KARACHI, Oct 30: For the past two years, the State Bank annual reports have tended to be more objective and have provided detailed information required by an emerging market.

Business needs accurate information and data to take right decisions in an regulated economy moving towards a free market. Transparency also provides equality of opportunity and weakens the system of patronage practised in a regulated economy.

The State Bank’s annual review of the economy indicates the elements of future present in the outgoing year. In brief observations hinting as to how the future would shape, it helps to form views about the directions things are likely to move. The quarterly SBP reports keep the business updated on the economic environment in which it has to operate.

The SBP reports are no longer couched in bureaucratic jargon that hides more than it reveals. These reports reveal a professional job better understood by the common reader. They reflect a change from the traditional to modern outlook.

In the annual report for 2000-2001 released on October 29, the State Bank has rightly added a new chapter on banking. It is the weak banks, which have impacted adversely on economic growth. It is the task of the State Bank to regulate the banks. And finance capital is the lifeblood of the market economy.

Yet, another fundamental issue that perhaps needs to be focused in a separate chapter is increasing poverty. If the benefits of economic development and growth fail to reach the common man, it threatens social instability. For the past 20 years, poverty has continued to rise unchecked. The trend has not been reversed. Social disorder hampers economic growth. There is so much in evidence in what is happening in Pakistan and Afghanistan.

The strategy, the poverty reduction programmes and the results must be constantly monitored and adjusted to changing environment.

The State Bank has to continue to modernize its concepts. It is political economy that is shaping the world. Economic sanctions disappeared suddenly because of the war and not for economic reasons. Pakistan’s economy and its problems of growth are to be seen in the social context to open up the right path towards economic and social progress. The economy would continue to limp without the right social framework.

Whatever its impact, some may call it old wine in new bottle, but the IMF has renamed one of its former facilities as “poverty reduction and growth facility” (PRGF) just to focus both on reduction of poverty as well as economic growth. The State Bank does focus on growth targets but not on distributive justice.

To quote the State Bank report, the IMF PRFG facility would have a “positive impact on restoring investors’ confidence.” Such hopes were also pinned on the successful negotiations of the stand-by arrangement. The SBA focussed on stabilization programme, and PRFG programme may not be that stringent. Yet the dominant factors that would influence business would be Pakistan’s status as a frontline state and the global recession.

Multinationals have been hit by global economic downturn and plummeting profits. They are not in the expansion phase, witnessed in an economic boom. They are facing a deep recession. If some companies were to look at the frontline country, they would like to extract premium on greater sovereign risks. There is many a slip between the cup and the lip when one looks at 600 million dollars anticipated from US Export-Import Bank and OPIC. One of them is the balance-sheet of the PIA, which is seeking funds from the US bank for buying aircraft.

The SBP report reiterates the official view that “the path of economic self-reliance and a corresponding exit from the IMF programmes would be adhered to. The intention is laudable but the objective hardly achievable.

Economic self-reliance may receive a fillip in the face of the shrinking world trade and the hit that globalization would take from an international economic downturn. But, that it would lead to an exit from the IMF programme, is doubtful.

In the next three years, Pakistan expects an eight-billion-dollar bail-out package to manage its fiscal and current account deficits. It would be oxygen to keep the patient alive, but not in a very good health. What could pull the public finances from the present shambles is debt write-off. That is not on the agenda.

The leverage that Pakistan has gained on account of Afghanistan and an expected slower economic growth are likely to slow down the pace of on-going IMF reforms. It is unlikely that the government would become slimmer. With domestic and foreign investment shrinking, it would take time for a big government to be back in business. It would be a massive development spending that would stimulate business and kick-start the economy.