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ISLAMABAD: Dr Ashfaque H Khan, eminent economist and former economic advisor to the finance ministry, has termed the incumbent government’s bad governance and the non-serious attitude of its economic team to be responsible for the country’s economic collapse. He stated this during a seminar titled ‘Audit 2012: perspectives on economy, energy, rule of law and democratisation’ organised by the Center for Research and Security Studies.
He said that a great threat has been posed to the country’s survival due to the way the economy had been managed in the last four and half years. “The economy has never been on the present government’s radar and without a strong economy, neither democracy can flourish nor can the country’s defence be ensured,” he said. During the last four and half years, four finance ministers, six secretaries of finance ministry, four governors of the central bank and six Federal Board of Revenue (FBR) chairmen were changed. “When there is no stability in the economic management team then how can we have a stable economy?” he added.
According to Khan, Pakistan’s foreign exchange reserves depleted to $8.6 billion by end-June 2012 from $14.8 billion in June 2011. “The reserves of commercial banks are on the rise as compared to the central bank’s foreign exchange reserves,” he said. “When the commercial banks’ reserves start increasing, it means that dollarisation has picked momentum.”
He added that Pakistan’s public debt swelled to Rs6 trillion only in 60 years, which increased to Rs13 trillion in the last four years and is likely to further increase up to Rs14.5 trillion by end of June 2013. He believes that the economy has never been in such a bad shape as it is today. He dispelled the present government’s stance that it had inherited a shattered economy through facts and figures compiled by the government itself and global financial institutions. “Pakistan’s total GDP increased from $60 billion in 2000-01 to $170 billion in 2007-08. Real GDP growth was seven percent with low inflation during the same period. The government policies contributed towards reduction in poverty and improvement of social indicators,” he underlined.
Macroeconomic progress, according to Khan, resulted from the implementation of a series of structural reforms during the last government’s era. He narrated that although there were challenges during the current government’s tenure, it could address these challenges through better financial discipline and political will. But unfortunately, it has failed to address these challenges so far and the result is a 2.9 percent GDP growth. Meanwhile, the budget deficit averaged around seven percent of GDP and the public debt more than doubled in four years. Over $20 billion foreign debt accumulated in four years. Inflation persisted in double digits for 50 months in a row, whereas the rupee lost 36 percent of its value, noted Khan.
Regarding next year’s outlook, he said that the economy will grow around three percent of GDP. The investment-to-GDP ratio will further decline and industrial growth will remain flat. Pakistan will face a large financing gap and will be unable to service its external debt obligations. The country will have to go to the IMF again, he projected.
He added that no party will win an all-out majority in the upcoming elections and a coalition government will further hamper the prospects for economic revival. He observed that financial discipline will be the litmus test for the new government.
Also speaking on the occasion was Daniyal Aziz, former chairman of the National Reconstruction Bureau. While mentioning the importance of devolution of power to the local government level, he said that unless the fundamentals such as peoples’ empowerment through devolution are addressed, it will be difficult to fight against insurgency.
He pointed out that almost 80 percent of the fight against insurgency is through political means and about 20 percent through the military.
Energy expert Arshad Abbasi said that oil production has decreased by five percent in the past one year. He added that the energy crisis in Pakistan is due to mismanagement and corruption. “We have power generation capacity of 235,000 MW but we can only generate 14,000 MW due to lack of resources and mismanagement, while our demand is 18,000 MW,” he said. He proposed that the government should invest heavily in hydropower projects, rather that subsidising the import of oil.
He said that a great threat has been posed to the country’s survival due to the way the economy had been managed in the last four and half years. “The economy has never been on the present government’s radar and without a strong economy, neither democracy can flourish nor can the country’s defence be ensured,” he said. During the last four and half years, four finance ministers, six secretaries of finance ministry, four governors of the central bank and six Federal Board of Revenue (FBR) chairmen were changed. “When there is no stability in the economic management team then how can we have a stable economy?” he added.
According to Khan, Pakistan’s foreign exchange reserves depleted to $8.6 billion by end-June 2012 from $14.8 billion in June 2011. “The reserves of commercial banks are on the rise as compared to the central bank’s foreign exchange reserves,” he said. “When the commercial banks’ reserves start increasing, it means that dollarisation has picked momentum.”
He added that Pakistan’s public debt swelled to Rs6 trillion only in 60 years, which increased to Rs13 trillion in the last four years and is likely to further increase up to Rs14.5 trillion by end of June 2013. He believes that the economy has never been in such a bad shape as it is today. He dispelled the present government’s stance that it had inherited a shattered economy through facts and figures compiled by the government itself and global financial institutions. “Pakistan’s total GDP increased from $60 billion in 2000-01 to $170 billion in 2007-08. Real GDP growth was seven percent with low inflation during the same period. The government policies contributed towards reduction in poverty and improvement of social indicators,” he underlined.
Macroeconomic progress, according to Khan, resulted from the implementation of a series of structural reforms during the last government’s era. He narrated that although there were challenges during the current government’s tenure, it could address these challenges through better financial discipline and political will. But unfortunately, it has failed to address these challenges so far and the result is a 2.9 percent GDP growth. Meanwhile, the budget deficit averaged around seven percent of GDP and the public debt more than doubled in four years. Over $20 billion foreign debt accumulated in four years. Inflation persisted in double digits for 50 months in a row, whereas the rupee lost 36 percent of its value, noted Khan.
Regarding next year’s outlook, he said that the economy will grow around three percent of GDP. The investment-to-GDP ratio will further decline and industrial growth will remain flat. Pakistan will face a large financing gap and will be unable to service its external debt obligations. The country will have to go to the IMF again, he projected.
He added that no party will win an all-out majority in the upcoming elections and a coalition government will further hamper the prospects for economic revival. He observed that financial discipline will be the litmus test for the new government.
Also speaking on the occasion was Daniyal Aziz, former chairman of the National Reconstruction Bureau. While mentioning the importance of devolution of power to the local government level, he said that unless the fundamentals such as peoples’ empowerment through devolution are addressed, it will be difficult to fight against insurgency.
He pointed out that almost 80 percent of the fight against insurgency is through political means and about 20 percent through the military.
Energy expert Arshad Abbasi said that oil production has decreased by five percent in the past one year. He added that the energy crisis in Pakistan is due to mismanagement and corruption. “We have power generation capacity of 235,000 MW but we can only generate 14,000 MW due to lack of resources and mismanagement, while our demand is 18,000 MW,” he said. He proposed that the government should invest heavily in hydropower projects, rather that subsidising the import of oil.
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