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ECONOMY 2014


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For the media, good news is not news. To be certain, every coin has two sides and every cloud has a silver lining. Yes, the economy is cloudy, murky and muddy but here’s the silver lining:

One: Budget deficit, the root cause of at least a hundred other financial ills, is at 5.5 per cent of GDP ‘more contained than an average budgetary deficit of 8 per cent of GDP over the past three years. In rupee terms, that amounts to an improvement in excess of Rs500 billion in just one year.

Two: Construction activity is up 11.3 per cent, LSM is up 4 per cent and electricity supply is up marginally by 3.7 per cent (LSM is large-scale manufacturing including fertilizer, chemicals and leather).

Three: Foreign exchange reserves are up by a hefty 40 per cent from $9.5 billion in October 2013 to $13.2 billion in October 2014.

Four: Rural income, country-wide consumption expenditures, wholesale and retail trade volumes are all up. Rural income is up because of bumper harvests of wheat, sugarcane and rice. And consumption is up because of increased foreign remittances and higher rural income.

Five: After a gap of seven years, the minister of finance managed to sell $2 billion worth of Eurobonds (against an initial target of $500 million).

Six: Privatisation is underway after a break of seven years. Target: $4 billion.

Seven: On August 18, the IMF issued the following statement: ‘The IMF is encouraged by the overall progress made in pushing ahead with policies to strengthen macroeconomic stability and reviving investment and growth. Economic indicators are generally improving, with growth continuing to momentum.

Now the cloudy, murky and muddy part of the economy:

One: No reforms, neither expenditure nor taxation. No reforms, neither fiscal nor monetary. No regulatory reforms either. The economy is going nowhere without reforms ‘and there are no reforms on the agenda.

Two: The government has completely failed to decipher the energy sector puzzle. A 60 per cent increase in electricity tariff is rendering the export sector globally uncompetitive (exports are down 7 per cent).

Three: The trade deficit is widening as exports are declining and the import bill is rising.

Four: Rising income inequality; rich getting richer, poor poorer. The economy is getting more and more cartelised and the cartels are becoming more and more powerful ‘the power cartel, the oil cartel, the sugar cartel, the cement cartel and the banking cartel.

Five: The Public Sector Development Program (PSDP) on the butcher’s block ‘down a scary 25 per cent from a budgetary allocation of Rs1.1 trillion to an actual spending of Rs865 billion.

Six: No strategy or plan to remove structural constraints to investment and growth. Look at Pakistan’s global ranking on ‘ease of doing business’ slipping.

Seven: The PML-N in a fix; restless voters on the one side and a stringent IMF on the other.

By:Dr Farrukh Saleem


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