The writer has stated that in PWC report the Gross Domestic Product ranking projections were based on Purchasing Power Parity (PPP) which adjusts for price differentials between countries reflecting the volume of goods and services produced and not GDP at market exchange rate (MER) which would reflect the value of goods and services in the local currency and converting it into dollars based on market rates though to be fair the heavily overvalued rupee would have enabled the government to show a better GDP MER than in fact the case. For understating foreign loans, they have relied on an overvalued rupee, whereas the government is taking credit that PWC report has claimed that by 2050, Pakistan and Egypt could overtake Italy and Canada. She further stated that numerous waivers were granted to Pakistan during IMF programme on account of failure to deliver on key structural reforms in the energy sector, privatisation, and tax system and also criticised in the same article on high debt, rising imports, less funds to education and data manipulation etc.
It is more important to see the positive international perception being created on the economic progress of our country rather discussing micro details. It is for the information of the writer that international agencies assess the country on the basis of performance and futuristic views are based on their assumptions. The PWC approach is based on a robust long term economic growth model that focus on how will the global economic order change by 2050 and assumes broadly growth friendly policies.
The government when came into power particularly focused on growth friendly policies through a combination of stabilisation and structural reforms. During a period of 4 years, the economy has taken a turnaround and all economic indicators are showing positive trend which has been appreciated by the international development partners and agencies. The IMF in its World Economic Outlook (WEO), April 2017 has assessed that a broad-based recovery is expected to continue at a healthy pace supported by ramped-up infrastructure investment. The appreciation is based on the performance of the economy provided in the charter of the present government and the roadmap under Vision 2025.
As far as writer's concern on waivers. In this respect a number of times clarifications were provided, however, it is again for the understanding of the writer that there is need for proper appreciation of a waiver. The request for waiver is only allowed when the Executive Board of the IMF is satisfied that the programme will be successfully implemented. The Fund programme was not a one-off static assessment of certain outcomes. It was a three year programme with quarterly reviews and in each review, the performance was assessed keeping in view the likelihood of success as the programme moved forward.
The writer has made general statement on data manipulation without mentioning any specific data. In this respect a number of rebuttals have been issued whenever the criticism raised on the data manipulation. PBS is an independent body that follows the internationally approved methodology to produce the data.
The author has also made a very vague criticism on the unprecedented rise in imports at a time when international prices of oil have been declining and is not backed by data uploaded by the State Bank of Pakistan.
The imports of machinery in all groups are rising thus reflecting signs of productive activities and improved performance in industrial sector and also backed by impressive growth in credit to private sector. The LSM growth in April 2017 registered a growth of 9.7 percent which reflects the productivity in industrial sector.
With regard to investment, the writer has stated that the data contained in the Economic Survey 2016-17 is disturbing. In this regard it is to mention that not only have investments increased in absolute terms but the investment to GDP ratio has also gone up. On a positive note, it is persistently increasing on account of improving FDI inflows, increasing investor's confidence, and rising PSDP spending. In the medium term, investment to GDP ratio is projected to increase by 20 percent.
The writer has also tried to mislead the readers by stating that domestic indebtedness increased by 54 percent in four years and foreign indebtedness by 24 percent with a steadily rising reliance on the prohibitively expensive borrowing from foreign banks which at present stand at 2 billion dollars impact on growth.
In this regard, it is to be mentioned that by the end of FY2013, gross public debt increased to Rs 14,318 billion while net public debt increased to Rs 13,483 billion, thereby the previous government contracted net debt of around Rs 7,833 billion during its term (2008-13), at an annual compounded growth rate of 19.0 percent. The present government started its first fiscal year in 2013 with inherited gross public debt of Rs 14,318 billion and net public debt of Rs 13,483 billion comprising of external public debt of US $48.1 billion (Rs 4,797 billion) and net domestic public debt of Rs 8,686 billion. During the period from July 2013 to March 2017, the gross public debt has grown to Rs 20,874 billion while the net public debt has grown to Rs 18,894 billion, out of which the external public debt was US $58.4 billion (Rs 6,126 billion) while net domestic public debt was Rs 12,768 billion. Thus there is a net increase of Rs 5,411 billion in total public debt. This constitutes an increase in net public debt at an annual compounded growth rate of 9.7 percent per annum during first three years and nine months of the present government compared to 19.0 per annum during the previous government.
It is also to be noted that within external public debt, the largest component is the multilateral debt and bilateral debt, constituting around 87 percent of the external debt at end March, 2017. While the proportion of commercial loans only stood at 3.8 percent at end March 2017. The loans from multilateral and bilateral development partners are aimed at removing structural bottlenecks from Pakistan's economy. These commercial loans are primarily utilized towards implementing structural reforms in the areas of taxation, doing businesses, trade facilitation, education and promotion of small and medium enterprises (SMEs). The average cost of the external loans obtained by present government comes to around 3 percent which is significantly lower than the domestic financing cost even after a margin of capital loss due to exchange rate depreciation is added.
The author has also stated that population growth could boost GDP in Pakistan, however, the PWC report adds a rider, 'only if jobs can be created for young people'. In this regard it is to mention that the country has the demographic dividend. As a result of various initiatives and policies along with PM Youth programmes the unemployment rate has declined to 5.9 percent in FY2015 from 6.2 percent in FY2013. Similarly, new programmes in agriculture, financial sector, exports, textile and social sector are helping in employment creation. Additionally, CPEC related activities and historical allocation of Rs 1 trillion for federal development spending is a welcome development for employment generation going forward.
The author's assertion that education has not been the major recipient of government is not true. Public expenditure on education as percentage of GDP has increased to 2.3 percent in FY2016 from 2.1 in FY2013. The government is persistently increasing the resources to education sector and ensuring proper and timely utilization of funds in order to achieve the target of 4.0 percent of GDP by 2018. The provincial governments are also spending sizeable amount of their Annual Development Plans (ADPs) on education.
While referring to the World Bank's recent report, the writer has stated that the report urged the government to continue with reforms identified by IMF in its recent programme though there appears to be a singular lack of government interest in this regard. The writer's assertion is baseless as the present government initiated difficult key structural reforms in the country. These reforms not only strengthened the confidence of the international community but have put the country on the path of sustainable growth which is being internationally recognised. It is the commitment and interest of the government in making Pakistan more prosperous through effective implementation of comprehensive agenda of economic reforms.
The writer's assertion that handling of the economy is characterized by following the IMF prescription in curtailing the deficit at the cost of growth, heavy borrowing and data manipulation is not based on facts. Particularly, fiscal deficit has been reduced on account of prudent expenditure management and effective resource mobilization. The expenditures have been efficiently allocated to development and social sector programmes and overall tax collections have also improved. With fiscal discipline, the economy is moving on upward growth trajectory.