The worst ever?
BEFORE the budget of the next financial year is announced within the next few weeks, the Ministry of Finance is, as every year, expected to reveal its Economic Survey for the on-going fiscal year 2011-12.
The Economic Survey is a report card of the government’s economic performance over the last 10 months, and announces achievements in core economic indicators. These include the closely watched and much-cited annual growth or GDP rate, fiscal deficit, balance of payments numbers, the inflation rate, and a host of other numbers which allow economists to make arguments about the state of the economy and the performance of the government in power.
In recent years, however, with easy and frequent access to information and data, one does not need to wait for the last week of May to be able to assess the state of Pakistan’s economy, and economists pass judgements as and when key indicators are revealed and assessed. One usually knows what the broad trends of the economy are and this gives rise to predictions and much analysis.
Since this is also expected to be the last budget of the incumbent government, many analysts, some of whom are not economists, have been passing judgment on the performance of the first four years of this government. If one is to believe what many of the critics of this government are writing, this is probably Pakistan’s worst-ever economic performance, for which they squarely hold the incumbent government responsible.
One such writer, Ashfaque H. Khan, a key member of the Musharraf economic team, has written that “there is a general consensus within and outside the country that the economy of Pakistan has never been in such a bad shape since its inception in 1947. Pakistan has faced serious difficulties off and on over the last 64 years but has managed to sail through because of a competent economic team and strong leadership. Now there is a general view in the country that such leadership and economic team are missing today”.
Sakib Sherani, another key Musharraf economic adviser, writing in Dawn earlier this month, stated that the finance minister “has presided over an economy whose condition has never been worse, in aggregate terms, in Pakistan’s history”. Other economists, such as former State Bank governor Muhammad Yaqub have written that “the real threat to the survival of the country was not from India, the US or from terrorism, but from an economic collapse that may be closer than people think if certain policy actions are not taken”.
Is the analysis that this is Pakistan’s worst-ever economic performance valid, or is this merely point-scoring and political posturing by those who represent different political dispensations?
Many of the key economic numbers which are to be announced later this month in the Economic Survey will show that some are, indeed, the worst ever, or at least the worst in the last 50 years. While inflation was higher during the Z.A Bhutto government, there has hardly been a month of the 51 months in power of this government, when it has not been in double digits; this is a notorious first.
Similarly, the fiscal deficit has been in the range of 4-6.5 per cent under this government, but was higher — often more than eight per cent of GDP — under Gen Ziaul Haq’s military rule. The growth rate in the pre-9/11 Musharraf three years 1999-2002, after which his government received a bonanza and huge windfall, was a mere three per cent, but it has been lower, though only slightly so, over the last four years.
Overall domestic debt, which has been growing over the last four years, is still much lower than that which was accumulated over the Ziaul Haq period and in the period between 1988-1999. However, two indicators which are considerably worse and are particularly worrying are the falling tax-to-GDP ratio and investment.
There are numerous other indicators related to the economy, which have never been this good, despite problems in slowing trends. Per capita income continues to rise albeit at a slower pace; remittances and exports have also improved; and poverty is probably lower than many were expecting, given Pakistan’s slow growth and rising and persistent food inflation.
Any fair, unbiased account of the state of Pakistan’s economy shows that while parts of Pakistan’s economy have been in a poor state, this is certainly not the worst period ever. Moreover, many of the factors which have affected the current state of affairs have their origin in the policies of the Musharraf era.
Nevertheless, what is perhaps striking about the last four years has been the poor and wavering economic management and leadership of the economic team. The absence of vision, insight and any clear idea of what needs to be done, given Pakistan’s persistent and, in many cases serious and growing, economic problems, has been the most striking aspect in the leadership of the Ministry of Finance and the Planning Commission.
A committed and more able leadership was critical to improving Pakistan’s economic situation, and in this perhaps lies the government’s biggest failure. While it is clear that the economy’s overall performance has certainly not been the ‘worst ever’, the verdict on the economic team and its leadership, is less certain.
The writer is a political economist.