Well, depends on who you listen too, or rather want to listen too. The IMF-led government version is that things are on track, thanks to the finance team, by and large, adhering to the structural reforms programme and good days are around the corner - well if not exactly the next corner than the corner right after a few turns and twists.
Everybody else's version is more alike a doomsday scenario, some of which, admittedly, may even be politically motivated. Invariably both sides support their respective versions with colourful graphs and charts coupled with fancy mathematics and unverifiable or indigestible data; and a lot of noise. Contrary to physics, economics is a discipline where you can defend any position, for or against, and by using enough jargon, symbols, tables and graphs appear extremely scientific.
In the ensuing confusion the common man, excluding the diehard supporters and those who know it all, are wondering who is right, and if anything, what is wrong.
In this highly polarised political environment, it would be rather foolish, even suicidal, to take sides and accordingly I am here neither to bury Cesar nor to praise him - with due respect to the Bard.
Additionally, in this piece you will definitely not find references to any models based on fantastic assumptions and definitely no graphs or tables or data based on guesstimates which by and large are unverifiable.
For me the three critical economic indicators which are easily verifiable are trade balance, external debt and capital investment, and that too, not as a percentage or ratio of any other variable, like the irksome GDP. In absolute terms, we still have an unmanageable trade deficit, external debt continues to increase and capital investment is nothing to write home about.
The worrying bit, if you ignore what the usual suspects harp about while analysing the economy on the idiot box and the print media, is that those who matter, the entrepreneurs don't seem to be in sync with the take off version, had they been it should have led to a surge in capital investment. At the risk of taking slack, I for one am not a great fan of the casino being a barometer of anything let alone the economy- capital investment as used here refers to investment in the real economy, industrialisation.
The curious bit is that struggling with increasing prices of all kinds of utilities, and that too significant if not back breaking, increasing regressive taxation and a significantly depreciating rupee - a triple jeopardy - where will consumers get the buying power to spend on goods and services? Notwithstanding whether or not the domestic industry has the ability to produce sufficiently to meet demand, what are the assumptions in the IMF model as to where will the customers get the means to pay?
And let's not forget the political side of the political economy - just a few months ago we supposedly had sufficient quantities of flour and sugar, apparently more than projected demand, enough to allow exports, but suddenly today, beyond rumours, no one seems to know for sure what exactly happened for prices of these homegrown produce to sky rocket. Since the cost of production could not have increased, somebody might surely have made a killing?
It is also common sense that irrespective of whether or not high interest rates can ever bring down food inflation of the kind that we witness in Pakistan today, and also ignoring the hot money debate, those wealthy enough to have money in the bank are today getting twice the return compared with less than a couple of years ago. Rising income inequality aside which by the way is getting more and more starkly evident in Pakistan as well-very recently write ups published internationally asked whether billionaires accumulated wealth illegitimately and argued for a case for abolishing billionaires- the question is with these kind of returns for doing absolutely nothing, why would they, the wealthy, risk investing in businesses and worry about finding markets where they could sell their produce profitably. And even if any one of them wanted too, why would the banks lend to him when the banks are already making a killing lending risk free to the government?
The key point is with the middle class struggling with a seriously declining purchasing power, what assumptions give the IMF comfort that businesses will not shut down facilities and lay off their workers.
And why is no one talking about stagflation?
Considering the multiple graphs, tables and projections accompanying IMF reports and reviews, most of which is generally Greek for most of us, the safest bet is to stay away from arguing with the "experts" and hope and pray that they are right about the economy being on a growth trajectory. However, the very recent previous experience lends credence to the view that they were right all along until suddenly they were wrong!
So will history repeat itself, because if it does it definitely will be uglier?
Keeping everything crossed, there is very little to do but hope that this time around the experts surely know what is wrong!
(The writer is a chartered accountant based in Islamabad. Email: [email protected]. The views expressed in this article are personal. The views are not necessarily those of the newspaper)
Comments
Comments are closed.