The Economic Survey and budget of Pakistan are out. The Survey has painted a promising picture of major economic indicators.
It came up with 5.97pc GDP growth due to decent growth of industry (7.2pc), services (6.2pc) and agriculture (4.4pc). It surprised many experts, including international agencies.
Pakistan Tehreek-e-Insaf (PTI) is celebrating numbers and better management of economy as their success.
The ruling coalition is unable to understand the myth of magical numbers.
However, analysis of numbers tells us a different story and certain areas require attention and serious debate.
First, the GDP growth is mainly fuelled by consumption with 96.2pc. Household consumption is biggest contributor with 85.2pc. Majors reasons of unprecedented contribution of consumption are cash transfer schemes, increased number of vehicles and luxury items.
Consumption in itself is not bad if it is being met by domestic production system. Unfortunately, in the case of Pakistan, it is opposite and Pakistan had to import to meet the demand.
It resulted in record current account deficit as country had to meet the demand by importing.
Second, agriculture growth was mainly triggered due to three factors, machinery import, livestock and increase in the production area of major crops.
The cropped area of maize was increased by 16pc followed by sugarcane and rice with 8.2pc and 6.1pc respectively. Owning to increased crop area, these crops showed positive growth rate.
On the other hand, wheat crop area decreased by 2.1pc which resulted in decrease in production. Besides, Pakistan will have to adjust wheat production estimates because in many areas of Pakistan, climate change impacted the growth of grain.
Third, industrial growth rate is highly skewed in favour of few products e.g. food, tobacco, automobile, furniture and wearing apparel.
It is interesting to note here that wearing apparel was introduced as new category after rebasing the economy with the base weight of 6.08.
Textile sector, which had weight of 20.9, was reduced to 18.16 by excluding wearing apparel.
Now, both categories occupy same weight (24,24). Knowing that textile was performing well during COVID-19 due to closure of economy of competitors, government changed the weight formula to show good growth. Besides, senseless growth of automobiles has further stressed the economy.
It resulted in fly of foreign reserves as assemblers had to pay back money in US dollars. It also contributed to increase the oil import which again hit foreign reserves.
The case of tobacco is even more alarming because Pakistan committed WHO to reduce use of tobacco.
However, favourable conditions for tobacco industry are helping it to flourish.
It can be concluded that fancy numbers of Economic Survey have been built on very weak bases. Consumption-led growth without production base is a disastrous recipe.
It is worrisome situation, but PTI is celebrating it. Budget 2022-23 also tells the same story. It seems to be continuity of directionless policy.
It is pity to note that coalition government tried to mitigate political negativity rather than fixing the economy.
They have presented numbers which do not have economic rational and cannot hold ground In front of IMF.
For example, government revised the limit of taxable income to Rs1.2 million and announced to bring down tax to zero for import of seed and machinery and some other input.
Unfortunately, these announcements are against the conditionality of IMF.
However, government can implement these decisions by abolishing subsidies for the elite. But, government does not seem in a mood to compromise on elite class, rather trying to enhance benefits for them. For example, it has given a special executive allowance to senior bureaucracy in addition to 15pc increase in salary. Second, government is continuously expanding the cabinet.
It cannot be figure out, in such a difficult situation, how government can expand or increase the perks of bureaucracy? But, it is happening at the cost of common people and country.
After ensuring subsidies and perks for elite class, government has started to lobby and convince common citizens to take bitter pill of IMF.
The campaign is being led by the Prime Minister and assisted by Finance Minister. A few days back, Finance Minister was telling media IMF was not happy and government would have to take tough decision. So, the process of U-turn has started.
It is expected that after going to IMF, government will pretend as innocent and will tell people; we tried to give you relief but IMF is not allowing us. We will have to eliminate subsidies for common people.
The glimpses are already visible as coalition government has started to talk about increase in the prices of oil, essential goods and taxes on personal income.
It will lead to a new wave of inflation which will be different witnessed in the past.
We know rupee is depreciating and prices are increasing. On top of that, if government increases personal taxes, it will add salt to injury. It will be beyond the capacity of middle class and poor to sustain the shock.
The solution government is suggesting to common citizens is to avail BISP relief packages. It is another way to secure votes and oblige bureaucrats (by offering lavish packages).
Thus, it can be inferred that numbers do not tell true story of economy which further complicate the crisis.
Hence, if the ruling alliance wants to overcome crisis, they need to speak truth and tell the people real story.
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