Daily Times

Recent news in Pakistan’s media presents a rosy picture of Pakistan’s economy. For example, the news is that the current account deficit (i.e., the difference between import and export) went down by $259 million and imports went down by 18 percent. The excitement continued with the news that Pakistan has climbed 28 places ranking 108 in the World Bank’s Ease of Doing Business Index. The news suggests Pakistan’s economy is doing well and heading into prosperity soon. However, the current account deficit decline and decrease in imports indicate that the economy is in trouble. Unfortunately, the PM and Finance Minister do not understand the connection between imports and economic activity.

For example, an article on October 24, 2019, “Big industry shrank over 7 percent in August” and indicated that large-scale manufacturing output shrank for the fifth month in a row. Further, the LSM index dipped by 7.06 percent compared to a year ago. The LSM dip was due to a decrease of 14 percent in petroleum, 12.82 percent in the automobile sector, 9.9 percent in fertilizer, 9.81 percent in pharmaceuticals, 5.10 percent in iron and steel, and on and on. Almost every sector of the economy has been hit and indicates an economic disaster. Dawn reported on September 8, 2019, that,” … the current fiscal FY 20, private sector credit… was negative, indicating that firms are retiring loans rather than borrowing … private sector credit was negative Rs 84.6 billion compared to net borrowing of Rs 31 billion last year.” Dawn (October 20, 2019) also reported that the chairman of the Pakistan Association of Automobile Part and Accessories Manufacturing (PAAPAM) said, “that its members have laid off over 4000 employees and another 1500-2000 firms have been hit hard, and he sees more layoffs coming.” Finally, Dawn (October 24, 2019) reported that “The lackluster performance in the industrial sector reflects the overall economic slowdown…” All these news are a clear indication of the economic slowdown, budget deficit, and more debt the government must incur.

The IMF has a failed history of making economic suggestions that, when followed, make many countries economically worse off. For example, the government revenue decreased from Rs 1.47 trillion to 1.28 trillion in the first four months of the years and it fell again in October 2019 from Rs. 376 billion to Rs 320 billion

Despite these danger signs, the naive Finance Minister does not realize that the country is heading into more economic trouble. Hence, the statement “Emperor has no clothes.” I understand that as a politician, the PM would like to present a rosy picture to show how good he is managing the affairs of the country. But sadly, the economic indicators show he is lying. The economy is in serious trouble, and no one either understands the indicators or does not want to tell the PM that the economy is in trouble and is heading toward disaster. I do not blame the PM as he is not an economist. Unfortunately, either he has surrounded himself with economic illiterates or sycophants who want to keep their job by providing optimistic information while ignoring the disaster facing the country.

These obvious indicators of economic disaster, which I hope people will see, show that all those rosy declarations are lies. As I had published in my Op-Ed in the Daily Times, IMF suggestions would bring economic disaster to the country and should not have been followed. Regardless, my predictions have come true. For example, a news item in Dawn (Oct 24, 2019) states, “the impact was more noticeable in construction … as demand for housing moderated amid rising building materials’ prices and higher cost of financing.” The outcome I had predicted did happen by raising the interest rate by the ill-advised command of the IMF. Sadly, Pakistan not only followed the unwise suggestions of the IMF but also put an IMF person in the State Bank of Pakistan. The IMF has a failed history of making economic suggestions that, when followed, make many countries economically worse off. For example, the government revenue decreased from Rs 1.47 trillion to 1.28 trillion in the first four months of the years and it fell again in October 2019 from Rs. 376 billion to Rs 320 billion.

The reason for the decline in imports, which should not be cause for celebration, was the depressed (27 percent) demand for automobiles ($261 million) in the first quarter. Heavy-vehicle imports dropped by $67 million. Additionally, demand for motorcycles and auto parts dropped. Dawn (November 13, 2019) reported: “overall car sales plunged 44 percent compared to the same period last year.” Sadly, if the PM and his Finance Minister are proud of destroying industries to reduce the current account deficit, good luck when the public wakes up to see soaring prices for vehicles and houses as well as higher unemployment. The Chairman of the PAAMA has said, if “the government feels proud controlling [the] soaring current account deficit” by curtailing the import of vehicle parts, then be ready for job losses and plummeting auto sales, resulting in lower revenue for the government and higher prices for goods.

The writer is PhD. (USA) and Professor Emeritius (USA)