The last assessment — or one can call it the final report card — of the previous government’s performance on the economic front is in and there are really no surprises. All the growth targets have been missed, and by a significant margin.
Follow up:
What is worse, the already dismal rate of growth seems to be tapering off, which is perhaps because of the extremely irresponsible fiscal behaviour of the previous government in its last year in office, which was obviously election year.
And just as the government did with inflation, making changes in the methodology to ensure that inflation numbers clock in lower, it did with growth as well. The base year was changed from 1999 to 2005 and this basically ensured that the GDP growth rate registered at 3.5 per cent, which otherwise would have been about 3.2 per cent. It does not really make much of a difference though since 3.5 per cent is still worryingly low and a deep cause for concern. One also has to realise that growth rate is relative and has to be pegged with something or based against another value for one to get an idea of how good or bad it actually is.
It’s the same for economic growth. There is a very easy way to assess if the economy is growing in real terms or not. And that is to see if the economy is growing faster than the pace of new job seekers who enter the market every year. The number of job seekers in Pakistan increases by about seven per cent every year. So, in real terms, with the current growth rate of 3.5 percent, the economy actually shrunk 3.5 per cent this year. There has been no real growth at all.
And it seems there won’t be any in the medium term. Based on reports coming in, it seems we are going to miss our tax collection target by a wide margin and our wheat production target by over a million tonnes. Both are significant. Low tax collection will cause the deficit to swell, and a fall in wheat production will push up food prices, and inflation. The domino effect will be hard to tackle.
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