Numbers’ game

Hiding the bitter facts about the health of the economy, the government has once again resorted to numbers game. Addressing a press conference in Karachi on Thursday, State Minister for Finance Rana Muhammad Afzal claimed that the country currently holds foreign exchange reserves of 19.7 billion US dollars and is also able to control its trade deficit. But on 30th December 2017, while talking to reporters, he admitted that Pakistan has to pay $ 6 billion foreign loans in the next six months and the current account deficit is $ 12 billion. The minister gave a vague picture of the economy. He said, “Since stability is rampant there is no need of concern.”He categorically said that the financial managers of the country are not contemplating to contact the International Monetary Fund (IMF) in the near future but in the same breath added, “We, however, always keep our door open to all possible options.”It reflects a simultaneous thesis and antithesis of the economic situation to conceal the facts.

Gross foreign exchange reserves, held by the State Bank and Commercial Banks, stood at $ 14.133 billion on December 22. The State Minister for Finance should have told that how a rise of $ 5 billion was achieved just in 12 days when the exports are falling and imports are fast rising. The recent increase in the prices of petroleum products will further vitiate the already bad economic environment, negatively impacting the exports. The opinion of the chambers of commerce and industry about the economy provide a valid assessment as to whether economy is rising or falling. The Lahore Chamber of Commerce and Industry (LCCI) in their meeting of 20th December repudiated the all is well claim of the government, painted a very grim picture of the economy and warned the government that economy is slowly heading towards the point of no return. They urged the decision makers to revisit the economic policies. LCCI President Malik Tahir Javed decried in a statement that industry is the main victim of deepening economic crisis, whereas rupee depreciation is adding to the economic miseries of the country.   He said that sky high tariffs of energy inputs have created stagnation in the manufacturing sector and export products are losing their competitive edge in foreign markets. In this dismal economic scenario how a spectacular growth in foreign exchange reserves was achieved. There is no indication that government has acquired more commercial loans to raise these reserves. The IMF loan program had ended in 2016, and then what is the source of capital inflow for piling up foreign exchange reserves? Because of the ruptures in PAK-US relation the United States has stopped the delivery of $256 million economic aid.

If the State Minister for Finance claim of $ 19.7 reserves is correct even then the health of the economy is not satisfactory. The combined external loans and foreign trade payment liabilities are $ 18 billion plus. After the payment of these liabilities, the foreign exchange reserves will fall to a dangerous level and situation will be more or less identical to that of October 1999 when the country was virtually on the brink of default. The government should hold meaningful consultations with the business community as to how best exports can be boosted during the next few months. The government is also reluctant to give political support to FBR for expanding the tax base by bringing wealthy people and unregistered companies under the tax net. The number of tax filers is 1.14 million and 42 percent of registered companies and unregistered partnership firms have not filed their tax returns. The FBR do have the data of millions of tax evaders and the commercial banks are willing to provide more data of wealthy individuals and firms that are out of the tax net. The political expediency should not be a delaying factor in the implementation of much needed tax reforms. It is time that government demonstrates realism and initiate measures for the turnaround of the economy.