EAC member steps down

ISLAMABAD: The high-profile Economic Advisory Council (EAC) has lost yet another member who tendered his resignation citing personal reasons, it has been learnt.

Sakib Sherani is fourth in the row of members who have tendered their resignations so far. Though Sherani cited personal reasons for stepping down, there are voices coming from the members that the EAC has been bypassed on preparation of macroeconomic framework or finance supplementary (second amendment bill) 2019.

This debate has arisen in the council whereby the members have raised questions as to why the forum had not been taken into confidence on such an important document known as macroeconomic and medium term budgetary framework for next five years starting from 2018-19 to 2022-23. “The macroeconomic framework has been literally outsourced leaving the economic policy making at the mercy of ADB, WB and DFID retirees,” the sources said, adding that this policy had also disturbed the EAC ranks.

Prime Minister Imran Khan constituted the EAC that comprises renowned economists but its four members have tendered their resignations so far.

Sherani headed a consultancy firm on economic and revenue related issues after quitting as economic advisor to the Ministry of Finance during the tenure of PPP government.

When The News contacted him on Friday for seeking his comments and asked in writing why he had stepped down and whether he got disturbed when the EAC was not consulted on major economic issues, he replied, “I resigned because I had stopped my work for the past five months to avoid conflict of interest. This voluntary unemployment had become unsustainable. I had informed both the prime minister as well as finance minister”.

Earlier, three members of EAC, including Atif Mian, Dr Imran Rasul and Asim Ijaz Khawaja, had resigned.

A top official of Finance Division told this reporter that Sherani had informed the government in the maiden session of the EAC that he might not be able to continue for more than a few months because it was not sustainable for him to keep doing the consultancy work.

On the issue of not taking the EAC members into confidence, he said the finance minister had instructed convening the EAC meeting to share the draft of macroeconomic framework strategy next week and making it public after incorporating their comments.

However, sources said four sub-groups of EAC had been constituted for framing recommendations about different sectors of economy and one such group had worked on macroeconomic framework. However, complaints came out from other members of the EAC that the macroeconomic framework had never come into discussion in any whole meeting of the EAC in which all members were present.

The macroeconomic and medium term budgetary framework will be unveiled next week by Minister for Finance Asad Umar as he had made commitment to this effect during his speech on the occasion of presenting finance supplementary (second amendment) bill 2019 in Parliament on last Wednesday.

The sources said the macroeconomic framework should have been tabled before the EAC as a whole to get their input because there was increasing criticism that it had been prepared on the basis of flawed assumptions.

Even renowned economist Dr Hafiz Pasha who is not EAC member had severely criticised formulation of this framework on the basis of wrong assumption.

If the government claims that its macroeconomic and budgetary framework is consistent then it can be checked through the World Bank’s model known as RMSM.

The RMSM is known as the Revised Minimum Standard Model (RMSM) which was originally created in 1973 as a means of ensuring a consistent approach to the World Bank projections and thus facilitate inter-country comparisons.

These objectives are met through the provision of a standard list of variables and a minimum set of economic relationships. The RMSM is a thinking and planning tool.

Its primary purpose, like the original two-gap models, is to show the user what levels of investment, imports, and external borrowing will be required for a targeted real GDP growth rate. The planners’ choice of a real growth rate will determine what level of investment will be necessary.

Now the PTI-led government envisages GDP growth rate at 3.3 percent for the current fiscal year under macroeconomic framework and projecting that it will go up to 6 percent by end of the tenure of the PTI led regime in 2022-23.

On the other hand, the current account deficit has been projected steep fall ranging from 6.1 percent of GDP in last fiscal year 2017-18 to 0.2 percent of GDP by end of tenure of the PTI-led regime in 2022-23. With this assumption, the investment and savings will have to jack up almost doubled in next five years that seems impossible equations to achieve the desired results.