Dar's unwarranted optimism?

Finance Minister Ishaq Dar loses no opportunity to project the economic achievements of the present PML (N) government. Addressing the participants of the forum of strategic research on economic turnaround of Pakistan in Paris, he said that Pakistan has introduced tough and deep-rooted fiscal and economic reforms that have paid dividends. The country achieved the highest GDP growth of 4.7 percent in the outgoing year and is now set to achieve 5.5 percent growth in the current fiscal (2016-17). Besides, Pakistan is geared to achieve a growth rate between 6 and 7 percent over the next two years. The country collected record tax revenues in 2015-16, enjoyed the lowest inflation rate in decades and brought down the interest rates drastically to stimulate economic activity. Pakistan also entered into the final phase of eliminating terrorists and the government financed the entire expenditures of the Zarb-e-Azb operation out of its own resources. Dar also remarked that "credible international rating agency is terming Pakistan 10th fastest emerging market and the next Asian tiger."
It may be stated that the Finance Minister made these observations when he was visiting France to ink an OECD (Organisation of Economic Cooperation and Development) convention on tax matters and there is no denying the fact that signing the convention would add to the prestige of the country and facilitate the exchange of information, etc, on tax policy, practices and make the evasion of taxes by individuals and corporations much more difficult. However, what he told the participants at the forum was either patchy or somewhat divorced from reality. For instance, the achievement of growth rate of 5.5 percent during the current financial year and in the range of 6 to 7 percent in the following two years appears implausible, given the present dismal rate of saving and investment, political unrest, endemic corruption, poor governance, etc. The problem could be further compounded by low agricultural productivity and depressed international prices. The improvement in credit rating by a notch by the rating agency will not change the attitude of foreign investors as the current rating is still way below the ranking likely to attract their attention. As regards graduation of the country to an Asian tiger, the less said, the better. Even if the country follows the right policies, it would take decades to come to this level.
The most interesting observation was the introduction of tough and deep-rooted reforms to steer the country towards sustainable development. The fact of the matter is that although the present government has the right intentions, its approach towards various issues is rather weak and it has to bow to strong pressure lobbies. Take the case of public sector enterprises (PSEs). The present government, for instance, could not denationalise PIA, PSM and simply backed out from railways' privatisation. The tax net could not be widened or deepened enough to make an impact on fiscal outcomes. Yes, economic reforms, as claimed by Ishaq Dar, have yielded dividends in certain sectors but the extent of failures in some key areas could only be ignored at great perils to the economy. For instance, it is a great tragedy that Pakistan's exports have decreased by more than 15.4 percent from dollar 24.58 billion in 2012-13 to dollar 20.8 billion in 2015-16 and this has happened despite the grant of GSP plus status to the country by the EU. This negative development should have been a challenge to the present government since once exports lose global market, recapturing the same will not be easy. Whatever the reasons behind the decline in exports, policymakers, particularly the Finance Minister, have failed to fashion a suitable response. The stock of public debt and liabilities has grown sharply during the tenure of the present government and the people in the government do not seem to be bothered about the issue. Capital expenditures, particularly in Sindh and Balochistan, are not used properly and continue to be frittered away through corruption. We are of the view that the Finance Minister and his associates need to take a realistic view of the situation and say and act accordingly to overcome the weaknesses of economy. Constant eulogisation could only lead to complacency.