Federal Finance Minister Ishaq Dar referred to some statistics, specifically unemployment, released by the Economic Survey 2012-13 as 'politically expedient' and therefore not credible. Unemployment rate of 6 percent in 2010-11 is not credible however Pakistan does not have the necessary labour exchanges and other data networks to be able to evaluate the unemployment rate effectively. During the previous tenures of Nawaz Sharif's government too the rate of unemployment was grossly underestimated; however Dar committed that the newly elected government would undertake a labour survey next year to evaluate the unemployment rate accurately.
Inexplicably Dar did not mention data manipulation by Dr Hafeez Sheikh whereby he compelled the Federal Bureau of Statistics (FBS) not to change the base year premised on six year long sectoral research and insisted that 1999-2000 continue to be used as base year, the year that productivity plummeted as Pakistan was isolated in the aftermath of the Musharraf coup. The focus of the incumbent Finance Minister was instead on highlighting all the budgetary targets that were missed including the Gross Domestic Product growth rate, the budget deficit and tax collections. GDP grew by 3.6 percent instead of the budgeted 4.3 percent, budget deficit was estimated at between 6.5 to 7.5 percent by the Survey in contrast to the upward revised budgeted 4.7 percent, and budgeted tax revenue collection was downgraded three times during the year and there is concern that the actual collection would still fall short of the target by 30 June 2013. In addition, economists have already expressed their reservations over acceptance of a fiscal deficit of 7.5 percent of GDP and Dar projected a deficit of 8.5 percent of GDP. Other negative trends reflecting an economic downturn were a decline in investment to GDP ratio - from 19.2 percent in 2007-08 to 14.2 percent in 2012-13 and crowding out of private sector investment due to a massive rise in government borrowing.
Inflation was 7.5 percent, a considerable achievement given that it was around 25 percent in 2007-08. Food inflation rose by 6.6 percent in contrast to 11.1 percent last year; however this reduction may not have been that significant if the FBS had not reduced the weight of food in the calculation of the Consumer Price Index by a whopping 6 percent. And remittance income continued to rise and reached 11.5 billion dollars in July-April 2012-13 compared to 10.876 billion dollars in the comparable period last year. Trade deficit improved due to a decline in imports mainly attributed to a decline in the international fuel price, while exports rose due to favourable international prices.
The Economic Survey also notes several global trends particularly the negative 0.3 growth in the Eurozone countries which would have a negative impact on Pakistan's trade figures. The survey expresses optimism that Pakistan would divert its trade towards emerging markets.
The Survey as expected highlights three major challenges requiring emergent remedial measures. First, the energy crisis which Dar dwelt on at considerable length during his press briefing; he focused on what has impacted the most on the Ministry of Finance namely unbudgeted release of funds periodically to enable Pakistan State Oil to pay for fuel imports, PSO's liquidity crisis sourced to a 500 billion rupee (plus) inter-circular debt. Dar committed that the government would remain focused on eliminating this debt once and for all.
Second, urgent attention is required by Public Sector Entities (PSEs) to end their 'burden on fiscal side and putting government into problem in managing fiscal discipline." Advertisements to head these institutions with specific terms of reference have already appeared in the media and the government's commitment in this regard is palpable. And, finally Pakistan's rising public debt is a source of serious concern and the Survey noted that domestic debt rose from 3266 billion rupees in 2008 to 8796 billion rupees in 2013 while external debt rose from 2778 billion rupees in 2008 to 4831 billion rupees in 2013 and this in spite of the fact that Pakistan has not received budgetary support/programme lending from multilateral and bilateral sources since 2010 due to failure to implement the agreed reforms under the 2008 Stand-By Arrangement with the International Monetary Fund.
It is however not clear whether the newly elected government would implement the Medium Term Expenditure Framework (2013-2016) that was approved by the former cabinet and that envisaged pro poor programmes and prioritisation of 17 pro-poor sectors.
There would be few supporters of the handling of the economy during the past five years but perhaps the single most strident demand of the people of this country would be for the economic managers to provide realistic data on which to base their forecasts. Prime Minister Nawaz Sharif during election campaigns as well as after his victory at the polls promised that he would take the people into confidence. One would have hoped that Ishaq Dar had committed to providing realistic data and targets that would form the cornerstone of a path towards economic recovery.