SBP report card

MAKING a comment on the state of Pakistan`s economy these days is like stating the obvious. This is exactly what the State Bank has done in its first quarterly report on the performance of the country`s economy for the current fiscal: the economy is showing signs of some improvement, but the risks remain. What are those signs of `improvement`? The December inflation has receded to 9.75 per cent year-on-year. Tax revenues have grown by 27 per cent in the first half of the fiscal from a year ago. The budget deficit has declined to 2.6 per cent of GDP during the same period from 2.9 per cent.

And what are the `risks` to the economy? Price inflation is projected to resurge on spiking energy prices. The tax revenue target of Rs1.95tr still looks daunting because of the government`s failure to implement the reform agenda. The budget deficit could swell beyond six per cent of GDP at the end of the year if the government fails to realise the uncertain Coalition Support Fund dues from the US and the remaining privatisation proceeds of the PTCL from its Gulf buyer. The failure to raise the projected funds of $700m from the sale of 3G telecom licences could also increase the size of the deficit. Even the government move to settle a part of the circular debt (Rs160bn) outside the budget through the debt-swap facility will not help bring down the deficit. The non-realisation of these financial inflows will also jeopardise the current account deficit, which has already expanded to $2.15bn or 1.8 per cent of GDP from a surplus of $8m last year. Large-scale manufacturing posted a negative growth of 0.54 per cent in November, slowing to 1.56 per cent in the first five months of the fiscal on growing energy shortages. And so on.

So where do we go from here? While economic growth is still expected to pick up and go up to around four per cent this year from 2.4 per cent last year, the solution to the country`s macroeconomic problems essentially lies in taking tough decisions and implementing the fiscal and governance reform agenda. Tax coverage and revenues will have to be significantly increased, loss-making public-sector businesses will have to be restructured and sold, wasteful spending on general subsidies will have to be removed, the power and gas sector will have to be revamped and the government`s own expenditure reduced. Unless we take these actions growth will remain anaemic and the economy will not be out of the woods, despite showing periodic signs of improvement.


REPORTS emerging from the opaque world of the Afghan Taliban reconciliation talks indicate that the Karzai government may be opening up its own bilateral avenue for negotiations, possibly with Pakistan`s support. While the Americans and the Taliban are in discussions in Qatar, the Afghan administration has reportedly been unhappy about its level of involvement in that process. Afghan officials have now told the media that a separate set of talks will be launched in Saudi Arabia, this time directly by the Karzai government. If these reports do turn out to be true, that is a worrying sign about the peace process. First, there is, of course, the question of how successful the process can be if it is a fragmented one conducted by various interlocutors and if the Afghan and US governments are not seeing eye to eye. Second, negotiations should be conducted from a position of as much strength as possible, and a divided front will only be interpreted as a sign of weakness by the Taliban. The development also calls into question the mantra of an `Afghan-led` and `Afghan-owned` process, a line that both the US and Pakistan, among other nations involved, have been promoting. American officials still insist that this is the ultimate goal, positioning the Qatar talks as simply laying the groundwork. But the opening up of a separate channel through Saudi Arabia only indicates that the Karzai government is deeply uncomfortable with the Qatar process.

Meanwhile, the recent kidnapping by the Taliban of a member of the High Peace Council in eastern Afghanistan demonstrates that the other side, too, is either fragmented on the talks issue or is far from trusting the peace process. While the decision to participate in the Qatar talks was reportedly made by the Taliban governing council, it is unclear how supportive various commanders in the field are. Alternatively, the group is still going to play hardball — including targeting officials involved in talks — until it begins to benefit from the reconciliation process. Either way, between lack of consensus on the US-Afghan side and unclear intentions on the Taliban side, it looks like the effort will continue to be an uphill struggle for some time.


THAT around 30 of the 62 seismometers in Pakistan are not transmitting data in real time to the national seismic activity monitoring network speaks volumes for the level of official apathy where disaster preparedness is concerned. The reason for this, as reported in this newspaper, is shocking: the meters are offline because the Met office has been unable to pay their monthly connectivity cost, ranging from Rs2,000 to Rs5,000. Collecting and analysing accurate data is an essential part of disaster preparedness, but the relevant authorities here don`t seem to think so. In general, our attitude towards preparing for and managing disasters is ad hoc and shambolic. This is quite troubling considering the fact that various parts of Pakistan are prone to seismic activity. For example, major earthquakes struck Balochistan in 2008 and 2011, while it has been reported that six minor quakes were recorded in Karachi in 2010, along with a few recent tremors. The devastation caused by the 2005 quake in northern Pakistan has still not been forgotten.

While it is true that after the 2005 quake there has been greater awareness about disaster management both in the public and private spheres, there is much room for improvement. For example, while masons have been trained in different parts of the country — through UN help — to build safer structures, building codes, especially in cities, are routinely flouted and structures not conforming to safety standards approved. Also, earthquake drills in schools and workplaces are almost non-existent, though experts say that considering our seismically active neighbourhood such drills should be routine. It is better to be prepared now in order to minimise damage rather than grapple with the consequences of being unprepared when disaster does strike. For a start, the disconnected seismometers should be brought online immediately.

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Regards,
CHAIRMAN MAO