Woe Betide Us — Planet Lollywood?
The American Movie-Star Sylvester Stallone (along with a few other superstars) runs his restaurant PLANET HOLLYWOOD far better than we have been running our economy, which exercise is more akin to living in a fantasy world of figures, most of them fudged to fool everyone and his uncle, Uncle Michel Camdessus of the IMF among them. If we thought last year’s growth rate of 4.6% was bad enough, compare it to the 3.1% for this year. The macro-economic situation remains under tremendous pressure because of a number of deep-rooted structural failures as well as policy weaknesses. Economic performance has been short of targets for some years, the pressures on prices have continued unabated, fiscal deficit have remained stubbornly high and balance of payments deficit have been on the increase as a percentage of the GDP. Even last year’s growth rate of 4.6% was attributable more to divine nature than anything else, a bumper cotton crop and increases in the production of a number of minor crops. Really scary was the slump in manufacturing, small scale manufacturing registered 8% plus to offset the huge decrease of 1.25% in large scale manufacturing, a negative growth. The major pressures originated in the high budget deficit of 6.3% of the GDP, balance of payments deficit in excess of 7% and the alarming increase in prices plus of 13%. To put it very bluntly the state of the economy is abominable despite all our efforts at getting additional resources and some real progress in controlling expenditures. The challenges before our economic managers are very serious, the ability to meet these challenges depends upon identifying the root cause of the economic imbalance, that remains the substantially large fiscal deficit. Government revenues in last year’s Budget, in particular tax revenues, are insignificant in relation to the GDP despite all the additional taxation efforts. The success of Mr Sartaj Aziz’s proposals made on Friday evening depends not upon rhetoric alone but on reciprocity by the business community to the liberal concessions and on strict implementation of the reduced taxation measures. Unless we can increase the numbers in our tax net and get those who are already in the tax net to pay their actual dues, we will remain economically adrift searching for friendly shores who will disburse easy loans.
We are Rs 55 billion short of our projected revenues according to conservative estimates. Since we were already borrowing Rs 55 billion, total bank borrowing will exceed Rs 110 billion. The proposed budget is very much weighted to galvanize business and industry, it envisages a responsible response from the business community, if it is not forthcoming the deficit will grow larger and our chances of economic survival smaller. Coupled to an all-round improvement in the existing tax structure renewed efforts are required in containing expenditures. Unless this is done it will hamper efforts of arranging additional funds from abroad as well as exchange rate depreciation to freeze the current account deficit. There is tacit acceptance that the recent economic package announced by the Federal Finance Minister will take some time before it kicks in to effect the lot of the common man down the line, increasing production and investment as well as substantially improving government revenues. In the meantime the common man is expected to get used to kicks of the normal kind. Further deterioration can only be arrested by additional revenues and increased exports so that inflation is brought down to a single digit.
Given that in China the level of domestic savings is four times that of Pakistan, in Singapore it is as much as five times and even in India double that of ours, the domestic savings in Pakistan is only 11% of the GDP and abominably low. Pakistan remains a very high consumption society, in fact this is a long-term socio-cultural issue which has everyone trying to go one better than the Jones-es next door. The low level of savings ensures that we have to turn to additional funds from abroad to maintain a growth rate of 6-7%. Foreign aid/or credit, as opposed to investment, means increasing our foreign debt. The immediate challenge is how to address both the domestic and foreign debt (in total 85% of the GDP) and taken together with defence, takes a big chunk out of our budget revenues. Therefore a visionary and drastic approach is necessary. Sales of public sector enterprises and other government property must be used to bring down the level of debt, both foreign and domestic, to within manageable limits, otherwise nothing will be left in the kitty for administration and development.
All across the board indicators are alarming, agricultural production this year has only increased by 0.7% while exports in the real sense may not increase at all. To this government’s credit, in relation to the apocalypse situation six months ago the indicators are better, foreign exchange reserves have risen to US$ 1.1 billion plus. On the evening of Wednesday June 11, 1997, we expected to hear from the PM an analysis of the economic review of the nation released earlier that day and how to cope with the situation! Expectation was of a fireside chat Roosevelt-style during the days of the Great American Depression in the 30s. As he has done since April 1993, the PM spoke well and eloquently, straight from the heart, and talked on issues close to the heart of all Pakistanis but the issue closest of all to everyone’s heart (and stomach), the economy, he hardly gave time to. Mian Nawaz Sharif was spiritually back on the stumps full of the rhetoric of an election campaign. The PM has evolved into an excellent speaker over the past four years, unfortunately it is not a campaign speech we are looking for but one of much more substance than was on display. To be fair to the PM, we have great expectations from him and whenever his performance falls short of what we expect it to be, we relapse into a disappointment. As a very likable and deeply sensitive human being, anything that seems to affect the PM emotionally at a particular moment gets his utmost and undivided attention in supersession to anything else. He stayed the course on matters trivial compared to the economy (and one daresays, Karachi). The issues were no less important mind you, but not “the right stuff” what both the intelligentsia and the masses were expecting. As a sincere and capable leader who has time and again proven that he is an electoral giant in his own right, Mian Sahib should now stop running for office and get on with the process of governing of the country, using the best available talent in the country. For the moment he is all that we have and it becomes incumbent on him to come to grips with the situation and focus on the real issues, not waste his time in peripheral matters best left to the domain of the Chief Ministers of the Provinces.
The Federal Budget, as expected, is a pragmatic document that takes into account the prevalent state of the economy. An absolute master of the numbers game, Senator Sartaj Aziz’s virtuoso performance was predictable. As an expert ideally geared to tackle such a critical financial situation, he is an asset to Mian Nawaz Sharif. The PM must get more able persons ideally slotted in the Cabinet to manage each discipline on a “horses for courses” policy. The nation has shown a lot of faith in the PM, he is duty-bound to show some faith in those from places other than Model Town and Lahore and/or close to it. Mian Nawaz Sharif has a tremendous opportunity before him and it is he alone who can capitalize on it for the sake of the nation. If he confines his choices to Planet Lollywood alone, than woe betide us because our dreams will stay in the realm of planets and stars and if we thought the last 3 years were bad, then we ain’t seen nothing yet!
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