Cut the budgetary deficit into half – the real game-changer. Cut the circular debt into half – the real game changer. Finish off the losses at public-sector enterprises- – the real game changer. If you cannot do any of these things, then dream on.
Back to reality. An “economic indicator is a statistic about an economic activity. Economic indicators allow analysis of economic performance.” The top four economic indicators are: changes in GDP; balance of trade; budget deficit; and Consumer Price Index (Inflation). Remember, figures don’t lie.
GDP: According to the World Bank, Pakistan’s economic growth increased from 5.4 percent in 2017 to 5.8 percent in 2018. S&P, one of the big-three credit-rating agencies, now says that “Pakistan’s economy has slowed down and GDP growth forecast has been revised to 4 percent....”
Moody’s, also one of the big-three, has predicted real GDP growth to “slow down to 4.3 percent in fiscal year 2019….” The Economist Intelligence Unit (EIU) is projecting GDP growth of 2.9 percent. This slowdown would mean an economic hit to the tune of Rs1 trillion or Rs30,000 for each and every Pakistani family. Yes, this would also mean an increase in the rate of unemployment and a slowdown in construction activity. Auto sales are down 12 year-over-year and cement dispatches down 11 percent.
Balance of trade: The PML-N left a current account deficit (CAD) of $18 billion. The good news is that the CAD is projected to shrink to around $14 billion (primarily because of a sharp decline in the international price of oil). The bad news is that the rupee has lost more than 30 percent of its value against the dollar but our exports are up a meagre 2.2 percent. Yes, our rupee has lost 30 percent of its value but our imports are down only 5.2 percent. Clearly, the devaluation-focused medicine is not working.
Budget deficit: The budgetary deficit is the root of most financial evil – in Pakistan and everywhere else. S&P insists that “fiscal and external imbalances will remain high”. The PML-N left a deficit of over Rs2 trillion. The bad news is that the budget deficit is projected to explode to Rs2.5 trillion. To be certain, the way we calculate our budget deficit is grossly misleading. The Rs1.1 trillion loss at public-sector enterprises is not included. The Rs1.5 trillion accumulated circular debt does not show up anywhere. The Rs628 billion liability out of the government’s commodity operations does not show up anywhere. Alarmingly, an all-inclusive budget deficit will be close to 10 percent of GDP.
Inflation: the Pakistan Bureau of Statistics (PBS) insists that “inflation increased by 7.19 percent in January, the highest level in over four years.” I know that my gas bill has gone up by more than 300 percent year-over-year. Bus fares are up by 50 percent; tomatoes are 28 percent more expensive; diesel is up 19 percent; tea is up 17 percent; medicines and LPG cylinders are both up 15 percent. Alarmingly, the State Bank of Pakistan has warned that the rate of inflation could go up even higher.
In short, GDP growth is slowing down sharply and budgetary deficit – the root of most financial evil – is going through the roof. The rate of inflation is at a four-year high and exports are not picking up. In my opinion, the government is not even trying to cure the disease. The government is merely trying to suppress the symptoms. Curing the disease means structural reforms – and that isn’t taking place. Remember, figures don’t lie.
The writer is a columnist based in Islamabad.
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