WITH macroeconomic data for major part of the outgoing financial year now available, a number of grey areas surfacing out of weak fiscal and economic management have come to light dashing hopes for an economic turn around in the near future.

To start with, in the first nine months (July 2011-March 2012) fiscal deficit has turned out to be Rs1.286 trillion against a budget target of Rs949 billion, higher by 66 per cent. And this does not include estimated Rs130 billion to be injected into the ever losing power sector.

That indicates that the fiscal deficit might have already gone beyond 6.1 per cent of GDP in the first nine months against an annual revised target of 4.7 per cent even though the data relating to last quarter are not yet available. A “one off” payment of Rs391 billion as a result of additional debt is reported to have played a key role here. On the other hand, there are now clear indications that the FBR would stay short of meeting its revenue target of Rs1.952 trillion by at least Rs35 billion.

Second, the available data have also called into question the government’s revenue mobilisation effort as the tax-to-GDP ratio is disappointing, notwithstanding better collection in absolute terms.

Official numbers put the total revenue in nine months at 8.3 per cent of GDP, down from 8.6 per cent, of the same period last year.

Similarly, the non-tax revenue posted a significant decline and stood at 1.7 per cent of GDP compared with 2.2 per cent of GDP achieved in three quarters of last year. That could perhaps be attributed mainly to unrealistic budgetary projections about key inflows like exchangeable bonds, Coalition Support Fund disbursement from the US, telecom licences and privatisation proceeds on account of PTCL.

Third and more importantly, the targets for total investment and savings also seem to have been missed by a significant margin. This is more tragic given the fact that investment and saving ratios are already too low compared with other regional or comparable economies.

The government has officially confirmed that total investment as percentage of GDP will be only 12.5 per cent during the current fiscal year against a revised estimate of 13 per cent and budgetary estimate of 13.8 per cent fixed in June 2011.

Even more ironically, the national savings for the current year are now estimated at a disgusting 10.8 per cent against the budgeted 13.1 per cent target and 13.8 per cent saving rate achieved a year before (in 2010-11). A few factors behind the dismal national savings could be the continued higher inflationary trends, failing economic policies and huge profits earned by the banking industry at low returns to depositors and investors.

The more worrying fact is that the average saving rate has declined from over 18 per cent of GDP in 2000-01. In comparison, the saving-to -GDP ratio in India has improved to 29 per cent last year. The investment rate that hovered around 17 per cent in 2000-01 has now come down to about 12 per cent. While the fall in these two indicators is alarming, the policy action to reverse the trend has been missing over the last four years.

The government may like to easily park these failures against the adverse security situation but the fact is that the continuously rising energy costs and shortfalls and an anti-investment stance prevailing in the country are more to be blamed. An unannounced restriction at bureaucratic level on issuance of visas and work permits to foreign nationals working in major international companies to secure bribes and commissions and increasing number of adverse judicial decisions are case in point.

Many independent economists attribute root cause of these problems to weak fiscal management. This has led to persistent high fiscal deficit and increased borrowing from external and high cost non-bank sources. The result has been a challenging external and internal debt and its servicing, higher interest rates and inflation, leaving little room for the public sector to expand.

And the government, now in fifth year of its rule, has not been able to stop or reverse the declining trend in savings and investments and the faltering tax-to-GDP ratio. Seen in the context of its own targets of increasing tax-to-GDP ratio of 15 per cent by 2013,it has miserably failed.

In all these years, the government has not been able to achieve its budgeted targets for total revenue, tax revenue, federal taxes, FBR taxes and provincial taxes.

Estimates also suggest that about 12 per cent of the existing tax burden was being borne by the poorest 20 per cent of the population, compared to 13 per cent and 15 per cent in the next two income quintiles, respectively. This apparently suggests that the government has relied on taxes that are easiest to collect without any effort from the tax machinery.

It is in this scenario that next year GDP growth rate target has been put at 4.3 per cent, showing a weak macroeconomic environment, political uncertainty and natural disasters impeding economic recovery, according to official statements.

It says the growth in 2012-13 will largely depend upon recovery in the large-scale manufacturing sector which can capitalise upon its existing idle capacity. The agriculture sector also needs to reinvigorate growth momentum. Additionally, adequate resource availability to finance development framework would be critical for growth but remain subject to risks like deterioration in energy supply, extreme weather fluctuations, and fiscal profligacy.

The investment is targeted to improve from the current level of 12.5 per cent of GDP to 13.1 per cent in 2012-13, with government expecting contribution both from public and private investments. Fixed investment is estimated to grow from 10.9 per cent to 11.5 per cent of GDP. The government also expects the national savings to improve slightly from 10.8 per cent of GDP in 2011-12 to 11.2 per cent in 2012-13.

The government agrees that Pakistan needs structural and fiscal reforms that help in the long run, but do not depress demand in the short-run, requiring a careful articulation to strike a balance between growth objective and fiscal consolidation. The fact, however, remains that poorly targeted and unanticipated bailouts of public sector enterprises continue to be a significant drain on budgetary outlay and pose key question if these cash bailouts are sustainable.