An economic ‘dressing-up’

Not for the first time, the government’s economic managers have applied certain ‘tactics’ to make the country’s economic performance look better than it is. While the government blows the trumpet on increasing foreign exchange reserves, it conveniently ignores the fact that public debt forms a significant portion of the increment. It cites improved macroeconomic indicators, but ignores the help received through tumbling oil prices. Circular debt is parked in a holding company to reduce the budget deficit, but efforts aimed at decreasing that amount through power sector reforms are absent. At least technically, there is nothing wrong with such measures.

But the government’s latest such tactic is to exclude a certain portion of the loans it has taken, from the public debt figure, as it aims to decrease the debt burden on paper. The move will help the authorities in meeting an IMF condition that caps the maximum borrowings the government can make for budget financing. All this would have been easier to swallow if there were assurances that efforts would be made to reduce future borrowings. However, this move is only aimed at enabling subsequent borrowings. This is nothing new. Pakistani governments have the tendency to make most things look good on paper. They, however, ignore that regardless of which head the debt amount is parked under, nothing can change the fact that the country owes that money and will need to pay it back to the lenders. By moving it from one column to another, Pakistan’s fiscal position will not improve in reality. No short-term measure can relieve us of the debt burden. It can only reduce in actual fact if more Pakistanis contributed towards tax revenue than they currently do. By increasing its debt portfolio, Pakistan is sacrificing crucial development spending that could benefit us. The SBP and the finance ministry differ on the amount of public debt the country owes. What can be agreed upon is that it is definitely more than Rs18.14 trillion and needs urgent attention.

Published in The Express Tribune, December 14^th,  2015.

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