PRIME Minister Yousuf Raza Gilani recently stated that he was the longest-serving prime minister of the country. He could have also been the most admired if he had mustered the necessary courage and foresight to address Pakistan's deep-rooted economic challenges.

A review of macroeconomic indicators shows that the economy has performed poorly in almost all areas during his tenure so far. As data is available on a fiscal-year basis only, let us take July1, 2008, instead of March 25, 2008 when he took charge, as the starting point of the review of the economy under him.

In the first three years of his government, the average annual rate of economic growth was 2.6 per cent as compared with 5.4 per cent in the preceding three years. The commodity-producing sectors grew at an even lower annual rate of 2.2 per cent.

The growth rate was about the same as that of the population and, therefore, real per capita income remained stagnant.

With growing income inequality, most people were in fact economically worse off compared to the time he assumed office.

The average investment-GDP ratio declined to 15.6 per cent from 20.5 per cent. The level of investment directly affects the growth rate and it rarely improves when investment is falling.

The average national saving-GDP ratio fell to 13.1 per cent from 16.2 per cent in the preceding three years. Most of the neighbouring countries have a savings rate of more than twice that in Pakistan. Whatever savings took place was in the private sector.

The public sector was a net dis-saver in the three years following his taking charge. In FYll, government expenditure on debt-servicing and defence together exceeded the total rev-enue of the federal government.

In other words, all the civilian non-debt servicing current expenditure and the entire development expenditure of the federal government was financed by internal and external borrowing. Consequently, the total government debt increased to Rs11,525bn on June 30, 2011. At this level, every citizen was burdened with a government debt of Rs64,000.

The price situation worsened sharply. The consumer priceindex increased by an average annual rate of 15 per cent in his first three years compared with nine per cent in the previous three years. This is the only government in whose period inflation remained in double digits all the time.

More importantly, prices of everyday food items rose alarmingly, adversely affecting the budget of the low-income population. For example, in three years, the price of maash pulses went up by 229 per cent, onions by 204 per cent, sugar by 105 per cent, kerosene by 95 per cent, tea by 77 per cent, mutton by 74 per cent, wheat by 57 per cent, eggs by 47 per cent and vegetable oil by 39 per cent.

Contrary to explanations given by official circles, the double-digit inflation was basically a policy-driven phenomenon.

An expansionary fiscal policy increased money supply at an annual average rate of 13 per cent in three years as against the output growth of 2.6 per cent leaving an 'inflationary gap' of 10.4 per cent per year.

Simultaneously, unemployment increased due to the adverse impact on economic activity of lower investment, increased loadshedding and gas rationing, rising lawlessness, and addition to the workforce due to the growth in population.

There were two outwardly bright spots in the economy for which the government has been claiming credit: remittances increased from $6.4bn on July 1, 2008 to $11.2bn by end-June 2011, and foreign exchange reserves of the State Bank from $8.6bn to $14.8bn.

The increase in remittances was partly due to worsening domestic unemployment and rising cost of living of the families left behind, requiring larger financial support from workers abroad.

Additionally, tightening of international regulations for, and surveillance of, money transfer across borders diverted remittances from informal to official channels. Increase in foreign exchange reserves reflected mainly borrowing from the IMF and other multilateral and bilateral sources. In the first half of FY12, all macroeconomic indicators showed a sharp deterioration. Government borrowing for budgetary support increased to a record level of Rs840bn during June-December 2011 compared with Rs308bn in the same period of FY11, and money supply was up by seven per cent despite a decline of Rs130bn in net foreign assets.

Stagnant exports and sharply rising imports gave rise to a large trade deficit of $6.4bn and a current account deficit of $2.1bn during July-November 2011. The exchange rate came under pressure and depreciated substantially in the first half of FY12.If the macroeconomic trends of the first half of the year continue in the second half, FY12 would turn out to be the worst year for the economy.

It is obvious that the performance of the economy during the current dispensation is turning out to be the most disappointing of all previous governments. The growth rate has been the lowest and the inflation rate the highest.

Savings and investment rates have declined. Budget deficit and government debt have risen sharply, and public-sector enterprises have become bankrupt. General public and industries have faced increasing loadshedding, gas rationing and lawlessness.

Government borrowing from the banking system increased sharply, foreign exchange reserves declined in the first half of FY12 and the exchange rate came under pressure. Most importantly, notwithstanding the government's sloganeering, the sufferings of the poor have multiplied.

The country is indeed in a grim economic situation. Mr Gilani needs to pay attention to the sinking economy rather than talking about the longevity of his tenure.

The writer is a former governor of the State Bank of Pakistan.