Show-casing Pakistan's economy

Economic managers of the government on their recent visit to Washington to participate in the annual meetings of the IMF and the World Bank tried to assure the international community that the economy of the country is performing well and the present economic policies will be maintained even if there is a change in the government after parliamentary elections to be held in January, 2008.
Speaking at the annual meeting of the Board of Governors of the World Bank and the IMF, Salman Shah, Advisor to the Prime Minister on Finance and Economic Affairs, said that Pakistan's economy had grown at an average rate of almost seven percent per annum over the last four years, positioning itself as one of the fastest growing economies in the Asian region. The size of the economy had more than doubled (from 58 billion dollars to 132 billion dollars) and per capita income almost had doubled (from 438 dollars to 847 dollars) during the last seven years.
There was a sharp pick-up in investment, reaching a new height of 23 percent of GDP, debt profile had improved significantly, exchange rate continued to be stable, foreign exchange reserves were at a record level and home remittances and foreign investment were the highest in the country's history. "Prudent macro-economic policies and wide-ranging structural reforms underpinned Pakistan's economic turnaround and six/seven years of consistent and transparent economic policies along with economic reforms have transformed Pakistan into a stable and resurgent economy," the Advisor claimed.
However, while economic fundamentals have gained strength, relatively higher inflation, largely attributable to higher food prices, and widening of current account deficit, owing mainly to slower growth in exports, remained the key macro-economic challenges confronting the country.
In a separate presentation at the Johns Hopkins University, Ashfaq Khan, Special Secretary to the Ministry of Finance, revealed that despite political differences, there was agreement in Pakistan on the general direction of the economy and the economic reforms introduced by the present government would be maintained. Whoever was elected in the next general elections would continue to build on the solid base provided by the current government.
This assurance was given to Merrill-Lynch, an international financial firm, in interviews by PPP's Naveed Qamar and PML (N)'s Ahsan Iqbal. According to Salman Shah, the government intended to move forward with the privatisation of the power and energy sectors as well as railways and airlines. Islamabad had also planned tax reforms to broaden the tax base and to take steps for enlisting the private sector in infrastructure development. Second-generation reforms would lead to "leaner government and a much more active and aggressive private sector" in the country.
From the above statements, it appears that both Salman Shah and Ashfaq Khan have generally given positive vibes about the economy of Pakistan and its prospects. In the given situation and before an international audience, it was both necessary and expedient. Foreign investment tends to flow to the countries whose economies are stable and there is no threat to the safety of investment or risk to the repatriation of profits. The task of our economic team was made easier because most of the macro-economic indicators were actually moving in the right direction and there was no need to exaggerate the situation to make a positive impact.
It was also appreciable on the part of our economic team to point to the weaknesses of the economy. Dr Salman Shah, while highlighting the achievements of the government, was quick to list the challenges confronting Pakistan which included improving competitiveness for exports growth, increasing savings and investment to support growth momentum and creating job opportunities for the young generation.
He also did not hesitate to say that it was very important for Pakistan to succeed in the war on extremism. We appreciate such a balanced view of the situation. After all, international investors and multilateral institutions are not so naïve. With the information they have, they can easily sift facts from fiction and unnecessary positive spin cannot befool them. However, we are not entirely convinced about the assertions of our economic team that the economic policies of the present government would be maintained by the incoming government and no adjustment is likely to be made.
Naveed Qamar and Ahsan Iqbal must have discussed the overall thrust of economic policies with Merrill-Lynch in their private capacities. Actual positions of the opposition parties would only be known when they announce their manifestos for the coming elections. At present judging from their statements in the media, however, it looks that the next government would be less concerned about growth numbers and more preoccupied with poverty alleviation and employment generation measures.