Challenges again!

Curiously while the voting populace is embroiled in figuring out who bought his cruiser how, and struggles to solve the mystery of who might or might not be the next Finance Minister out of the names floating on the grapevine, if we have to have a new one in the first place, those who apparently are not key stakeholders, continue to issue updates on our beloved country's economy all the time issuing warnings about the challenges ahead; seriously we are not interested!
Courtesy the electronic media creating and/or covering multiple sensational dramas like scandals repeatedly and quite regularly, the common Pakistani on the street has no time to worry about the economy, especially when the collective national understanding of the subject is next to zilch? I have stopped being surprised by the wisdom of the Pakistani crowds who continue to believe that we don't ever have to pay back our national foreign debt, apparently because someone will always be there to give us more dollars for some inexplicable reason, which I for one have remained unable to comprehend; except as more and more time passes, and we continue to pile up more debt without batting an eye, I too have almost crossed over to this particular baseless optimists view that there is nothing to worry about, we ain't paying it back!
Logically, and on a more serious note, persons who have given loans in excess of US$ 80 billion to Pakistan, in theory at least, are capable of moving all kinds of mountains to get their money back.
With the preamble and the punch line out of the way, we can move on with the more mundane segment which revolves around the Pakistan Development Update (The Update) issued by the World Bank (WB) very recently. First thoughts on the economic update and related outlook and risks sections included in the Update are that not much is different from what the State Bank of Pakistan discussed in its Annual Report for 2017, which I covered the last couple of weeks. In summary, the GDP was tops for a decade but debt has increased and its maturity profile has changed posing renewed refinancing and re-pricing risks; apparently getting disbursed US$ 10 billion during FY17 was some sort of a record. Further, the trade deficit has gotten blown out of proportion and the foreign exchange reserves are going down. Like I said same old story!
Except that when getting to risks associated with debt, WB has an interesting take. Debt is expected to fall to 66.4% of GDP by 2019, not because we are paying anything back, but because nominal growth in GDP will outpace nominal growth in public debt; curious reasons for a bank to be optimistic about debt. The Update however is concerned about that materialization of contingent liabilities, because of loss making Public Sector Enterprises, and the Update has an interesting take on the level of rupee depreciation which the WB fears could result in a 10% adverse impact on the debt-to-GDP ratio. The curious are invited to search the Update themselves; I just hope someone in the government is following up the assumptions used by WB for that particular conclusion and digesting them. A boxed suggestion in the Update is, "However, a managed depreciation of the exchange rate to correct the estimated overvaluation should have limited cost...".
The WB does not believe that there is any possible way to immediately improve our exports mostly because we never focused our energies to move into value added sector such as high-tech; Vietnam focused on the technology sector from 2010 onwards and its economy is now the talk of the town. The Update suggests structural fiscal reforms since, "...macroeconomic imbalances have significantly worsened over the last 9-12 months". This is disconcerting and even scandalous since back then, 9-12 months ago, we were strictly following what IMF was telling us and everyone was praising our economy; the only rational conclusion can therefore be that either we don't understand the WB/IMF reforms or they don't work; I vote for the latter.
Notwithstanding, one of the currently suggested reforms includes improving Pakistan's ranking in Doing Business for which according to the Update our government already has a 3 year strategy. Except that is not the interesting take from the Update on this matter. Doing Business is a World Bank publication, which annually ranks countries on ease of doing business in their jurisdictions on the basis of multiple factors. Our ranking for 2018 is 147; our ranking in 2008 was 80!
And guess which factors might have deteriorated over the last 8 years; according to the report we fell behind in getting electricity, registering property, paying taxes, and enforcing contracts, amongst others! Remarkably, for a country trying to improve its tax to GDP ratio, even paying taxes is a problem. And what were we doing letting our Doing Business ranking collapse like that? If we really wanted FDI, why were we not watching this ranking?!
The Updates section on Human Development is perhaps even less encouraging and considering the brevity of space there is no point in getting into such boringly worrying details; in any case who cares! I just write to film the space for op-ed column in Business Recorder, and not because I want anyone taking these issues seriously! So have a nice day and a good night's sleep... . Cheers!
(The writer is a chartered accountant based in Islamabad. Email: [email protected])