Of this, Rs95,910 is claimed in car monetisation allowance while a 20% additional allowance is charged on the same account, according to the pay slip of the auditor general.

Rana has been making these car allowance claims since January 2012 – even though he has been riding in a chauffeur-driven car.

The amount the auditor general was getting was Rs21,000 over and above the car allowance that the previous government had fixed for Grade-22 officers.

Currently, the auditor general is getting a salary 20% higher than the maximum salary payable to a Grade-22 officer. On the same grounds, he got a monthly car allowance which is 20% higher than what is available to a Grade-22 officer.

Rana is also illegally getting 20% special pay or Rs17,140 per month in addition to his normal salary, which is already 20% higher than any Grade-22 officer, his pay slip shows. On account of special pay, the AGP claimed Rs1.6 million arrears.

Sources within the Accountant General of Pakistan Revenue office said the AGP was availing car monetisation facility despite opposition by both the finance ministry and the cabinet division. The cabinet division had opposed the move on the grounds that the constitutional position holders like the AGP were not entitled to such an allowance, the sources said. Under the rules, holders of constitutional positions are not allowed to claim car monetisation allowance

In order to curb misuse of official cars by the bureaucrats the previous government had withdrawn cars and in return gave cash to Grade 20 to 22 officers.

After finding the demand illegal, the then AGPR Farah Ayub Tarin refused to extend the facility to the AGP Rana. Vexed by the refusal, the AGP replaced Tarin and appointed Manzar Hafeez Mian as AGPR who sanctioned him the car allowance, the sources added.

The Express Tribune contacted the former AGPR, Manzar Hafeez Mian, who is currently serving as the Deputy Auditor General of Pakistan. “I do not wish to  comment,” said Mian in a terse response. The incumbent AGPR Tahir Mahmood was also not available for comment.

The disclosure came on the heels of the AGP’s demand for a 400% increase in salary. His continued misuse of taxpayers’ money put a question whether he is really a custodian of the exchequer.

The auditor general’s office is the prime institution in the country for ensuring public accountability and fiscal transparency in governmental operations. It is also responsible for bringing improvements in the financial discipline and internal control environment in the executive departments for minimising the possibility of waste and fraud.

The AGP’s spokesman Imran Iqbal also refused to respond to any of the questions on illegal car allowance, getting pension on a job and whether Rana was really a custodian of the taxpayers’ money.

According to the AGP Ordinance of 2001, the AGP is paid a pension of Rs25,000 per annum for each completed year of service. This amount is in addition to what the AGP will get in normal pension after retirement. However, the sources said, the AGP Rana pushed the former AGPR Mian to give him Rs25,000 per month in pension that he had to agree.

Till 2001, the auditors also used to perform the audit of the AGP under 1973 laws. However, the AGP’s audit had been stopped after this function was deleted in the 2001 Ordinance.

Published in The Express Tribune, May 20^th, 2013.

In April alone, the federal government spent Rs185 billion more than its income, which is equal to 0.8% of national output.

Officially, considering the old base year of 1999-00 which the Ministry of Finance insists on using, the deficit stands a little lower at 5.4% of gross domestic product (GDP).

The 10-month gap between federal income and expenditures is Rs103 billion higher than the annual ceiling of Rs1.184 trillion, or 5% of GDP, set by the parliament for the current fiscal year. The breach of the limit points to the previous government’s failures in curbing expenditures and boosting revenues.

According to sources, the overall budget deficit stood at Rs1.207 trillion or 5.3% of GDP, calculated with the new base year of 2005-06, considering Rs80 billion worth of savings by provinces.

On the revenue side, against the annual target of Rs2.381 trillion, the Federal Board of Revenue may hardly hit the Rs2 trillion mark by the end of fiscal year in June, a fact acknowledged in official correspondence of FBR officials.

In 10 months, FBR’s tax collection have reached only Rs1.485 trillion, making it nearly impossible to collect the remaining amount of Rs896 billion in the remaining two months of the year.

In the case of expenditures, total power subsidies are likely to clock in above Rs350 billion, compared to the budgetary target of Rs185 billion. So far, in 10 months, over Rs320 billion have already been doled out to the power sector under this head.

According to revised assessments, the budget deficit is likely to reach around 8% of GDP by the end of the year because of a massive revenue shortfall, surge in power subsidies and high interest payments.

With a gap this wide, the new government will not have many options for restraining the expansionary fiscal policy when it will present next year’s budget, analysts say.

A realistic budget deficit figure for next fiscal year will be around 6.5%, as the new government cannot consolidate more than 1% to 1.5% of GDP in its first year, said Dr Ashfaque Hasan Khan, dean of the Business School of the National University of Science and Technology. He said bringing down the deficit to 4% will require three to four years of continuous consolidation.

To finance a deficit of around 6.5%, the new government will have to borrow Rs1.6 trillion from the market. Officials say that given the volume of borrowings, inflationary pressures will persist and private credit will be squeezed in the next fiscal year as well.

In the first nine months (July-March), net external borrowings remained negative at Rs4.2 billion. To finance the nine-month deficit, the federal government borrowed Rs1.05 trillion from the domestic credit market, finance ministry documents reveal.

Sources say any deficit target below 6% for the next year will be unrealistic and difficult to achieve. If the new government decides to play with budgetary projections, they cautioned, it will only be repeating mistakes of the previous regime and may face similar trust deficits.

Published in The Express Tribune, May 19^th, 2013.

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The items include cosmetic products, racing cars, filter rods of cigarettes, lubricant oils, air conditioners, deep freezers and various types of other oils.

Sources in the Federal Board of Revenue revealed that tax officials have proposed that the policy to phase out Federal Excise Act of 2005 over three years may be abandoned from the next fiscal year, 2013-14, following the previous government’s move to abolish duty on 25 revenue-generating items which hit tax collection hard.

If the duty stays, it will generate billions of rupees next year, but the final decision will be taken by the Pakistan Muslim League-Nawaz government that is poised to take the reins of the country after winning general elections.

PML-N stalwart Sartaj Aziz did not comment on his party’s policy on federal excise duty. He only said the PML-N wants to increase revenues, but the policy to achieve this goal will be formulated by the new finance minister and the cabinet.

In 2011, the PPP-led coalition government started phasing out excise duty and scrapped the duty on 15 items in the first phase. In his last budget speech, former finance minister Dr Abdul Hafeez Shaikh vowed that the Excise Act will be completely phased out in two years while announcing withdrawal of duty on more items.

The previous government was eliminating the duty in a bid to gradually reduce the number of taxes to two major ones – income tax and sales tax – aimed at simplifying the system besides reducing the cost of doing business.

Sources said excise duty on most of the goods had been removed as an incentive to the private sector to bring down product prices. But the duty on some of goods like motor oil and waste oil was scrapped allegedly in the face of pressure from some vested interests and in return for kickbacks.

The exchequer suffered a revenue loss of Rs8 billion on just these two items, they said.

Excise duty is universally imposed to curb consumption of luxury items, but this principle is violated by successive governments as the duty is levied on many essential items as well, said Ashfaq Tola, a renowned chartered accountant from Karachi and a tax expert.

Proposals

Tax authorities seek to impose again 10% of the difference between the price before tax and production cost as excise duty on air conditioners and deep freezers. Both of these are considered luxury items and are also subject to sales tax.

The FBR is also aspiring to levy 5% duty ad valorem on station wagons and racing cars with cylinder capacity exceeding 8,500cc.

Furthermore, it is planning to impose 10% duty ad valorem on viscose staple fibre, Rs13 per litre duty on organic composite solvents and thinners, Rs25 per kg duty on grease, 88 paisa on methyl tertiary butyl ether, 7.5% duty on carbon black oil, 10% of retail price or Rs7.5 per litre duty on waste oil, 15% duty ad valorem on other mineral oils excluding sewing machine oil, Rs185 per ton on other fuel oils, Rs13 per litre on solvent oil and Rs10 per litre on transformer oils.

Last year, FED was removed from lube oil, lubricating oils, filter rods and skincare products. FBR’s proposal includes levying 10% per litre duty on lubricant oils, 10% on skincare products and 20% of the difference between cost of production and price before tax on filter rods of cigarettes. The proposal also includes increasing federal excise duty rate for cement.

Sources said the government is also considering reintroducing federal excise duty on livestock insurance and asset management companies.

Published in The Express Tribune, May 18^th, 2013.

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Released on Thursday, a summary of the fiscal operations of federal and provincial governments for the July-March 2012-13 period showed that Rs83.3 billion has been recorded in national accounts as a “statistical discrepancy”.

This is not the first time such a sizable amount of funds remains untraceable, despite the fact that the country is implementing the Rs9.6 billion World Bank-funded Project to Improve Financial Reporting and Auditing (PIFRA). PIFRA is aimed at ensuring that real-time information of every public transaction taking place in the system is available.

The details of the federal government’s expenses reveal that the previous government spent Rs1.1 trillion more than its income during its last nine months in office – a gap budget-makers had anticipated would cover almost the entire fiscal year.

Interestingly, the finance ministry has under-pitched the budget deficit in terms of percentages, using the obsolete size of the economy of Rs23.6 trillion to work out the deficit figure. Keep in mind that the Governing Council of the Pakistan Bureau of Statistics and the National Accounts Committee have already approved 2005-06 as the new base year of the economy, under which the new size of the economy has shrunk to Rs22.9 trillion.

On the basis of the old base year, the finance ministry has said the federal budget deficit is 4.65% of GDP. On the basis of the new base year, the budget deficit actually comes to around 4.8% of GDP.

The federal deficit target, approved by parliament for the entire fiscal year, is Rs1.184 trillion or 5% of GDP. The overall budget deficit target, including savings by provinces, had been set at Rs1.11 trillion or 4.7% of GDP.

On the basis of the now discarded statistics on the size of the economy, the figures show that the overall budget gap stood at Rs1.046 trillion or 4.4% of GDP in the nine months of this fiscal year, as the four provincial governments saved Rs103 billion out of their incomes, which helped restrict the national deficit. Had the finance ministry used the new base year for its calculations, the budget deficit would have been 4.6% of GDP.

The previous federal government borrowed the entire amount of the shortfall from the domestic market, as net foreign loans in this period remained a negative Rs4.2 billion. These massive borrowings for budgetary support left virtually nothing for the private sector, resulting into a credit crunch followed by an increase in unemployment.

In nine months, gross federal income remained roughly Rs2 trillion. The major reason behind the increase in income was the release of $1.9 billion by the United States on account of the Coalition Support Fund. Tax revenues, meanwhile, accounted for Rs1.4 trillion.

Out of the total income, the federal government gave Rs893 billion to provinces as their share in federal taxes, leaving itself with less than Rs1.1 trillion.

Against this income, the government spent Rs2.2 trillion in nine months, out of which Rs772 billion was spent on interest payments. Defense spending remained at Rs405.8 billion, while federal development spending – including a sum of Rs42.5 billion spent at Ashraf’s sweet will – remained at Rs203 billion.

Published in The Express Tribune, May 17^th, 2013.

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Correction: An earlier version of the story incorrectly attributed the missing money to the Auditor General of Pakistan. The error is regretted. 

While chairing a meeting here on Wednesday, Prime Minister’s Finance Adviser Dr Shahid Amjad Chaudhry asked the Planning Commission to present the 10th Five-Year Plan to him by next week. The plan had earlier been shelved by the last government, officials said.

They added that the adviser said his government wanted to leave the 10th Plan (2013-18) for the next government for consideration, in place of the Planning Commission’s Framework for Economic Growth (FEG). During the meeting, Dr Chaudhry asked officials if necessary chapters from the FEG should be merged in the plan.

The FEG had been prepared by former Planning Commission deputy chairman Dr Nadeemul Haque, who was recently dismissed from his post by the caretaker government.

When Dr Haque became the deputy chairman, the Planning Commission had been preparing the 10th Plan for 2010-15, which he ordered shelved. In its place, he had provided his own strategies for economic development. The FEG was later approved by the National Economic Council, the country’s highest economic decision-making body. However, the FEG was never implemented and lacked broader acceptance.

Differences between the Plan and the FEG

The 10th Five-Year Plan (2010-15) was in tandem with the growth models the country was implementing, but was advocating the status quo. It had envisaged 7% growth, increasing literacy to 65% and reducing the incidence of poverty.

The main focus of the Plan was to move gradually towards increasing investment in education and health and to improve living standards. The Plan had also promised to usher in an era of development in parts of the country that had remained underdeveloped thus far.

Some other targets under the Plan included the reduction of infant and maternal mortality rates, mobilising resources, improving the security situation, addressing the energy crisis and improving management of the public sector enterprises.

On the other hand, Dr Haque had presented the FEG as a new approach towards accelerating and sustaining economic growth. The strategy was based on sustained reforms that would build an efficient and knowledgeable governance structure, and create markets in desirable and well-connected locations.

It recognised the severe resource constraint that the country faced and therefore focused on productivity. The thrust of the strategy was focused on the software of economic growth: through addressing issues of economic governance, institutions, incentives and human resources.

“The country will look terrible if we do this,” Dr Haque responded when told the FEG may be scrapped. He said the FEG had been approved by the National Economic Council, while the 10th Five-Year Plan was merely a draft document put together by the current finance adviser’s brother, Dr Rashid Amjad, in the latter’s capacity as acting chief economist at that time.

Dr Haque had withdrawn the title of acting chief economist from Dr Rashid Amjad, restricting him to the Pakistan Institute of Development Economics as vice chancellor of the institution, when the former assumed charge as deputy chairman of the Planning Commission.

Dr Haque said the interim government should not overturn the National Economic Council’s decisions, especially when a new government is about to be formed. He said only the National Economic Council can reject the FEG, and there must be a discussion prior to such a decision. He said the finance adviser was not above the National Economic Council, and the apex body had not approved the draft of the 10th Five-Year Plan. He further said that the law and rules must be followed before the government takes any decision on the FEG and the 10th Plan.

“Is the future of the economy a family game limited to only the privileged few?” Dr Haque asked, alleging nepotism behind the decision.

Published in The Express Tribune, May 16^th, 2013.

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ISLAMABAD: The government has given an extension to chairman of the Federal Board of Revenue (FBR) Ansar Javed till end of June in a bid to not disrupt the budget making exercise.

Ansar Javed, who was appointed as the taxman on April 10, was due to retire today (Wednesday). The spokesperson of the FBR Riffat Shaheen Qazi confirmed that Prime Minister Mir Hazar Khan Khoso extended Javed’s contract till June 30. She said the Establishment Division will soon issue a notification to this effect following the approval granted by the premier.

It was the first extension given by the caretaker PM after the May 11 elections and few days before Nawaz Sharif’s PML-N is poised to make a government in the centre. It was not immediately clear whether the caretaker government consulted the PML-N leadership before giving an extension to the chairman FBR.

The government had appointed Javed as chairman of the FBR in place of Ali Arshad Hakeem who had been suspended by the Islamabad High Court after finding flaws in the procedure adopted by the previous government for his appointment. The IHC, on Monday, reserved a judgment on the review plea filed by the suspended chairman FBR Hakeem.

The budget exercise may be completed smoothly after the extension but questions remain over the ownership of the decisions that Javed takes as the chairman FBR. There have been incidences in the past where every new chairman scrapped the policy of his predecessor and implemented his own, creating chaos in the FBR machinery, according to the FBR officials.

Since his appointment, Javed has been making transfers and postings at a time when the FBR machinery should be concentrating fully on fine tuning the budget proposals, they added. In the past, there used to be a ban on making transfers and postings during the budget making exercise.

Published in The Express Tribune, May 15^th, 2013.

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If appointed, Senator Dar, a two-time former finance minister, faces immediate challenges. He has to present next year’s budget in the shortest possible timeframe, while finding a solution to the looming threat of a national default on international payments due to external debt amortisation.

The options in front of him dictate that either he go straight to the negotiating table for a bailout package from the International Monetary Fund (IMF), or bet on timely help from friendly countries. However, analysts say that relying on friendly countries may not be immediately possible.

Senator Dar was appointed Leader of the Opposition in the Senate of Pakistan on March 14, 2012. He has also served as finance and commerce minister in the past. His first tenure as finance minister was under Nawaz Sharif, and he was appointed to the office again for a short stint under former prime minister Syed Yousaf Raza Gilani in 2008.

Dar achieved his certification in chartered accountancy from the Institute of Chartered Accountants in England and Wales, and was one of the youngest Pakistanis at the time to have passed the professional qualification in the minimum time period. Senator Dar is now a Fellow Chartered Accountant.

In 2008, when Dar was appointed finance minister under Gilani, he presented an extremely bleak picture of the economy which, according to many, had shattered investor sentiment when it was in dire need of diligent rebuilding. Senator Dar had stated in 2008 that the budget deficit would become bigger than 9% of the Gross Domestic Product that year. The announcement shattered the confidence of the business community and foreign investors, who had been hoping to invest in Pakistan in hopes of some stability following a decade of dictatorship. This caused the rupee to plummet and there was a run on the banks.

Former finance ministry officials, however, claim the establishment had actively misled Senator Dar. They say bureaucrats had deliberately painted a sorry picture by taking into account the coming year’s liabilities by applying the accrued accounting model, but took revenues only for that year by applying the cash-based accounting method.

Analysts say Senator Dar must countercheck the facts presented to him by bureaucrats this time around before making them public. There are chances that the bureaucrats may repeat the same episode in a bid to remain in the good books of the government by throwing responsibility on the previous government.

Another allegation against Senator Dar is that he stopped the issuance of Global Depository Receipts (GDRs) of some entities as finance minister in 2008. These had been planned to raise $4 billion from international markets. They included the GDRs of National Bank of Pakistan, Kot Addu Power Company, the sale of 15% shares of Habib Bank and 10% exchangeable bonds of the Oil and Gas Development Company.

The stoppage had led to panic in the market and forced the government to discuss a bailout package with the IMF later on.

However, according to former finance ministry officials, President Zardari had been calling the shots behind the scenes, and had stopped Dar from moving forward on the issue. Former adviser to the finance ministry Dr Ashfaque Hasan Khan, who was serving in the finance ministry at that time, said Senator Dar had been all for the transaction.

Ahsan Iqbal, who was the deputy chairman of the Planning Commission in the 1997 setup, is also tipped to be handed the same post with the status of a federal minister. The Gilani government had abolished the Ministry of Planning and Development, and Nawaz Sharif may revive this ministry.

Following the elections, Standard & Poor’s Ratings Services termed them a key achievement for Pakistan’s maturing democracy in the face of general economic malaise, widespread and incessant sectarian and political violence, large-scale domestic insurgencies, and on-going tension with neighbouring India. S&P said the election outcome puts the incoming government in good stead to seal a deal with the IMF soon.

Published in The Express Tribune, May 14^th, 2013.

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Receipts for the July to March period totalled just 47.6% of the annual budgeted estimate of $3.8 billion, according to documents released by the Economic Affairs Division. Out of the $1.8 billion, a sum of $228 million was received in grants, while the remaining was accounted for by different loans.

The United Kingdom provided the largest component of aid, as it gave $100.8 million in grants. The UK had promised to give $97.1 million for the full year. That sum was higher than even the US, the country’s coalition partner in the war against terror, as the Obama administration disbursed only $70.4 million under the Kerry-Luger package according to official documents. The disbursements from the US came to less than 40% of the annual budgeted amount of $179.7 million.

The US had committed $7.5 billion over five years under the Kerry-Luger package, but the documents show a wide gap between commitments and actual disbursements.

Analysts have revised their estimates after the fresh data was released: they are now anticipating an external financing gap to the tune of $1.5 billion – $500 million higher than initial estimates. That shortfall is likely to bring the rupee under further pressure due to the rapid depletion of foreign currency reserves, they added. Pakistan has already begun negotiations with the International Monetary Fund (IMF) for a second bailout programme in less than five years.

According to the documents released, the PPP government failed to float a $500 million exchangeable bond, which was to be backed by shares of the Oil and Gas Development Company. The debt crisis in the euro zone and deteriorating domestic economic conditions restrained the last regime from going to international debt markets, officials said.

Similarly, the flows of funds from Japan, the Asian Development Bank, the World Bank, the Islamic Development Bank and other bilateral lenders trickled in far below estimates.

Japan had promised $444.4 million in loans and grants, but instead gave $114.7 million or 25.8% of the annual assistance promised. The World Bank, on the other hand, gave only $326 million as against annual commitments of $762 million. The disbursements came to only 42.5% of annual commitments, according to the Economic Affairs Division.

The Islamic Development Bank gave only $315.3 million or 53% of the annual assistance promised, including an expensive loan worth $256 million. The ADB disbursed $277 million or 61.3% of annual budget estimates.

International lending agencies had suspended additional budgetary support to Pakistan besides slowing releases of funds in the pipeline due to the last government’s inability to implement taxation and energy reforms. During the ongoing dialogue, the IMF told Pakistan that it will provide fresh loans only to the extent of what Islamabad already owes to the Fund. For additional funding requirements, the Fund asked negotiators to separately talk with the World Bank and the Asian Development Bank.

Authorities estimate a financing gap of $6.5 billion for fiscal 2013-14. If the IMF and Pakistan agree on the terms for a new programme, the Fund will give Islamabad $3.6 billion for the first year. Pakistan will separately negotiate with other lending agencies in order to bridge the $3 billion gap.

Published in The Express Tribune, May 11^th, 2013.

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ISLAMABAD: A summary has been moved to interim Prime Minister Mir Hazar Khan Khoso, asking for a one-year extension in Planning Commission (PC) Member Energy Shahid Sattar’s contract.

The move comes just days before the nation will choose a new government for the next five years. It also comes on the heels of the removal of former PC deputy chairman Dr Nadeemul Haque, who was recently dismissed by the caretaker government.

PC spokesperson Asif Sheikh confirmed that a summary has been moved for a one-year extension in Sattar’s contract. To a question, Sheikh said it will be up to the caretaker government to decide whether it has the mandate to approve such summaries.

Analysts are questioning both decisions, arguing that it is not the job of the caretaker government to hire or sack anybody.

The member energy is responsible for providing advice on energy policy, and has an important role in the approval of new projects. He or she is also required to deal with international lending agencies to secure loans for the energy sector.

When contacted, a senior PC official could not provide a justification for seeking an extension in Sattar’s contract. Such justifications are usually provided to the decision-making authority when a government body recommends an extension in contract for an individual’s services.

Sattar has been serving in the PC for the last two years and is said to have played a controversial role on many occasions, particularly in the evaluation of technical and financial bids for a project under which 400 million cubic feet per day of Liquefied Natural Gas (LNG) were to be imported, sources said.

A number of questions had been raised on the role played by Sattar in the scrutiny of technical and financial bids for the import of LNG. Sattar was a member of a subcommittee of the Economic Coordination Committee (ECC) of the Cabinet which worked on the LNG import project.

The subcommittee is said to have stepped beyond its mandate while discharging its duties. Sattar went to London to evaluate the technical bids for the project, submitted by three bidders on February 18 this year, as a member of the ECC subcommittee. He was then also present at the time of opening of financial bids earlier this month, revealed officials who were involved in the $46 billion transaction.

Immediately after evaluation of the bids submitted for the project, the then government had appointed Sattar as a director on the Board of Directors of the Sui Sothern Gas Company (SSGC). SSGC was one of the importers acting on behalf of the government.

Interactions with officials and bidders revealed that Sattar had allegedly tried to obtain information from one of the potential bidders regarding whether that company was bidding on the due date. Once the bids were submitted, he contacted another party to the transaction and pressed it to disclose its bid price. In London, even before the pre-bid conference, he told a party that the federal government had decided to technically qualify all three bids.

The subcommittee later declared that the lowest bid, submitted by Elengy, was noncompliant, clearing the way for Pakistan GasPort Limited to be awarded the contract. When the financial bids were first opened, Sattar had been the first one to demand that Elengy’s bid be declared noncompliant on grounds that the company had quoted two prices based on two separate formulas.

Elengy had used a Brent-based price, as required in the Request for Proposal for the contract, which had turned out to be the lowest at $17.618 per million British thermal units (MMBTU). It also quoted another price of roughly $16.56 per MMBTU, which was even lower than the Brent-based price. However, the second price was based on the Henry Hub formula, which was not considered by evaluators, yet nonetheless became a bone of contention.

After the press highlighted the government’s attempts to knock out the lowest bidder, the Supreme Court of Pakistan had taken suo motu notice and stopped the government from processing the deal.

Published in The Express Tribune, May 10^th, 2013.

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Provisional estimates given by the Pakistan Bureau of Statistics and based on the new base year of 2005-06 show that the investment-to-gross domestic product ratio stands at just 14.2% for the current fiscal year 2012-13.

However, the numbers were not that bad few years ago. In 2008, when the Pakistan Peoples Party-led coalition government took over, the investment-to-GDP ratio was 22.5%.

In resource-scarce rich countries, economic takeoffs are strongly associated with high levels of investment, which also greatly reduces the number of unemployed, say experts.

“The 14.2% figure is rubbish, to say the least. Had the ratio been calculated on the basis of old 1999-00 base year, it would have been 11.5%,” said Dr Hafiz Pasha, a renowned economist and former finance minister.

Sounding suspicious, he asked why the economy was rebased before expected talks with the International Monetary Fund (IMF) for a new assistance programme.

For the last fiscal year, however, the statistics bureau has revised upwards the investment-to-GDP ratio to 14.9% from 12.5% following the change in the base year.

According to the estimates, private investment dipped to 8.7% of GDP this year from last year’s 9.6%, indicating that private businesses are continuously being squeezed. Contrary to this, public investment improved slightly to 3.9% from 3.7% primarily because of spending under the Public Sector Development Programme and other government expenditure.

The fixed investment ratio fell to 12.6% this year from 13.3% last year.

Though bureaucrats and politicians blame law and order and energy crisis for the decline in investment, the Board of Investment, headed by Saleem Mandviwalla, has listed over half a dozen factors for the slump.

Last year, the BOI said contrary to the perception that law and order condition was the only obstacle in the way of attracting foreign investment, in reality, it was only one of many factors.

It attributed the continuous decrease in investment to global economic recession, inconsistent policies in the country, high cost of doing business, regulatory hurdles like lengthy processes, inadequate infrastructure and delayed response from ministries and provinces to investment proposals.

The BOI proposed a roadmap to address the challenges, but it remained only on papers and was not implemented, admitted Mandviwalla, who also served as finance minister in the last one month of the PPP government, which completed its term in mid-March.

Mandviwalla, who is still the BOI chairman, insisted that the overall economic slump had hit Pakistan’s economy hard.

When compared with regional peers, Pakistan is trailing badly. In India, the investment-to-GDP ratio is 35%, in Bangladesh 25.8%, Sri Lanka 33.3% and China, the world’s second largest economy, an impressive 46.8%.

A country like Afghanistan, which has borne the brunt of the ‘war on terror’, is also performing better than Pakistan as its investment ratio stands at 24.7%.

Published in The Express Tribune, May 9^th, 2013.

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