News One – 24 May 2012
After the issues with US do you think Pakistan has reservations for the new budget?
I am not the kind of person who would give a negative picture but the kinds of structural reforms desired for our country have not been witnessed. To improve the fiscal situation we have to cut down on expenses and increase revenue generation. There has been no improvement so far in broadening the revenue base of this country. In a few days we will receive the previous year’s economic survey report showing revised estimates and actuals.
Economic Surveys always overestimate the revenues and underestimate expenses. Last time we heard claims of 414 billion rupee external assistance arriving but the actual amount that has been received till now is only 66 million. Estimated subsidies were stated to be 122 billion which have now reached 300 billion. The government is moving towards commercial bank borrowing and consequently the private sector has been crowded out. With this avenue blocked printing money becomes the second resort for the government.
The actual problem will surface when we will run out of Foreign Exchange to pay our obligations. The country can print rupees but not dollars. As a result there is going to be a 4 to 5 billion current account deficit. Capital and financial accounts that are supposed to support current account is already going into deficit. In the coming years principal amount repayment of loans will be due. There seems to be no contingency plan for that so far.
Why do you think all the discussion in Pakistan is not mature enough to circle around the economy? It seems as if the people show no understanding of future implications of the global economy, in Pakistan?
I believe that we are divorced from realities as such. Ever since Pakistan was made we have relied heavily on external aid especially from the US. After 9/11 we took 180-degrees turn. NATO supply was initiated without charging any money. Air bases were offered, drone attacks allowed and CIA given a free hand to operate.
I sincerely believe that trade negotiations are the toughest to handle. I myself have been a chief trade negotiator for quite sometime and I have witnessed that even with friendly countries, these negotiations have a tendency to become difficult. The reason is that each country has to safeguard their interests. When the new government came if they believed the strategies followed previously were faulty it was that time that they should have come together and questioned the system. I fail to understand that all of a sudden now the issues are being highlighted. I believe that in the previous few months sensitive matters pertaining to the country’s solidarity have been very childishly handled. I am very disappointed because in the name of democracy the country has been plundered and the situation is going towards a nosedive.
What do you feel about the heavy amount that is being allocated for PSDP?
Like I mentioned the state tends to overstate revenue and understate expenses. There is no effort to cut expenses. The amount spent on protocol is massive as compared to the financial position Pakistan is in today. If we analyze PSDP in the previous four years we will see that when revised estimates arrive the amount allocated is usually halved. The tricky part is to first acknowledge how much PSDP is spent in actuality. I assume it should be around one third or in a perfect situation somewhere around 50%. The priorities should be set initially starting from energy to water and agriculture.
I foresee almost 10 billion dollar annual deficit. The reserve is almost 14 billion there is a limit to which the state will draw down. There is no plan for the Balance of payment scenario that is going to be faced by Pakistan.
Since you have good comprehension of the pulse of Rawalpindi and Islamabad. Strategic politics and its failure is the consequence of Pindi and its reconciliation with the facts?
We involve Pindi in issues unnecessarily. The parliamentary sessions fail to suggest actual causes and solutions. We see no strategic issue being debated. Salala incident is not the only reason for the disturbance but there were 16000 other people who lost their lives also. I disagree that it was a consequence of the army taking a stand, even if it were so, I feel that it was incapacitation of the government to have been in a position to not make a difference.
Source: Capital Circuit – News One – 24 May 2012