Addressing the conference titled “CFOs: Driving Sustainable Organisational Success” organised by the Institute of Chartered Accountants of Pakistan (ICAP), he said the bad economic situation was the result of poor governance rather than the global financial crisis. “The Chinese economy grew by 12.7% in 2005-07, and 9.7% in 2008-11. The growth rate of the Indian economy was 9.5% in 2005-07, and 7.7% in 2008-11. It’s obvious that there wasn’t much different in pre- and post-recession years,” he said, noting that Pakistan’s growth rate came down to 2.9% in 2008-11 from 7.2% in 2005-07, which is far worse than the regional countries.
Referring to Pakistan’s budget deficit, which has become 6.5% of the GDP, he said it was twice that of the average of other Asian developing counties. He noted that the devaluation of the Pakistani rupee by 34% under the present government had led to double-digit inflation for 15 consecutive months, which was unprecedented in Pakistan’s 65-year history.
With heavy debt repayments of $4.3 billion and $4.8 billion in the next two years, Khan predicted a severe balance of payment crisis.
The latest NFC Award, which is the distribution of financial resources among the provinces by the federal government on an annual basis, also came under heavy criticism, as Khan called it the “source of macroeconomic instability” in Pakistan. “Fiscal stability can never be achieved under the present award. It was done in haste. It was a mistake.” The provincial share of the divisible pool had increased from 47.5% to 56% in 2010–2011.
Khan said energy audits should be carried out to fix fuel-guzzling power plants by making targeted investments. He added that raising the power tariff continuously to meet the increasing cost of electricity only encouraged people not to pay their bills. “It’s like taxes. If you increase taxes too much, people start evading them.”
Speaking on the occasion, Atlas Honda CEO Saquib H Shirazi said the economy of Pakistan was inherently strong because it was consumption-driven. “Both Pakistan and the United States have large populations with consumption-led economies,” he said, adding that the growth rate could be increased to 7% by solving the energy crisis and reducing tax evasion.
Calling for consistency in government policies, he said his company’s energy costs increased by at least 60% last year unexpectedly. “We have 13 chartered accountants, and none of them could predict the rise. We under-budgeted by Rs250 million.”
Published in The Express Tribune, March 29th, 2012.
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"Consumption driven"?! The man must be cracked.
I hope our economy is not consumption-driven. The focus needs to be on savings, investment and exports!