COUNT-DOWN TO THE INDO-PAK SUMMIT--III
by B.Raman
As Gen.Pervez Musharraf,
Pakistan's unelected and self-styled Chief Executive, prepares himself for
his forthcoming summit with the popularly elected Indian Prime Minister,
Mr.A.B.Vajpayee, next month, what is the State of Pakistan's economy, its
privileged Army and its hungry millions?
The Government of the military, by the military and for
the military run by a dismissed General, who overruled his order of
dismissal by the duly elected political leadership and not only reinstated
himself as the Chief of the Army Staff (COAS), but also proclaimed himself
as the Chief Executive and granted himself an extension as the COAS and
shortly proposes to proclaim himself as the President, is due to release
the annual budget for fiscal 2001-02 on June 18.
On June 16, Mr.Shaukat Aziz, the Finance Minister,
released the Economic Survey for 2000-01 indicating the performance of the
economy on the basis of the actual statistics for the first nine months of
the fiscal ending March 31,2001.
When the General seized power on October 12,1999, he
levelled the following three charges against Mr.Nawaz Sharif, the
overthrown Prime Minister:
* Reducing democracy to a farce.
* Arbitrary style of functioning.
* Gross mismanagement of the economy.
Fiscal 2000-01 was the first full year of the General in
power. How did the economy perform?
* The GDP grew by only 2.6 per cent as against 4.3 per
cent in 1997-98, the first full year of Mr. Nawaz Sharif's second
tenure, 3.2 per cent in 1998-99, the year of Gen.Musharraf's Kargil
adventure and an estimated (final figure not yet known) 4.5 per cent in
1999-2000, which fell partly under Mr.Sharif and partly under the
General. It is the lowest growth rate in 20 years.
* The GDP growth rate would have been even less but
for a 7.1 per cent growth in the manufacturing sector, made possible by
the commissioning during the year of new enterprises started by
Mr.Nawaz. During the fiscal 2000-01, to meet an acute sugar
shortage, the General imported a large quantity of raw sugar and had it
refined locally. He has shown in the economic survey this imported
sugar as produced locally in order to fudge this growth rate in the
manufacturing sector.
* Agriculture, which grew by 6.1 per cent last year
thanks to the policies initiated by Mr.Sharif, registered a negative
growth of 2.5 per cent. Since the General cannot blame it on the
politicians, he has blamed it on Allah and the drought caused by
Him---understressing the fact that the last two years of Mr.Sharif too
faced a severe drought.
* Foreign investment registered a dramatic decline of
73.5 percent. While portfolio investment was negative by US $ 96
million (that is, money running out of the country scared of the
General), foreign direct investment (FDI) declined from $ 360.5 million
to $ 232.3 million.
* The actual defence expenditure would amount to Rs
157.5 billion, as against Rs.143.37 billion in 1999-2000. As a
percentage of the GDP, the Government claimed that it is likely to
decline to 4.5 percent in 2000-01 from 4.7 percent of last year.
The defence expenditure accounted for 20.8 percent of the total
expenditure and 23.9 percent of the current expenditure in
2000-01. (Writer's Comment: There has been considerable fudging of
this item. Last year, the Government had transferred the
expenditure relating to pensions of ex-servicemen (Rs.26.1 billion) from
the budget of the Defence Department to that of Civil
Administration. It is not clear from the statement of Mr.Aziz
whether the amount of Rs.157.5 billion includes or excludes
pension. If it excludes pension, the percentage of increase of the
defence expenditure should be much higher. Mr.Ardashir Cowasjee,
the well-known Pakistani columnist, had last year ("Dawn"
of December 31,2000) estimated the real defence
expenditure at Rs.230 billion or 51 per cent of the revenue. According
to him, many items of defence expenditure were concealed in the budgets
of other departments)
* As against the defence expenditure of Rs 157.5
billion, the expenditure on the Public Sector Development Programme
(PSDP) amounted to Rs 110.9 billion only as against Rs 95.6 billion of
last year. As a percentage of the GDP, it has remained at the last
year's level (3.2 percent). Pakistan has a total population of 140
million, of whom the military personnel, serving and retired, and their
families constitute about 8 to 10 million. The State spent
Rs.157.5 billion on them in the form of their pay, pension and
allowances, training, equipment, logistics, housing, education and
health care. As against this, it spent only Rs.110.9 billion on
the remaining 130 million people, who have nothing to do with the
military. If one takes into account the estimate (Rs.230 billion)
of Mr.Cowasjee, the State spent even more on the privileged 10 million
of the population--Pakistan's new class.
* Public debt grew from the already high level of Rs
155.0 billion in 1980 to Rs 802.0 billion in 1990 and jumped to Rs
3198.0 billion by mid-2000. Consequently, the public debt burden
increased from 66 percent of the GDP in 1980 to 94 percent in 1990 and
further to almost 100 percent by mid-2000. Outstanding public debt
was roughly 400 percent of the government revenue in mid-1980 but
increased to 471 percent by mid-1990 and further deteriorated to 624
percent by mid-2000. Public debt service as a percentage of the
revenue has increased from 20 percent in 1980 to about 60 percent today.
* It is the underprivileged sections of the Pakistani
society, which had to pay the price for this huge public debt, which is
even more than that of Nigeria and other worst-governed African
countries. The military would accept no cut in its expenditure or
size.
The Conclusion: Under the self-styled and self-exalted
Chief Executive, the Army, Pakistan's New Class, has never had it so good
and its hungry millions have never had it so bad.
And the General wants at least three more years of his
rule to show to the world and his people what miracles he can perform.
Allah save Pakistan and its people from this
self-presumed saviour.
The attached note summarises the salient points of the
economic survey.
PERFORMANCE OF THE PAK ECONOMY DURING 2000-01
(BASED ON FIGURES FOR July 1,2000-March 31,2001)
* The GDP grew by only 2.6 per cent as against 4.3 per
cent in 1997-98, the first full year of Mr. Nawaz Sharif's second
tenure, 3.2 per cent in 1998-99, the year of Gen. Musharraf's Kargil
adventure and an estimated (final figure not yet known) 4.5 per cent in
1999-2000, which fell partly under Mr. Sharif and partly under the
General. The large-scale manufacturing sector registered a growth
rate of 7.8 per cent against a target of 6.2 per cent -- best in 10
years --but the agricultural growth rate declined from 6.1 per cent of
last year to a negative growth of 2.5 per cent.
* Pakistan's growth performance during the fiscal year
2000-01 was a matter of serious concern. It was adversely affected
by the worst drought in the country's history and also by weaker
external demand, falling commodity prices, and the persistence of higher
oil prices in the international market. Although some parts of the
country (Sindh and Balochistan) were facing drought-like conditions for
the last two to three years, the situation not only worsened, but
engulfed the entire country during the fiscal year 2000-01, causing
serious damage to agriculture and to the overall economic growth.
* The drought wreaked havoc in 58 of the total 106
districts of the country. Causing devastation and loss of human
lives in semi-arid regions, the drought eliminated US $ 247 million
worth of livestock in the first five months of this year alone.
Given that 70 percent of the entire population of Pakistan is rural
based and dependent on agriculture for its livelihood, the negative
agricultural growth of 2.5 percent (estimated) has not only impacted
agro-based industry, but also displaced a large number of the rural
poor. Massive migratory trends have been witnessed, therefore, to
irrigated and urban areas. The losses of the agricultural sector
will also trickle down to the banking and financial sectors, in view of
the farmers' outstanding loan obligations and financing needs of
agro-based industries.
* Partly due to the drought, which caused a 40 per
cent shortage of water, production of the four major crops, which
account for 41 per cent of the agricultural production, declined--
cotton by 4.5 per cent, wheat by 12.1 per cent, sugarcane by 5.9 per
cent and rice by 6.8 per cent. Last year, they had registered an
average growth rate of 15 per cent due to the policies initiated by Mr.
Sharif. . The minor crops, that account for
19 percent of agricultural production, are estimated to grow by 1.4
percent against the negative growth of 9.1 percent last year. The
livestock sector, which is 36 percent of agriculture, grew by 4.8
percent against the targeted 2.8 percent and the actual 2.4 percent last
year. The negative growth will reduce the share of agriculture in
the GDP by 1.2 percent from 25.9 percent last year to 24.7 percent this
year. The wheat production is estimated at 18.535 million tonnes
this year against the harvest of 21.079 million tonnes last year, while
cotton production declined to 10.732 million bales this year from the
harvest of 11.240 million bales last year. Mr. Aziz said that despite
the low wheat production, Pakistan would be in a position to export
wheat next year. Rice production is estimated at 4.8 million
tonnes this year down from 5.1 million tonnes last year. Sugarcane
production declined to 43.6 million tonnes this year from 46.3 million
tonnes last year.
* The manufacturing sector grew by 7.1 percent as
against 1.4 percent during the same period last year. Large-scale
manufacturing grew by 7.8 percent as against a 0.2 percent decline in
the same period last year. . All the major
11 groups of industries posted a positive growth for the first time in
the last five years. This was partly due to the going into
production during the year of three new plants started by Mr. Sharif --
the PARCO petroleum refinery, the Jordan-assisted fertiliser plant and a
new automobile plant. Due to the shortage of sugarcane, the
military regime had imported a large quantity of raw sugar and had it
refined locally. This has also been taken into account for
calculating the growth rate.
* Production of crude oil increased by 1.6 percent to
57,067 barrels per day from 56,141 barrels during the same period of
last year. Natural gas production increased by 6.9 percent to
2,371 million cubic feet per day from 2,217 million cubic feet.
The power sector consumed 32.9 percent of the gas, followed by
fertiliser 22.7 percent, household 20.8 percent and the commercial
sector 3.1 percent. The country's installed capacity of
electricity, in the forms of plants run by the Water & Power
Development Authority, the Karachi Electric Supply Corporation, the
KANUPP and the IPPs increased by 6.0 percent from 16,764 MW of last year
to 17,772 MW.
* About 2.4 million people, or 5.9 percent of the total
labour force of 41.2 million, were unemployed this year, which in
percentage was as much as last year. Of the unemployed labour
force, 1.4 million were in the rural areas and 1 million in urban.
The total number of employed persons in the urban areas increased from
11.4 percent last year to 11.8 percent this year. In rural areas
employment increased from 26.6 million in 2000 to 27 million this
year. The agriculture sector is the largest employer - 47.2
percent of the total employed - but its share is on the decline. The
share of the service sector in the employment increased from 15 percent
in 1995 to 16.2 percent this year. The share of the trade sector
decreased from 14.6 percent in 1997 to 13.9 percent this year. The
manufacturing, construction and transport sectors absorbed 10.2 percent,
6.3 percent and 5.5 percent, respectively this year as compared to 11.2
percent, 6.8 percent and 5.7 percent respectively, in 1997.
* The export of cotton fabrics registered a decrease
of 7.96 percent in terms of US dollars from US $ 988.573 million to US $
909.876 million.
* Foreign investment registered a decline of 73.5
percent. While portfolio investment was negative by US $ 96
million, foreign direct investment (FDI) declined from $ 360.5 million
to $ 232.3 million.
* Fiscal deficit was reduced from Rs 206.8 billion or
6.5 percent of the GDP in 1999 to Rs 185.7 billion or 5.3 percent of the
GDP in 2000-01. The military regime has claimed that this is the lowest
fiscal deficit in the last 18 years. It attributed its success to
a modest increase in total revenue and control of expenditure.
* The actual defence expenditure would amount to Rs
157.5 billion, as against Rs.143.37 billion in 1999-2000. As a
percentage of the GDP, the Government claimed that it is likely to
decline to 4.5 percent in 2000-01 from 4.7 percent of last year.
The defence expenditure accounted for 20.8 percent of the total
expenditure and 23.9 percent of the current expenditure in
2000-01. (Writer's Comment: There has been considerable fudging of
this item. Last year, the Government had transferred the expenditure
relating to pensions of ex-servicemen (Rs.26.1 billion) from the budget
of the Defence Department to that of Civil Administration. It is
not clear from the statement of Mr. Aziz whether the amount of Rs.157.5
billion includes or excludes pension. If it excludes pension, the
percentage of increase of the defence expenditure should be much
higher. Mr. Ardashir Cowasjee, the well-known Pakistani columnist,
had last year ("Dawn" of December 31,2000) estimated the real
defence expenditure at Rs.230 billion or 51 per cent of the revenue.
According to him, many items of defence expenditure were concealed in
the budgets of other departments)
* As against the defence expenditure of Rs 157.5
billion, the expenditure on the Public Sector Development Programme
(PSDP) amounted to Rs 110.9 billion only as against Rs 95.6 billion of
last year. As a percentage of the GDP, it has remained at the last
year's level (3.2 percent). Pakistan has a total population of 140
million, of whom the military personnel, serving and retired, and their
families constitute about 8 to 10 million. The State spent
Rs.157.5 billion on them in the form of their pay, pension and
allowances, training, equipment, logistics, housing, education and
health care. As against this, it spent only Rs.110.9 billion on
the remaining 130 million people, who have nothing to do with the
military. If one takes into account the estimate (Rs.230 billion)
of Mr. Cowasjee, the State spent even more on the privileged 10 million
of the population--Pakistan's new class.
* Total revenue is estimated at Rs 570.6 billion in
2000-01, amounting to 75.4 percent of the total expenditure and 16.4
percent of the GDP. It is likely to increase by 6.3 percent. Of
these, Rs 471.6 billion are to be collected from taxes and Rs 99.0
billion from non-tax sources. The tax revenue showed an increase
of 16.2 percent over 1999-2000. It consists of federal and
provincial tax receipts. Within indirect taxes, sales tax
registered a growth of 32.0 percent, central excise declined by 11.8
percent, and custom collection remained flat at last year's level.
* Public debt grew from the already high level of Rs
155.0 billion in 1980 to Rs 802.0 billion in 1990 and jumped to Rs
3198.0 billion by mid-2000. In other words, public debt grew at an
average rate of almost 16 percent per annum over the last two
decades. Consequently, the public debt burden increased from 66
percent of the GDP in 1980 to 94 percent in 1990 and further to almost
100 percent by mid-2000. Outstanding public debt was roughly 400
percent of the government revenue in mid-1980 but increased to 471
percent by mid-1990 and further deteriorated to 624 percent by
mid-2000. Public debt service as a percentage of the revenue has
increased from 20 percent in 1980 to about 60 percent today.
* The public sector investment grew by 4.6 percent
while the private sector investment remained more or less stagnant at
last year's level. The increase in public sector investment is
attributed to a 35.9 percent increase in capital formation in the
agriculture sector and a 16.5 percent increase in the transport and
communications sector. Total investment and fixed investment fell
from 15.6 percent and 14.0 percent of the GDP to 14.7 percent and 13.1
percent of the GDP, respectively. The national savings rate
declined from 13.7 percent to 12.7 percent. The domestic saving as
percentage of the GDP also declined to 14.4 from 15.2 percent.
* Exports were expected to
exceed $ 9 billion for the first time resulting in a moderate decrease
in the trade deficit from US $ 1.411 billion last year to $ 1.398
billion. Workers' remittances grew by 16 percent to $ 922 million
by March this year. Foreign exchange reserves now totalled $1.744
billion.
(The writer is Additional Secretary (retd), Cabinet
Secretariat, Govt. of India, and, presently, Director, Institute For
Topical Studies, Chennai. E-Mail: corde@vsnl.com)
