An incomprehensible claim

The steady rise in the international oil price has made serious dents in the growth targets of all countries, developed as well as developing. The reasons are largely related to America's war on terror extending to its occupation of Iraq and the consequent insurgency. There is every indication that chances of an early political solution to the impasse in that unfortunate country are dim.
This has led to the declaration by the Bush administration that troops will not be pulled out anytime soon, or with respect to futures market in oil, prices will remain high. Hurricane Katrina has added a further rising dimension to the oil price, reaching an unprecedented $71 in the aftermath of the storm.
This is attributed to the fact that several of the US oil refineries are situated in the Gulf region that has been hard hit by the hurricane. It is a measure of the world's largesse that countries have generously begun extending aid to the US, including digging into their oil reserves. However this largesse is expected to impact on international oil prices as well.
In response to these disturbing events, the International Monetary Fund Director General, Rodrigo Rato has revised world growth estimates affecting all the regions downward - from last year's 5 percent to 4.3 percent. Reviewing the achievement of the Millennium Development Goals that envisaged a halving of poverty levels within the next ten years, a panel of United Nations experts has stated that the achievement of these goals is threatened as a direct consequence of the rising price of oil.
More particularly the experts have pointed out that the poverty reduction targets would be compromised as oil prices would impact much more heavily on the poor than on the rich. This is as relevant in the United States with the poor suffering commensurately more than the rich with the price rise as it is in Pakistan.
However, the Economic Advisor, Dr Ashfaq Hasan Khan in an exclusive interview to the Business Recorder has made three statements whose validity is suspect. First, he argues that the oil price rise will have no impact on the Pakistan economy's growth target, with the existing much reduced reliance on oil imports, accounting for only 25% of total domestic demand. Ashfaq presented some statistics to prove his theory.
Pakistan has reduced its oil intensity from 9 to 3 units to produce one unit of GDP, he claimed. It is not clear what, according to him, one unit of GDP consists of. GDP is usually expressed either in total terms amounting to billions of rupees - at present value or deflated to a base year - or in percentage terms to assess its growth rate in any given year.
Second, he stated that according to his perception the international oil market is over-priced and a correction is in the works. Such logic that can so easily be refuted is surprising coming from such a senior man in government circles advising on key economic policy issues.
And finally he noted that the government is subsidising oil for the poor, a fact that accounts for constant prices of kerosene and diesel in recent months. Perhaps he needs to be reminded that the government relies heavily on taxing oil products in the country - a major source of revenue for the government.
The tax rupee earned from oil products may have been reduced or wiped out for the short term, given the dramatic rise in international prices, but it is doubtful if the government can afford to subsidise it for any prolonged length of time.
Given that the government has upped the price notwithstanding some reserves as and when the international price of oil reached a new peak are facts it is important for the public to know. Fudging facts and statistics has long been a past time of our economic managers and it maybe time to change that policy.
The public would understand the overwhelming reasons behind the government decision to raise the oil prices, as done only a week ago, in the current international context, and somehow misrepresenting facts only undermines the government's credibility.