Releasing the 'Economic Survey 2003-04', Finance Minister Shaukat Aziz termed prepayment of external debt, floatation of Eurobonds and re-basing of National Accounts as three major events of the outgoing fiscal year.
He also explained the tools and methodology for measurement of poverty. He said that this year has seen Pakistan pre-paying $1.17 billion worth of expensive loans to Asian Development Bank, indicating the exceptionally strong external liquidity position of the country.
This year also saw Pakistan making a successful return to the international capital market after a gap of over half a decade by issuing $500 million Eurobond at the tightest possible pricing.
RE-BASING OF NATIONAL ACCOUNTS: The third major event of this fiscal year has been the re-basing of Pakistan's National Accounts from 1980-81 to 1999-2000.
It is a well-known fact that over a period of time, production, consumption, and investment structure undergo structural changes. The relative price of various products also changes over the period. Besides, on account of continuous development and innovations, a lot of new products appear in the market and at the same time due to obsolescence many old products disappear.
Larger quality changes also result in the non-comparability of goods and services between far apart periods.
All these factors demand that the National Accounts series be re-based periodically to capture the structural changes, entry of new products and disappearance of old ones so as to depict the true picture of the level of economic activity.
How often should the base be changed? The international practice of re-basing the National Accounts varies considerably across countries with some re-basing after five years, others after ten years and even others every year.
In the Asian region the countries like Thailand, Philippines, China, India, Hong Kong, Sri Lanka etc undertake their re-basing exercise every ten years. The countries like Malaysia, Korea and Singapore undertake this exercise at a gap of 5 years.
As opposed to international practices, as well as practices followed in the Asian region, Pakistan delayed the re-basing of the National Accounts for two decades. As such, many structural changes which took place since 1980-81 until 1999-2000 on the production, consumption and investment structure of the economy were not captured in the country's National Accounts. As such, a number of areas remained either uncovered or under-reported and, accordingly, under-estimated the size of the national income. The re-basing exercise, which was commissioned in 1997, finally attained fruition this year.
As a result of the re-basing, the size of the overall GDP in 1999-2000 increased by 19.5 percent and, accordingly, the per capita income was estimated at $526 for the year 1999-2000, compared to $441 under the previous base. Similarly, fixed investment showed an improvement of 34.3 percent in 1999-2000.
POVERTY IN 2004: No efforts to revive the economy will be complete unless the macroeconomic gains are transferred to the common man. The best way to transfer such gains is to provide them gainful employment, scaling up investment in human capital and maximising the impact of existing public spending on education and health.
Encouraged by two years of strong growth and over Rs 860 billion of cumulative spending on the social sector and poverty-related programmes over the last five years, the Government of Pakistan asked the Federal Bureau of Statistics (FBS) to conduct a sample Survey of Household Consumption Expenditure (HCES) with a view to gauging the impact of socio-economic and macroeconomic policies on the living conditions of the people of Pakistan.
The Survey, covering 5046 rural and urban households (one-third of the sample covered in PIHS 2000-01) from all the four provinces of Pakistan, was conducted from April 19, 2004 to May 6, 2004.
The findings of the Survey were highly encouraging. Not only had the incidence of poverty shown a significant decline but other social indicators as well as indicators that represent the living conditions of the people also showed a marked improvement since 2000-01.
As regards the estimates of poverty, the Centre for Research on Poverty Reduction and Income Distribution (CRPRID) conducted the exercise by using the latest Survey. In order to make the results comparable, poverty estimates for the period of April 19 to May 6, 2000-01 were compared with those of the current (April 19-May 6, 2004) Survey.
The survey results showed that the incidence of poverty at the national level had declined by 4.2 percentage points during the period covered in the estimate with both urban and rural poverty also showing significant declines.
These results were not surprising as there has been a 35 percent increase in the average monthly consumption expenditure of households.
Notwithstanding a decline in the incidence of poverty, these results should be taken as indicative, as they do not cover the entire period of 2004.
The results simply suggest that the rising trends in poverty have been arrested and that a reversal has begun to take shape.
The results of the Household Consumption Expenditure Survey (HCES) 2004 showed a marked improvement in living conditions as well.
The number of households living in one-room homes showed a significant decline and that of households living in two to four-room homes increased significantly.
The number of households using electricity as a source of lighting and gas as cooking fuel also showed a marked improvement.
Indicators representing living conditions like the major source of drinking water, the type of toilet used and sanitation showed a significant improvement over the last three years.
All education-related statistics also showed significant improvements. In particular, the gross enrolment at the primary level increased significantly.
Similarly, gross enrolment at the secondary level also showed marked improvement over the last three years.
The results of the Survey were highly encouraging as they showed that strong economic growth along with massive spending on the social sector and poverty-related programmes is now beginning to yield dividends in terms of a decline in poverty, an improvement in living conditions, and an improvement in social indicators.
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