The White House report - Dr Ashfaque H Khan - Tuesday, April 12, 2011

The latest White House report on Pakistan’s economy and its economic management, as reported in an English newspaper on April 7, is highly damaging for the government and its economic team. Through this report the Americans have expressed their lack of confidence on the government and its economic team in addressing economic challenges confronting Pakistan.

The report has highlighted several issues. Firstly, it has depicted the country’s civilian government as “weak, divided and unable to deal with the problems plaguing the country.” As a result, “the government continues to be unable to develop consensus on difficult economic and fiscal reforms that are urgently required, including systemic tax reforms.” Secondly, on the rising fiscal deficit, the Report notes that “government spending continued to outstrip revenues and the fiscal deficit may hit 8.5 percent of GDP by the end of the fiscal year in June.”

Thirdly, on Pakistan’s medium-term stability, the report cautions that “the deterioration of Pakistan’s economy and slow progress on economic reforms pose the greatest threat to Pakistan’s stability over the medium terms.” Fourthly, the report notes that “there has been no progress in cutting subsidies to state-owned enterprises.”

Are these issues highlighted in the report based on facts or simply reflect the prejudiced mind of the White House? In my opinion, the listed issues are based on facts and reflect the minds of all those who have interest in Pakistan’s economy. I have not only been raising these issues in my columns for the last two years but also giving suggestions based on my experience to address these economic ailments. The government and the economic team in particular have considered me as their critic and therefore never bothered to seriously consider the suggestions that I have been making to address our economic challenges.

For example, on the first issue of weak and divided civilian government, I wrote (Jan 11) that “under the pressure of its allies and opposition in parliament, the government had reversed its own decision of passing on the high cost of international fuel prices to domestic consumers... In so doing, the government has exposed itself as being a lame-duck government.”

On the second issue of rising fiscal deficit, I wrote (Jan 18) that “Pakistan is facing the immediate problem of insolvency. Its revenue-expenditure gap is widening and may reach 7.5-8.0 percent of the GDP, if corrective measures are not taken immediately.” I further wrote that “there would be no politics without a viable economy. It is, therefore, in the interest of the major political parties to build consensus on key economic issues.”

On the third issue of the greatest threat to Pakistan’s stability, I wrote (March 14, 2010): “Time is running out. Everybody has to play his role to save the country from an imminent economic collapse.” I again wrote: “Pakistan is passing through the most difficult time of its history. The political leadership must realise the gravity of the situation and act fast” (July 6, 2010).

On the fourth issue of cutting subsidies to state-owned enterprises, I wrote “This is the time to get rid of the bleeding public-sector enterprises even if we get Rs1 for each enterprise. At least this will save several hundred billion rupees of the exchequer which can be spent on voiceless millions” (March 14, 2010).

The above analysis clearly indicates that the White House report on Pakistan’s economy is based on facts. I was not the only person highlighting the issues discussed above. In fact, Eurasia Group – a UK-based international consultant firm, in its report on Pakistan (Jan 7), also discussed the fragility of the civilian government and its inability to undertake serious economic reforms.

The recently released Asian Development Outlook 2011 of the Asian Development Bank (ADB) also points out similar weaknesses in our economy. For example, it writes that “current subsidy requirements and support for SOEs are incompatible with creating the fiscal space needed to support investment in infrastructure.” It further writes that “the current pattern of lower imports, lower development spending and exploding unproductive current outlays undermines domestic and external confidence in the economy’s prospects and deters investment.”

Only recently (March 24), Mr Wolfgang Herbinger, director of the World Food Programme (WFP) argued that “Pakistan’s government has pushed food prices too high for an impoverished population.” He further argued that “you may have the country full with food but people are too poor to buy it.” This is the point which I have been highlighting for years. In fact, I have identified the criminal increase in support price of wheat as one of the ten economic blunders of this government. As late as Sept 24, 2009 (“Death in a Stampede”), I wrote: “the country has produced a bumper wheat crop in the range of 23-24 million tons this year, but the poor and the destitute are being crushed to death for a few kilograms of flour. There is no shortage of wheat/flour as the country has produced more than its requirements, but at what price flour is available to the people of Pakistan in general and the poor and destitute in particular is a real issue.”

I would urge the political leadership and the economic team to take the White House report on the economy seriously. I would also urge them to pay heed to the assessment of international organisations like the ADB and the WFP. Even if you don’t listen to what I have been writing, please listen to what others have been arguing for the betterment of the economy of Pakistan.

The writer is principal and dean at NUST Business School, Islamabad. Email: ahkhan@

Source :

No comments:

Post a Comment