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| On poverty numbers |
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Friday, November 06, 2009
This is with reference to Dr Meekal A Ahmed's letter titled "On poverty numbers" (Oct 3). The writer is right about the collapse of growth rate, the increase in poverty numbers and the burst of economic bubble created by the economic team led by Shaukat Aziz. Former prime minister Shukat Aziz was not an economist but a smart investor and he knew very well how to create 'fake money' and then add it to the consumer market. This is now part of record that the economic growth rate and productivity figures were cooked up to give an impression of false growth. To add to misery, pension funds and government-linked companies were told to invest in the stock market.
Undoubtedly the sudden increase in consumer credit gives a boost to the production industry but as long as the investment in the production sector is higher than consumer credit, it will result in overheating and inflation. During 2006-07 the well-manipulated fake growth was managed by deferred oil payments, rescheduled debts and non-payments to power producers. The entire saving from these payments was directed to the consumer market and equity trading. The Karachi Stock Exchange rose from meagre 800 points in 1999 to over 15,000 points in 2007, meaning an injection of $70 billion. Although there was growth in the production sector it was not proportionate to the huge injection in equity markets. During the surge in the stock market, many earned hefty profits and became billionaires without adding anything to real 'productivity' or GNP.
I also agree with the writer that non-inflationary growth with moderate imbalances is healthy for economy but it has to be backed by proportionate growth in the production sector. Otherwise, it can never be sustained. This is what happened to Shaukat Aziz's economic bubble. When the new government took over, the immediate liabilities were far greater than available foreign exchange reserves and the entire structure created in a vacuum collapsed. Although the figures, fudged in his time as the economic wizard, were pretty attractive that was merely a scam. The most unfortunate aspect of this manipulation was of non-investment in the power sector, especially the dams, and it will continue to haunt us in future.
Ahmad Nadeem Gehla
Kedah, Malaysia
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With reference to Dr Meekal Ahmed's letter in the Nov 5 edition of your newspaper, I would like to assure him that a great number of the readers of The News welcome his letters on economic issues as they give an unbiased opinion of a seasoned economist who has a vast experience both in Pakistan and at the International Monetary Fund. Dr Ahmed is right in saying that "the seeds of the economic crisis of 2007-08 were sown during the halcyon that Dr Khan is so obsessed with". An economy is like a human body which shows signs before the actual malaise strikes.
These signs were visible long before 2007-08, but Musharraf's economic team either could not see or deliberately neglected them as it was busy all the time portraying a rosy picture of the economy. The members of that team still waste no opportunity to tell us how the economy was moving up and prosperity was all around during 2000-07. In this backdrop, Dr Ahmed's brief and succinct letters clear the fog and misconceptions created through the manipulation of facts and figures.
Prof Dr Sabit Rahim
Islamabad
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