Unfortunately the truth is not all milk and honey as some would want others to believe
http://www.thenews.com.pk/daily_detail.asp?id=9544
Released on Sunday, the Economic Survey of Pakistan 2005-06 tends to present a very rosy and positive picture. Laced with superlatives, its foreword, written by adviser to the prime minister on finance Dr Salman Shah, is replete with congratulatory self-praise. Pakistan’s growth is said to be “underpinned by dynamism in industry, agriculture and services, and the emergence of a new investment cycle supported by strong credit growth”. The government’s “most important achievements” of the outgoing fiscal year are said to include “a solid pace of economic expansion; per capita income in current dollar terms nearing $ 850; a sharp pick-up in overall investment, notably, private sector investment; robust consumer spending; … and most importantly, the underlying fiscal deficit performed better than the target despite pressure emanating from the earthquake-related expenditures.” The adviser then writes that the “ultimate objectives of the government’s economic policy are to create jobs, raise incomes of the people and reduce poverty” and that he is “happy to state that this year has seen major successes on all these fronts”.
What percentage of the population, seriously speaking, would agree with this assessment? One suspects not a very high number. The critics of the government’s argument of its economic performance – the debate on alleviation of poverty being a sore point – has always been that such criticism is anecdotal and not based on scientific surveys. To that end, its claim that the poverty rate has declined from 34.46 per cent of the population in 2000-01 to 23.9 per cent in 2004-05 should, or that is what the government would think, silence all such critics. But in matters such as judging a government’s economic performance, perception is as important as the truth. There is no denying the fact that a 6.6 per cent GDP growth is robust, that foreign direct investment has risen significantly (though a major chunk is made up of PTCL’s sales to a foreign consortium), that exports have crossed $12 billion or that the services sector has done much better than expected. In the Economic Survey the ministry has used the 6.6 per cent increase figure for “real GDP”.
In plain economic terms, with inflation running at nine per cent, is the ministry trying to suggest that nominal growth during 2005-06 was a whopping 15.6 per cent? Isn’t GDP of any year calculated at current prices and not constant prices, implying that any such figure is indeed nominal (not accounting for inflation)? The claim that poverty has declined by 10.6 percentage points between 2000-01 and 2004-05 is based on the Pakistan Social and Living Standards Measurement Survey 2004-05 and is bound to be questioned by many people. While the government will now have statistical information on its side (the survey claims to have covered over 76,000 households) in the debate on poverty alleviation, the fact remains that prices of essential items such as several varieties of basic foodstuffs and oil have risen significantly in the past few years.
However, the poverty reduction statistic and another (from the Labour Force Survey 2005) according to which the economy generated new employment opportunities that were much higher than average suggest that the ministry of finance is selectively using these surveys to paint an unrealistically rosy picture. For example, the PSLM also asked the households surveyed to compare their economic situation with last year to which only 24.2 per cent said that it was better, with the rest saying that it was the same or had become worse. Similarly, closer examination of the PSLM shows that the proportion of children under five years of age suffering from diarrhoea increased significantly in Sindh: from 11 per cent to 18 per cent and from nine to 18 per cent in the rural areas. However, one should not take away from the fact that, all things considered, 2005-06 was a tough year for the government because of what happened on Oct. 8. As a result of quake-related expenditures, the fiscal deficit ballooned to 4.2 per cent of GDP. Oil prices were on the rise and this meant a higher import bill. However, the massive trade deficit – a whopping $8.6 billion – could have been smaller had the government tackled the sugar crisis well in time. The cumulative installed capacity of sugar mills exceeds overall demand but the government failed to tackle the sugar cartel and was forced to allow the import of sugar, which was one of the main reasons for the high level of non-oil imports. The state of the economy may be healthy but not for everyone.