Thursday February 02, 2023

Is govt suppressing data or expecting a turnaround?

September 10, 2019

LAHORE: There is polarity in views on the economic performance of the country under PTI’s 13 month rule, with only government functionaries claiming a turnaround in sight, while almost all economists see no light at the end of the tunnel.

Even economists in the government panel openly criticise state policies. Dr Ashfaque Hasan Khan is amongst them. Independent economists see the economy going down as a result of flawed policies, and Dr Hafeez Pasha, the veteran respected economist issues frequent warnings in this regard.

Businessmen in the government panel also wonder at what is happening on the economic front. The Pakistan Bureau of Statistics has held back the trade figure for the month of July even in the second week of September; probably waiting for the public to forget what Advisor to Prime Minister on Commerce Razzak Dawood boasted about exports in the second week of August.

The central Bank has finally come out with figures that are much lower than what the commerce advisor stated. The government side is playing politics on economic progress. For instance they insist that exports in terms of quantity have increased, but the unit value has declined.

They do not explain why the unit price has declined. If they analyse the performance of all subsectors of our textile (mainstay in exports), they will find that every time the rupee was devalued by 5-7 percent in one go, the unit value declined.

The imprudent manner in which the currency was devalued gave foreign buyers ammunition to force the exporters to pass on major share of increase to them. The unit price of textile products declined in other economies as well, but marginally, and much less than the decline in unit values in Pakistan.

The need of the hour is to increase our exports in terms of value. July was the first month in this regimes tenure when the exports in value increased by double digit. But this month alone cannot be taken as an indication that the exports are on rise. The performance of subsequent months (at least a quarter) would indicate the way exports are performing.

Opposition MNA Dr Ayesha Ghaus Pasha has rightly pointed out the increasing policy rates when the inflation cost push is further dampening demand. The Indian central bank has been easing its policy rate for over a year in order to increase demand.

The United States did so for over a decade to avoid recession. We were already in recession, and the higher policy rates are further drowning the economy. It seems to be a ploy to enrich the banks where the main client is the government. Higher interest rates increase the debt servicing of the government on domestic debt that is higher than foreign debt.

Debt service on foreign debt has already skyrocketed because of massive devaluation of rupee. The debt servicing expenditure would continue to grow as we are set to acquire billions of dollars of foreign loans and over trillion rupee domestic loans in foreseeable future. Only reduction in policy rates would provide any reprieve to the state.

Inflation has remained in double digit despite change of base year. The CPI basket has also been changed. Is it based on ground reality? The government has increased the weight of energy in the basket, but has not touched the weight of food that remains at 34 percent.

The minimum wage has been fixed this year at Rs17,500/month – up from Rs15,000/month. Can any economist make out a budget for households earning Rs17,500/month based on the CPI index.

Majority of the population earns this amount (approximately (60 percent) assuming that 40 percent live below poverty line. Around 30 percent middleclass earns from Rs25,000-Rs50,000/month.

The remaining 10 percent are from upper middle class (high salaried class) and rich industrialists or landlords. For the sixty percent of the population the cost of food is over 50 percent of their monthly income.

For poorer segments it may go up to 80 percent. Why was this aspect ignored in the CPI basket? Why we continue to twist statistics according to our wishes and not on ground realities. Pakistanis would continue to suffer until reality based statistics are released. This would facilitate planners to remove the deficiencies in planning and set priorities to help the poor.