THE chapter on the economy in President General Pervez Musharraf’s book ‘In the Line of Fire’ does not reveal anything new. Nor does it deviate from the trite line that he has taken all along of comparing apples with bananas.
He attributes the serious shocks and reversals that the economy suffered in the initial period of his rule to luck. But credits the same of the 1990s to the ‘dreadful decade of democracy’.”
For him it was bad luck that an unprecedented drought lasted three years, ‘hurting our agriculture and the rural economy’, a global recession slowed demand ‘our exports’ and on top of everything else, India mobilised its troops on ‘our borders, and we were forced to retaliate, putting a further strain on our economy.
He appears to have forgotten that in the decade of 1990s Pakistan’s economy was under the severe strain of as many as four straight forward international sanctions, the last two of which he himself had brought in, first by going on the Kargil adventure and second by staging a military coup on 12 October 1999 and the responsibility for the first one rests squarely on the institution which he heads, by not properly safeguarding the national secret of having crossed the nuclear red line ( in 1990). It is under the defence institution that our nuclear programme is being managed.
The second one could be blamed on the then elected government of Nawaz Sharif but he was driven into taking the decision to test our nuclear device by popular sentiments.
All of these were severe sanctions. At that time Pakistan was perhaps the most affected country by sanctions after Libya. So to compare the performance of the national economy in the period of sanctions with that of a period of plenty and gloat over it in one’s autobiography can only be attributed to his selective memory.
It is now time to stop making such comparisons and confine to talking about one’s own achievements in the last seven years, only three years short of a decade.
But of course, he does not miss on claiming credit in the economy chapter for what he believes to be the achievements of his rule of ‘uniformed’ democracy:
In 1999, we were on the verge of default. The dreaded words ‘failed state’ were on everyone’s lips. That is a distant memory now. The economy is on the upsurge. Our gross domestic product (GDP) has risen from $65 billion to $125 billion—almost double in five years—and we now are in a different league altogether. International financial institutions look on us very differently and with respect.
Our overall foreign debt has been reduced from $39 billion to $36 billion. Per capita income has risen from $460 million to $800 million. We are in the middle income category of countries from the low-income category.
Foreign exchange reserves have risen from a paltry $300 million (equal to two weeks of imports) to $12.5 billion (equal to ten weeks of imports). Exports are hitting $17 billion for 2006, whereas they were only $7.8 billion in 1999.
Our imports have increased phenomenally…apart from the near doubling of our demand for oil, most of the rest of our import expenditure is on capital goods.
Revenue collection has increased from $5.1 billion to $11.7 billion. This phenomenal increase of 130 per cent is not from an increase in the number of rates of taxes. Rather, it is due to reduction in the number and rates of taxes, broadening of the tax base, rationalisation of the tax regime, documentation of the economy, and introduction of self-assessment scheme that has reduced the interface between the taxpayers and tax collector, thus decreasing the opportunity for corruption. All these factors have contributed to huge increase in revenue.
We are a far cry from 1999 when Pakistan compared poorly even against the ‘highly indebted poor countries’ (HIPCs), whose ratio to debt is over 250 per cent of foreign exchanges. It would have been a sorry day for our ego had we, a nuclear and missile state, been put in the HIPC category.
Remittances have jumped 400 per cent, from $1 billion to over $4 billion. The strong position of our foreign exchange reserves stabilised the eroding rupee. Under my watch, the exchange rate has hovered around sixty rupees to one dollar over the last four years.
Pakistan has also joined the international capital market for the first time. The very fact that private ventures are prepared to extend loans to it for such long terms at interest rates of merely two per cent above US government rates shows the confidence of the international financial community in Pakistan’s rising economy.
Our credit rating in Moody’s and Standard and Poor’s(S&P) had hit rock bottom in 1999. It has now moved up to B+ with Moody’s and BB with S&P.
The downside of the sudden upsurge in the economy was a rise in prices. The income of the salaried class and the earnings of others have improved, resulting in inflation, which had neared almost 10 per cent but has been brought down to around seven per cent. The sharp rise in international oil prices has played its part as well.
In 1999, only 39 cities were connected to the Internet. By 2006, 2,000 cities and towns were connected to it. In 1999 fiber optic connectivity was limited to only about forty towns; today 1000 towns have it. Bandwidth costs for the transmission of two megabytes per second have been reduced from $87,000 to $1,400.
Pakistan’s telecom industry has been a major success story. In only three years, from 2003 to 2006, tele-density, which is the number of telephones as a percentage of the population, has increased from a meagre 2.9 per cent to 16 per cent; cell phones have increased from 600,000 to over 30 million; and wireless local loop is taking root in the rural areas.
Information technology (IT) and the telecommunication are bridging digital divide not only across the globe but with in the country as well. They are playing an important role in the socio-economic development. The extraordinary growth in the IT and telecom sectors has created enormous employment opportunities, directly and indirectly for educated youth at call centres, in telecom engineering, as telecom salespersons, in customer services, in finance, in accounting, and so forth. This is one of the fastest growing sectors of the economy, and its pace is likely to accelerate even more in the years to come.
Last but not the least come our efforts to create jobs and alleviate poverty among the urban uneducated unemployed…. Today there is a boom in both these sectors (industry and building and construction) and the demand for labour is so high that workers’ income have automatically shot up. As far as labour and other construction-related personnel like draftsmen are concerned, it is a seller’s market.
Strong macroeconomic gains allowed us to raise development spending annually from less than Rs100 billion to Rs300 billion in just six years. These resources are being utilised to create jobs, improve education and health services, and strengthen the country’s physical infrastructure. As a result, for the first time, poverty and unemployment are showing a downward turn.
Phew!!! Only the crassest of his detractors and visceral haters of the state of Pakistan would not feel happy on these achievements.
But then, one would like to challenge some of these achievements nevertheless. Let us take the matter of reforms in the CBR. After all these reforms there are still no more than a little over a million income tax payers in the country—the same count as it was in 1999. About 45 per of the total revenue income is still coming from with-holding taxes.
Corruption is still rampant in the bureau. The self assessment scheme was not discovered by President Musharraf. It was introduced in the late 1980s by then the finance minister Dr Mehbubul Haq. Again it was Dr Mebub who actually introduced this country to the rudiments of market economy, the trickle down theory, privatisation, disinvestment, deregulation and liberalisation.
The successive governments followed this path. But because of limited financial space (because of the four sanctions), they could not achieve as much as he claims that he has done with all the bonanza and windfall that came Pakistan’s way following 9/11.
Again, it was under the HIPC scheme that this nuclear and missile state received the most generous rescheduling that it got in December 2001, only two months after 9/11 which liberated most of the earnings of Pakistan from the back breaking debt servicing of the 1990s.
And then it was because Pakistan has aligned itself with the war on international terrorism that the HICP loan which estimated at about $700 million during the negotiations were scaled up to more than a billion dollars along with the generous rescheduling.
Even the 9-month long bail-out which the IMF signed with Pakistan in June 2000 was not because of how good a job the official economic managers of Musharraf were doing but because Pakistan had agreed to do unannounced unilateral ceasefire on the LoC in return for the US and UK representatives absenting from the IMF board meeting. Had they attended the negotiations, they would have to vote against the bail out under their respective laws which forbid aid to countries under military rule.
In fact, the first tranche of the IMF was released only in December 2000 after Hizbul Mujahideen had announced unilateral ceasefire (in response to which India also stopped firing across the LoC) and Pakistan made public that it has also done the same.
Pakistan agreed to Agra talks also as one of the trade offs of the one-time bail out by the IMF. Perhaps Musharraf would have done in Agra what he did in Islamabad in January 2004 while signing a joint statement with Mr Vajpayee, if he had been as sure then of no backlash within his own constituency as he was in 2004.
He has put a lot of store by the macroeconomic gains that Pakistan has made in the last seven years because of what he claims to be his economic sagacity and the wisdom of his economic team. But then in the outgoing year, these macroeconomic gains appear to be collapsing under the weight of his free- for- all policy which is confused with market economy.
The chapter on the economy reads like an assessment of a five-year plan or as an election propaganda material.