Hyping economic hoaxes

LAHORE: This government is in the habit of creating euphoria on any positive news on economy and most of the times all overhyped hopes end up in despair and now no one wants to trust the ‘big news’ touted by the rulers anymore.

It seems that the positive news on economy was engineered to coincide with the completion of two years of this government. Every patriotic Pakistani hopes that the recent positive trend in economy is true and Pakistan has embarked on a growth path.

However, the past statistics and statements released by this government proved to be dud. If some foreign investors met with the Prime Minister, they were claimed to be dying to invest in Pakistan. In the end nothing materialises.

When the government announced offshore drilling for oil near Karachi, the public was made to believe it was the first time such exploration was taking place in Pakistan and a prominent global company had agreed to lead it. Hopes were raised that a huge oil reservoir would be discovered in six months. Statements were issued that Pakistan would become a net oil exporter; there would be no need for foreign aid and foreigners would rush to Pakistan for employment.

When the bubble burst it was revealed that the exploration exercise had been abandoned as no oil was found. It also came to light that the cost of exploration was $350 million out of which the foreign investor contributed $100 million, while the rest was contributed by two state-owned Pakistani companies.

Then our Prime Minister floated the idea of eradicating rural poverty through poultry farming. Four hens and a cock each were distributed among poor rural families. The result was zero. Poultry raised in controlled state-of-the-art farms costs less than the cost to the rural households. Yet another idea was to encourage rural households to rear cattle and sheep. This also turned out to be a failure.

The commerce advisor has time and again claimed a turnaround in exports but it never proved to be lasting. Exports increased and dipped periodically. The dip during coronavirus is understandable; otherwise the performance has been erratic.

There are high cost of doing business and capacity issues particularly in textiles. Experts are keeping their fingers crossed as this government like its predecessors does not honour its commitments to the exporters transparently. The efforts that exporters made to force the government to provide the promised relief consumes most of the time of exporters. This leaves them with little time to explore export markets.

The concession obtained from IPPs is good in the long run but there is no chance of an immediate relief to the consumers. For six months every transaction in power sector would be conducted on the basis of MoU after which the IPPs would ink a legal agreement. If the government honoured its deal with IPPs during next six months, the IPPs would surely go ahead with the deal. However, if payments were again withheld they would never enter a permanent deal. The government has lost its creditability and it will have to restore the confidence of investors in the next six months. For consumers it is a wait-and-see period. The government has granted some concessions to IPPs and extracted some from them. It was a give-and-take deal.

The domestic industry has been totally neglected by this government. There is no bankruptcy law as a result of which manufacturers are defaulting on their loans. Employment in these industries and even in commercial entities is barely on manageable basis. Those that lost jobs have not been re-hired. Some positive economic activity would not land them good jobs. It has to be rigorous growth that seems elusive at the moment.

Last of all we do not need engineered management of foreign exchange reserves. We have been maintaining or even slightly improving our reserves not on our economic performance but purely on foreign loans. The moment these loans stop rupee goes into a fall. In fact, despite keeping relatively high foreign reserves rupee is gradually losing its value. The hot money badly damaged our currency. The hawkish foreign funds are anxiously waiting for the interest rates to go up so that they could mint money by investing in Pakistani treasury bonds. The central bank should declare that the treasury bonds would be offered to Pakistani banks and institutions only.