It has been about a month since the IMF report on Pakistan ‘ingeniously’ highlighted the economy’s fragility. A sense of urgency was incumbent; the PM quickly and quite conveniently replaced the secretaries of finance and FBR. Very few questions were asked; the damage was covered. How and why would the public demand accountability and transparency, or an extenuating correction of seemingly portrayed fudged figures when it has been residing in blissful ignorance with regard to the economy? Or maybe the silence was another extension of the disillusionment with the system.
For the purpose of reminiscing, the IMF report in Feb-12 revealed that the (please note: expected) budget deficit communicated by the government for FY12 has been understated by Rs532 billion where in the revenue was overstated by Rs215 billion and expenditures were understated by Rs317 billion. This would imply that the budget deficit for the current fiscal year would arrive at about 6.6 per cent of GDP, instead of the government’s repeated assurances about realising the promised five per cent contingent on promised external inflows which even the sovereign would vouch by…but nevertheless.
Given this back drop, the very act of changing secretaries signals that the government is capable of making only cosmetic changes in an effort to please the almighty IMF. The first contention questions why the IMF is so important that the government needs to replace qualified personnel who have served its cause throughout the regime so far. Moreover, current deliberations by the ex-finance minister reveal that domestic debt has exceeded foreign debt, indicative of greater reliance on the domestic financial system instead of lenders abroad. So why is there a need to prove credibility in front of this iffy source of funds?
The second contention challenges the autonomy of the ministry of finance as the government’s window into its accounts. If expenditures, especially the larger recurrent ones are being exceeded than the target, is the finance ministry really supposed to suffer blame? There are severe structural deficiencies in the collection and distribution of revenues between the federal and the provincial governments. For instance, the provincial government or the chief minister has the power to undertake expenditures without taking prior approval from the national assembly. This automatically results in a greater than expected deficit in provincial budgets as the latter have limited space to raise revenues, especially, post the 18th amendment which led to the devolution of many subjects that were earlier apart of the federal list.
Third, the PM’s alacrity in reading international evaluations of the economy is commendable and therefore must be lauded. Why should he pay heed to weekly caveats published by domestic analysts who have repeatedly tried to inform, challenge or at least warn the government regarding the same macro variables delineated by the IMF? The government is ready to cheer the FBR chairman when he reports higher than target revenue collection, but ever ready to replace the same person when the numbers are challenged by an international body! Why are there no internal checks and balances? And moreover, is the 2-3membered IMF office in Pakistan better equipped to report federal collection of taxes and expenditures? Regardless of whether the answer is in the affirmative, there is only a sense of embarrassment and shame that holds its ground.
If the government is ever so concerned about accurate reporting of its accounts and more importantly meeting its target spending, ‘may be’ it needs to address the inefficiencies that exist in its very own government offices. Supposedly, for the provision of government services annually, the government spends about Rs13,000 per capita, leaving out the amount that is assigned for expanding the scope of these services ie the PSDP.
And to put an end note: there is little education, very little health and almost no security in the country.
The writer is an economic analyst and freelance financial journalist.
She can be reached at [email protected]