had to be revised upward by almost 50pc midyear. There is little doubt that the floods and the protests have dented the economy, but it is also important to keep in mind that the government’s growth story was in significant trouble long before these events materialised. The Senate standing committee should bear this in mind when taking stock of the secretary’s testimony.

Published in Dawn, September 29th, 2014