Economic indicators falling, planners seem unfazed

[Naveed Yaseen]

By Mansoor Ahmad
LAHORE: Economic planners are acting like an ostrich feeling secure while all macro-economic indicators are on the decline including employment, current account balance, foreign exchange reserves, trade balance, industrial production, consumer price index and exports.

Experts are dismayed as economic policies are moving in opposite direction to those pursued by governments in competing economies while taking into account current global recession. The policies in place are meant to curtail growth when the economy is already in a deep recession.

Indian and Chinese central banks have cut policy rate to 5.5 per cent and 5.75 per cent respectively, showing a significant decline in the past six months. However, the State Bank of Pakistan has increased its policy rate to 15 per cent. Economic experts question how high policy rate would help overcome recession in the country.

“Economic managers are living in a fool’s paradise,” said senior economist Naveed Anwar Khan. He said the Board of Investment was happy that foreign direct investment had slightly improved from last year when political uncertainty was at its peak.

However, “none of the new investment has gone into green projects meaning no increase in productivity or employment. Moreover, there is a huge outflow of portfolio investment which depicts low confidence of investors in Pakistan’s economy,” he said.

He said the Adviser to Prime Minister on Finance, Shaukat Tarin, only two months ago was extremely satisfied with revenue generation. In fact, he added, he was anticipating an increase in revenues, but tax collection was below target and would likely fall further.

With crude and edible oil at one-third of the prices prevalent at the time of presentation of budget in June 2008, the import bill should have come down by $3.5 billion, he said, adding the State Bank governor seemed elated when in the monetary policy he predicted the import bill would drop by $1 billion this year. “This would not even cover the advantage obtained from the two commodities.”

Dubai-based chartered accountant Faisal Qamar said the government had weakened regulatory institutions which could have brought down inflation in accordance with ground realities. For instance, he said, the Competition Commission of Pakistan had been denied funds to run its day-to-day affairs. “Instead of using its energies to check cartels, the CCP is fighting for its survival as it does not have resources to work till March.”

The Securities and Exchange Commission of Pakistan, he added, had lost its grip on the capital market as stock prices were at lowest levels in the past five years but still there were no buyers.

He said there was internal dispute in the Federal Board of Revenue after the formation of Inland Revenue Department which merged the direct taxes department with the customs, sales tax and excise department. These experiments should have been left for some other time when economic conditions would be better, he suggested.

Canada-based certified public accountant Asif Ali Shahid said the high policy rate of 15 per cent had assured that small and medium enterprises did not get bank financing, adding it would mean almost no creation of jobs and further closure of SMEs which would leave the existing workforce jobless.

He said job opportunities for Pakistanis around the globe were also very bleak.

The United Nations had already warned that in the best case scenario 20 million jobs would be lost around the world in 2009 and in the worst case the figure would go up to 50 million.

“Jobs would have to be created within the country by giving a boost to productivity,” he suggested.

http://www.thenews.com.pk/daily_detail.asp?id=160832