The State Bank of Pakistan (SBP) Quarterly Report for end March says it all. As predicted the drought is already having an adverse impact on Pakistan, and publicly contradicts what our so-called economic experts in the Ministry of Finance have been blithely stating, not only on prime time TV, but to the Chief Executive. To put it bluntly, they have been lying through their teeth and have brought us to our knees, economically.
The facts as given by the SBP Report viz (1) the IMF program has so far not helped Pakistan in reviving investment nor has it facilitated the economy in picking up (2) GDP is to grow at below 3% against the targetted 4.5% (which in layman’s language means we are in a recession of sorts) (3) tax collection targets for both end Dec 2000 and end Mar 2001 have not been met, short by Pak Rs 13 billion (4) exports have not done well, at projected US $ 9.2 é 9.3 billion will fall far short of the ambitious US $ 10 billion target (5) even though the balance of payments narrowed due to a lower import bill, the pressure on the Pakistani Rupee increased, the trade deficit remaining at US $ 1.32 billion, only marginally above the corresponding period last year (6) minus 5.4% growth expected in major crops against the target of 3.2%, a difference of 8.6%, putting overall agricultural growth to 0.2% against the target of 3.9% (6) large-scale manufacturing grew because of production of refined sugar and value addition in petroleum refining (7) remittances rose marginally from US $ 731.6 million to US $ 854.1 million (16%) (8) the impact of trade deficit on the Rupee was kept down by heavy buying of foreign exchange by SBP in the open market and (9) a higher average rate of inflation was recorded in all these price indexes as compared to the corresponding period the previous year. What it all adds up to is more dependance on the IMF for medium-term financial assistance, such loans have now become crucial for the country’s survival.
What is the SBP to do? Easing of liquidity in the banking system and lowering of lending rates have been ruled out, till at least October. In the face of depreciation of the Pakistan Rupee, not linked to SBP’s heavy purchases of US Dollar in the open market, the SBP considered it unwise to signal a relaxation in monetary policy for fear of putting additional pressure on the Rupee. One thing is sure, the SBP Quarterly Report should be a must reading for the CE, he may also read the bureaucratic rejoinder to my article “Interpreting Greek” which was supposedly written by an Assistant Economic Adviser to the Ministry of Finance, but of course had someone else as the author. This would help him to understand how financial bureaucrats can fake/fudge any figures when presenting an all-rosy picture to whoever is heading the government.
One is tempted to say, “I told you so” in analyzing the last SBP Quarterly Report in successive articles “THE PUSSYCAT AIN’T PURRING YET” (March 3, 2001), and “CREEPING ECONOMIC ANARCHY” (March 10, 2001) but it serves no useful purpose because obviously the CE did not read them, the messengers of bad news are scrupulously kept away from the ruler’s attention. We are in danger of becoming a McDonald’s economy (is it true that Jinnah Terminal is being re-named McDonald’s Terminal?). What is the McDonalds investment in Pakistan? Nothing, Nil, Zilch! What do they take away, about US $ 300000-500000 every month for the few branches already in operation. What will happen when a 100 come up and everyone and his uncle gets addicted to the Burger? Like it happened in the case of HUBCO, Pakistan may not be able to pay. Everything is imported, the buns, beef, the chicken, the tomatoes, the onions, the mustard, the paper wrappings, the tissues, the cartons, etc, etc there is nothing Pakistani here, except the air, and profits. And if they could import air, they would. Eating the burgers and paying for it in foreign exchange is called “investment”. And why blame McDonalds, if that is the type of “investment” we want, that is what we are going to get. But should the people of Pakistan be made to pay for the gullibility of our leaders? Are they naive or is there some vested interest? The pattern is the same in every regime, after a brief period while they evaluate the character of the new rulers, the looters always return to the scene of their crime and loot some more. Please re-name the National Accountability Bureau (NAB), the Bureau of Money-Laundering through Plea-Bargaining” (BPBML), here crooks can get their money laundered by simply returning part of what they had looted and then getting a clearance certificate to enjoy the ill-gotten fruits of their evilly-earned labor.
This economy is going nowhere, Chief Executive, unless you get people into place who will cut themselves from the apron strings of the errant financial bureaucracy and effect drastic and meaningful change. Otherwise we are dead in the water, at least in whatever little there is left of it. But let’s not forget the silver lining, an “A” to the State Bank for courage to report the truth, as always.
Mr. Ikram Sehgal is Publisher and Managing Editor of Defence Journal (Pakistan). He was Chairman APSAA for the year 2000, now acting in adhoc capacity pending elections for the year 2001.