Friday May 20, 2022

Playing with the numbers

January 22, 2022

LAHORE: The pathetic allocations for education and health and tax to GDP ratio were exposed when the government celebrated the debasing of the national accounts to 2015-16, which showed an increase in GDP growth to 5.57 percent in 2020-21.

Debasing was required to reflect the true picture of the economy. The national GDP as a result has increased to $348 billion (some sectors were included in national accounts and some reevaluated).

The per capita income also jumped to $1,666. The increase in per capita income was pocketed by the elite only as the common man is living as miserably as ever.

Usually when GDP growth rate is high, it is accompanied with general prosperity and decline in employment rates. The fact that the masses are suffering from price hikes due to stagnant incomes also shows that the growth was pocketed by the elite.

This is in line with the global trend where the richest have seen their wealth doubled after Covid-19. Developed economies compensated their non-rich population through regular support to offset the impact of high inflation that has hit them as well.

Another revelation accompanied with increase in total GDP was that the tax to GDP ratio has come down to miserly 8.6 percent -the lowest in the past 25 years. This again points towards accumulation of wealth in fewer hands.

It also negates the claim of this regime that it was serious about increasing tax compliance in the country. It will have to make hectic efforts to bring the tax to GDP ratio to the level of the past regime.

By simply pointing out GDP growth, the government cannot run away from the stark realities that debasing has exposed. Moreover, if the base year was changed in 2015-16 then the GDP growth of 2017-18 should also have been incorporated.

It would have shown the growth that year was much above 6 percent and not 5.3 percent as reported earlier. In that case that would be the highest growth in the past 14 years and not that of the year 2020-21 as claimed by this government.

Debasing reflects the reality of the economy. It also exposes the positives and negatives of the economic performance of the government.

The GDP growth of last year increased from 3.94 percent to 5.57 percent. Government takes pride in boosting industry, but after debasing the share of industry in the GDP has declined from 20.9 percent to 19.5 percent.

Pakistan has the lowest literacy rate in the region (except for Afghanistan) but its allocations for education have declined to below 1.9 percent of the GDP. Similarly, Pakistan’s health indicators are the lowest in the region, including average age, infant mortality rate, anaemia among women children, and stunting.

Even before debasing, health spending was merely 1 percent of GDP, but after rebasing the health allocations are down to 0.5 percent. Debasing has exposed the oft repeated government claim of giving priority to education and health.

As far as the health card is concerned, the planners ignored the fact that this card serves only those patients who are hospitalised. It is of no use for general illnesses like fever, cough, flu, diabetes, heart ailments or blood pressure requiring regular medicines and treatment.

Patients suffering from these illnesses require regular treatment and they flock to the government hospitals and clinics. These government facilities would become redundant after issuance of health cards, or the state would charge for the medicines.

Provinces that have not gone for health cards would probably serve their population better. After debasing, the share of the development budget as a percentage of GDP has declined to its lowest level in three decades. On top of that, the government has agreed with the International Monetary Fund to cut the development outlay by Rs250 billion.

Debasing of national accounts should be an eye opener for the rulers, who must now plan to reduce inequalities, increase education and health allocations and increase the tax base. To keep the tax to GDP ratio high, the petroleum levy has been treated as tax revenue. Earlier it was non-tax revenue.

The tax revenue would increase while non-tax revenue would decline.

Playing with statistics would not resolve our problems. It is time to keep the national interest supreme. The elite should be targeted irrespective of their political clout. This government should learn from the Indian government of 1990 that took difficult decisions resulting in its ouster from power, which nevertheless paved the way for sustained growth in India.