Daily Times

At the conclusion of Article IV Consultation discussions with  Pakistani authorities earlier this week, IMF mission head, Harald Finger, said, “After three years of reforms, Pakistan has strengthened its macroeconomic resilience and economic outlook, providing an opportunity to build on recent progress with structural reforms and to set the economy on a higher growth path. However, a number of challenges in the fiscal, external, and energy sectors could affect the hard-won stability gains in the period ahead. In this context, the mission calls for strong efforts with respect to fiscal consolidation, implementation of key structural reforms, and vigilance in managing the country’s external position.”

Asian Development Outlook 2017 also noted, “GDP growth is expected to edge up to 5.2 percent in FY2017 and 5.5 percent in FY2018, underpinned by higher growth in the major industrial economies.”

The rational and scientific appraisal of the state of Pakistan’s economy cannot, and should not, be made solely on the basis of reports by international financial institutions. Blindly following their so-called suggestions of “structural reforms” (sic) has also set forth the debt-trap in which we are ensnared now.

The biggest issue with our formal economy is the growing debt burden. Other issues like slow growth, falling exports, widening of trade deficit, worsening position of balance of payment, and the pressure of forex reserves also remain causes of concern. However, our worthy federal finance minister continues to be in denial. Being a chartered accountant, he is very fond of the number game and repeatedly takes credit for “micro stability”, “recovery” and now “growth take off phase” of the economy. These oft-harped claims by Ishaq Dar are as detestable as the unfounded prediction of doomsday by opposition leaders. We all know that (informal) economy is keeping Pakistanis alive and yet nobody has any idea about its real size and dynamics.

In his op-ed, Pakistan’s debt: putting the record straight, which appeared in many newspapers on February 1, 2017, Dar vehemently condemned his critics, without taking names. He lambasted them for doing a “disservice to the nation” by presenting “selective information”, and analysing it “on the basis of their preconceived notions”. He then appreciated World Bank, IMF and ADB. Obviously, at that time, he was not aware of their future words of cautions about his “marvellous performance”.  The claims made by the finance minister in his op-ed were more of an elaborate rhetoric than a meaningful analysis. He could have done better by inviting his adversaries, all of them being renowned economists, for a productive dialogue. Trying to convince them with facts and figures, he could have desisted them from rendering any “disservice to the nation”. Many analysts and economists, notably Dr Hafeez Pasha, Shahid Kardar, Dr Ashfaque Ahmad Khan and Sakib Sherani, have been raising their voice against rising debt and its sustainability. But, somehow, this is seen as “disservice to the nation” by our finance minister.

Dr Hafeez Pasha has repeatedly observed that our foreign debt, already over $70 billion, would reach $85 billion by 2017-2018; threatening the very sovereignty of the state. In his op-ed, Dar has specifically mentioned that the entire “amount of debt does not mature on the same day”. Since it becomes due over a period of time, he says, the government can plan its repayment schedule or roll over the existing debt and go for a new period, which is decided while taking into account the prevailing cost of borrowing, prospects of the rate for coming periods, and matching it with tax collection pattern. Now a newspaper report says that in order to make a payment on May 24, 2017, “Pakistan may borrow another $750 million as a short-term foreign commercial loan from China, ironically to pay back the Eurobond debt incurred during the rule of General (Retd) Pervez Musharraf, also underscoring that the country is no more able to retire its debt from own resources”. To borrow just to clear existing liabilities means there remains no chance of coming out of the debt prison. You need not be a trained economist to understand it.

(To be continued)

The writer is Advocate Supreme Court and Adjunct Faculty at Lahore University of Management Sciences (LUMS) and can be reached at ikram@huzaimaikram.com. He tweets @drikramulhaq