INSIGHT AND FORESIGHT

September 7, 2013

WHERE IS THE PAISA?

Filed under: Uncategorized — sharafs @ 5:24 am

An Appraisal of Pakistan’s Declining Economy

Co-30Somehow, I live with the hypothesis that Pakistan’s bureaucracy, technocrats and the military operate in exclusive hard shelled bubbles in chagrin to long term strategic and economic interests of Pakistan. The imperatives of a broad policy spectrum with synergised instrumentalism never formed the basis of any brainstorming or analysis. Inevitably, the bubbles burst compromising Pakistan’s national security.

In quest for short term advantages and strings tied with international financial institutions, the bureaucracy and technocrats have remained content in putting the national interests on the back burner. Due to absence of operational research and system analysis including SWOT, the end results were never their consideration. Application of Harvard and Westminster Models theorised on western political economy divorced them from the compulsions of ground realities are Pakistan’s nightmare.

Despite the fact the military has repeatedly intervened in politics, it lacked the capacity to impact on long term sustainable development. Its perspective was always India centric. It relegated the responsibility of economic development to bureaucrats and technocrats, more interested in showing short term indices. Hobnobbing with international financial institutions, tours and studies was their major pre occupation. There was unawareness that what could not be lost on the battlefield could be easily conceded through bad planning? An indicator to describe this meltdown is the fact that the rupee-dollar parity of 3.30 in 1955 now stands as 104 a 31.5 fold slump. For those who lived in 1955, life is now 31 fold more expensive. Pakistan is in serious crises and the Prime Minister despite two tenures in the past has no hesitation in admitting that his election manifesto was a wishful dream.

After the coup of 1999, I was charged with the responsibility to monitor the entire government from GHQ. One of my biggest concerns was Pakistan’s spiralling debt with a declared foreign component of 32 billion dollars. Yet no one in the Ministry of Finance or State Bank could confidently tell the volume and breakdown of this debt with relation to country-country borrowing, multi-lateral loans, bonds and encashment to provinces and autonomous bodies.  Having encountered blank faces, we decided to get reports from all ministries, provinces and autonomous bodies to determine the correct volumes. As reports and files continued to pour in, the figures collected cross checked and verified were startling. Pakistan’s debt was over 38 Billion US Dollars and continued to grow through the IMF borrowing and the sinking Rupee.

The single biggest recipient of loans was the water and power sector, accounting for approximately 70% of the loan component. The shocker was that 60% of it was spent on feasibilities most of which never translated into development. Approximately, half of Pakistan’s foreign debt has been gulped on drawing boards, visits, lodgings and expert studies. Result is that Pakistan has the world’s worst record in water management, conservation and power generation. Despite this huge wastage of expensive loans, Pakistan relies for the bulk of its power production on independent power producers.

It was a very incisive study that left everyone in the Musharraf Cabinet stunned and aghast, but this is where this revealing study ended. There was no follow up. Gradually, patriotic and concerned officials were shown the door. The study got lost in the sea of bureaucracy and thereafter it was business as usual. Pakistan was destined to sink deeper into the financial quagmire and by consequence the lowest human resource indices of the world.

I was convinced then and sure now that these economic managers and experts are all part of an international cartel that controls financial institutions and hence destinies of misgoverned countries like Pakistan. The study vindicated international political economists who viewed IMF and World Bank as exploitative instruments of neo-imperialism and masters of creating bubbles. Non-state corporatists who transcend international borders and whose loyalties lie with their pay masters rather than their moorings are Pakistan’s biggest threat; more than India or militants. Some of the biggest effects of this economic manipulation and mismanagement are appended below and will form the subject of subsequent articles.

  1. The water and power managers of Pakistan despite being the biggest recipients of foreign loans have not exercised vigilance on Indian water development projects mainly because they were guilty of corruption, negligence and technical insufficiency.
  1. These water managers have remained stuck in the politics of mega projects and failed to exercise imagination in creation of alternate water reservoirs and hydro power generation in Pakistan.
  2. The seizure of FCAs in 1997 however negative proved that a weak rupee was not a pre requisite to boost exports. After 9/11, despite 13 Billion Dollars in the system and an appreciating rupee, the Central Bank ignored the lesson of WEAK RUPEE VERSUS EXPORTS and devalued the national currency. Successive governments should have made efforts towards restoring rupee dollar parity and controlled devaluations.
  3. Under the pricing mechanism of 1994, IPPs with tax exemptions had recovered investments and begun remitting profits and outsourcing costs abroad. They were the new energy manipulators destined to earn windfalls. Reorganisation of PSO in 2004 facilitated the IPPS, creating a new goliath and nourishing conditions for the circular debt crises.
  4. The imposition of GST as a VAT was abandoned by CBR in 2000-1 converting it into an easy to collect levy. The incomplete GST regime did not help in documentation of the economy, served to boost inflationary trends, encourage consumerism and discourage small sector domestic production.
  5. Agriculture growth and pricing mechanism in Pakistan is deliberately manipulated by inelastic forces and cartels.
  6. The circular debt issue in the energy sector is an inbuilt mechanism with the potential to trigger a meltdown. This cannot be resolved unless monopoly of PSO is not challenged.

With such a bleak depiction of Pakistan’s economic performance, the effects of which are visible in every nook and corner of Pakistan something has direly gone wrong. This is not the fate this country deserves with one of the steepest water gradients of the world, four seasons, diversity of flora and fauna, abundant natural resources, skilled and semi-skilled manpower and best philanthropy record in the world.

The response is reflected in the fact that Pakistan hopelessly lacks a War Front on its political economy. Its economic statisticians and managers need to concentrate on economic policies rich in socio-political thought. Pakistan needs a paradigm shift in which a strong, robust and sustainable economy becomes the basic template of its national security. Unless economic policies built around a re definition of Pakistan’s currency are not implemented, the Paisa and Anna will never regain its value.

To be continued………..

Brigadier (Retired) Samson Simon Sharaf is a political economist and a television anchorperson.

Email and twitter: samson.sharaf@gmail.com

Written for Economic Affairs

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1 Comment »

  1. It was not introduced as an accounting discipline but as part of mathematical procedures, which
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    and withdrawals. If your Micro Small Business Australia is ever audited by the ATO you will need to produce
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    Double-entry bookkeeping requires recording of each transaction twice using
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    Comment by bookkeeping association — September 29, 2014 @ 3:22 am


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