We have all been playing Panama and doing nothing else for the past 15 months. And while we were playing Panama and doing nothing else, the economy fell off the cliff. Italy has been changing its prime minister as often as one changes a pair of socks. And Japan has been no different. But their economies do not fall off the cliff. Why? Because their economic decision-making has been institutionalised. Ours is not. When a Pakistani prime minister gets into trouble, the entire governmental paraphernalia abandons each and every one of its responsibilities and jumps into politicking. The results are for all of us to see.
Trade deficit: Never in Pakistan’s history have we imported goods and services worth a whopping $52 billion. Never in Pakistan’s history have our exports declined in the way that they have over the past six years. Never in Pakistan’s history have we had a colossal trade deficit worth $32 billion. Now we must beg, borrow or steal to bridge the deficit (A trade deficit is the “amount by which the cost of a country’s imports exceeds the value of its exports”).
Should we readjust the rupee-dollar parity? Should we continue with our failed policy of import substitution? How do we plan to finance a trade deficit worth $32 billion? The current import-export scenario is definitely not sustainable. The bomb is ticking and will explode sooner than we think. Who will decide it all?
Budget deficit: On this count, we have been deceiving ourselves like never before. The Ministry of Finance claims that the deficit is worth Rs1.5 trillion. We know that the FBR is holding back genuine refunds of Rs300 billion. We know that the government owes the IPP sector a sum of over Rs400 billion. We know that the FBR forces taxpayers to pay advance taxes. We know that the so-called state-owned enterprises – PIA, Pakistan Steel and Pakistan Railways – loose a few hundred billion a year every year.
Yes, the government has been trying to hide a trillion-rupee deficit that is out there like an elephant in the room. Yes, the deficit is around eight percent of the GDP (the government claims it is half of that). To be certain, the current revenue-expenditure scenario is definitely not sustainable. The bomb is ticking and will explode sooner than we think. Who will decide what to do?
Debt: In 1971 – a mere 46 years ago – our national debt stood at Rs30 billion. Lo and behold, our national debt has since soared to Rs22,000 billion. We are indebted like never before. Over the past four years, the government has obtained $35 billion in new foreign loans ($17 billion of new loans were used to pay back old loans). And that is in addition to Rs3 trillion in new loans raised in the domestic market.
Lo and behold, the only thing that the Ministry of Finance has done is change the definition of national debt. Yes, “illusion is the first of all pleasure”.
The out-of-control trade deficit has consequences. The out-of-control budgetary deficit has consequences. The out-of-control national debt has consequences. And these consequences would have to borne by generations to come. Yes, our economic security – which has long been the neglected element of our national security – is under serious threat.
The writer is a columnist based in Islamabad.
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