THE OFFICIAL economic managers of the military government in collaboration with the bureaucracy of the World Bank, Asian Development Bank and the IMF seem to have successfully brought the economy of Pakistan to a standstill.
They have done such a fantastic job of it that by end FY 2001 the country’s consumption of commercial energy has plummeted to much beyond what it was in the last year of elected government( 1999-2000).
In 1999-2000 the consumption of oil/petroleum as recorded by the Pakistan Economic Survey (2000-2001) was 17.76 million tonnes while today it is less than 17 million tonnes. The same year the consumption of gas was to the tune of 714,744mm cft while today the consumption of gas has gone down to 678,507mm cft. The electricity consumption in 1999-2000 was 45,586 Gwh and today it is no more than 44,558 Gwh. In 1999-2000 electricity generation had amounted to 65,751 Gwh while today it is 62,102 Gwh.
For want of authentic reliable data, the calculation of current consumption of commercial energy and supplies of electricity has been made using the rule of thumb, but the error perhaps would not be anything significant. In any case, the latest Economic Survey(2001-2002) is all set to come out within a couple of weeks and these figures could be verified to everybody’s satisfaction.
But what does it mean to the economy as a whole, this reduction or say stagnation in the consumption of commercial energy and its supplies? Well, it is the energy which keeps the wheels of the economy going. If its consumption goes down, the wheels also turn the other way causing a slowdown of the economy. And that is why the economy has been continuously decelerating since the advent of the military government. And that is why this government has nothing to show by way of achievement on the economic front except a surfeit of forex reserves. And since the multilateral aid agencies have also been active collaborators in this economic mismanagement, they too have gone along with the government and are continuously patting its back for ‘earning’ so much of foreign exchange without trying.
Who does not know that developing countries never export more than they import. But then they do not purchase dollars from the market to meet their trade deficit or balance of payments gaps. These deficits are met by among, other things, by foreign dole called concessional assistance in the absence of which you go and contract commercial loans to meet the gaps. If all that you needed to do to meet your mounting BoP obligation was to go and buy foreign exchange in the required amount, no developing country would have accumulated the mountain of debt that it had in the last 50 years. And who does not know that central bank buy and sell foreign exchange for a number of reasons, none of which to meet the BoP gaps.
The multilateral collaborators have become so much involved in this grand economic cover-up themselves that they do not ask the government to improve tax collection because they know that this is impossible under the circumstances that they have created for Pakistan with the help of the country’s finance ministry. That is why every time the government requests for a relaxation in the revenue collection target, the IMF immediately agrees. Last year (2000-2001) the total tax collection was to the tune of Rs393 billion, up from Rs354 billion in 1999-2000, the last year of elected government.
During 2000-2001, a number of one-time coercive tax collection steps were taken and as a result there was a jump of 12 per cent in the collection. This year the latest projection is Rs. 414 billion and the actual collection is not likely to be anything more than Rs400 billion and even if it is adjusted against the 40 per cent increase (Rs20 billion) in the refunds over last year then the increase in the collection would be no more than 6 per cent and if this is adjusted against the low rate of inflation of about 4 per cent, the increase is just about 2-3 per cent which in the economic terms is called stagnation.
The multilateral aid agencies do not seem also to be worked up as they used to be in the past about the poor performance of Pakistan’s exports because here too it is their prescription which has brought Pakistan to this sorry pass on the export front. Even the increased market access which the Europeans and the Americans and other countries have provided to Pakistani goods following the 9.11 tragedy, seem to have failed to break the stranglehold that the IMF’s prescription has taken of Pakistan’s exports. The emphasis still is a tight leash on budgetary deficit.
The more we succeed with the help of the multilateral agencies to reduce the budgetary deficit the more Pakistanis go below the poverty line as the rate of unemployment keeps shooting up. The rate of unemployment is directly linked to the economic activity in the agricultural and manufacturing sectors which is slowing down as is reflected in the current consumption rate of commercial energy.
The government has taken in hand a number of mega infrastructure projects. Ask any government official from the lowly minion in the finance ministry to the President himself. All of them will rattle off the names of these mega projects without batting an eye. But when asked about how these projects were going to be financed without having to resort to deficit financing, in the face of falling revenues and as yet unresponsive privatization process all that you get is a grabbled answer to the effect that we have already started these projects which would be financed from the Annual Development Plans. But the size of successive ADPs themselves have fallen short of their target by almost 25-30 per cent over the last three years.
The only redeeming feature of the economy since the military took over in October 1999 has been the resumption of international dole. But all this is in foreign exchange and can only be used for window dressing the Forex reserves. Any attempt to use them for internal purposes would entail mobilizing matching local funds which continue to be in short supply. Meanwhile, Pakistan has added another 3 billion dollars to its debt burden in the last three years. This includes about $816 million from the IMF and about $1 billion each from the World Bank and the Asian Development Bank. The third debt rescheduling which we received in December 2001 certainly has brought down the servicing burden, but then what would happen if we do not get a fourth round of debt relief say by December 2002?
Will we go back to square one and face a default again just because the fiscal room provided by the three rounds of debt relief was not allowed to be used by the multilateral aid agencies to revive the economy and start investment activity both in the public and private sector creating an environment for foreign private investment to start flowing in?