Explaining Pakistan’s Hindu Rate of Growth
1. The Hindu Rate of Growth
During 1950 to 1991 Indian GNP used to grow at an annual average rate of 3.5 percent V.K.R.V Rao – a leading economist – called this the “Hindu” rate of growth.
During the same period Pakistani GNP grew at an annual average rate of 5.7 percent. Indian annual GNP growth now averages 5.6 percent but Pakistan now has the Hindu rate of growth.
During the Musharraf era (1999 – 2002) annual average rate of growth was 3.3 percent. This was the lowest annual average growth rate over any consecutive three-year period in Pakistan’s history. Yet another “first” for the Musharraf government.
During 2001 – 2002 GDP has grown at the rate of 3.3 percent says the Third Quarterly Report of the State Bank. The Ministry of Finance expects the growth rate to be 3.6 percent. Growth rates estimated in the Survey have been revised downward on an average by about 12 percent during 1996 – 97 to 2000 – 2001. On this basis the State Bank’s estimates seem more accurate and GDP will probably grow by about 3.2 percent during fiscal 2001-2002, well below the Hindu rate of growth.
Even this is doubtful for the Survey shows that 70 percent of the growth in 2001 – 2002 is attributable to the service sector – i.e. public administration and defense, transport and communication, wholesale and retail trade and banking and finance.
As A.R. Kemal Pakistan’s most astute economist shows annual data on service sector components is not reliable. This is particularly so with respect to stock of housing. Defective calculation methods also make the estimation of value added in the transport sector vulnerable to very large margins of error. Estimates of value added in wholesale and retail trade are derived using a commodity flow method which implies application of trade mark ups to the flow of the marketed proportion of domestic and imported goods. Trade mark ups change over time but the Federal Bureau of Statistics adjusts them very infrequently.
All this means that a large proportion of service sector growth is based on unrealistic assumptions. Kemal estimates that in the mid 1990s assumed growth accounted for about 25 percent of the rate of GDP growth in a typical year. It is unlikely that this proportion has fallen significantly in subsequent years.
If service sector growth is “normalized” on the basis of realistic adjustments to FBS assumptions and methodology the rate of GDP growth would fall to 2.9 percent – well below the Hindu rate of growth.
2. Official Explanations
Why the Hindu rate? According to the State Bank and the Ministry of Finance there are two major explanations.
First the drought. This is seen as having accounted for the entire difference in the expected and actual rates of growth of agriculture and electricity and gas distribution.
This is simply untrue, first of all because as the State Bank and the Ministry of Finance admit the impact of the continuing drought was factored into the initial estimations of growth for 2001 – 2002 – and no evidence is presented to show that things turned out to be worse than expected.
Moreover not all crops were affected by the draught, nor was this the case with gas distribution. Sugar production boomed and wheat output was satisfactory.
There is simply no justification for “adjusting” for the drought impact by factoring out the growth performance of the entire agricultural and utility sectors.
The claim that had the drought not occurred, the entire economy would have grown at the rate of growth of 4.7 percent is – to put it mildly – something in the nature of a sick joke and illustrates the technical incompetence of the economists at the State Bank and the Ministry of Finance.
Moreover the continuation of the drought is not an exogenous factor. We have earned Allah’s wrath by participating in the American slaughter of Muslims in Afghanistan, by betraying the Kashmiri Mujahideen and by refusing to dismantle the riba based financial system. Nahoosat (blight) in the form of draught and other natural calamities is a natural and inevitable consequence of adherence to these policies, which arouse Allah’s anger.
Second both the State Bank and the Ministry of Finance attribute the Hindu rate of growth to the aftermath of the counterattack on American imperialism. But again no evidence is presented to substantiate this claim.
Quite the contrary, the State Bank is full of praise for measures taken to turn Pakistan into an American colony – the US has given us $1 billion for helping to slaughter Muslims in Afghanistan. (It is expected to give us more if we assist India in slaughtering Kashmiri Muslims), debt has been reprofiled, the State Bank has reduced external liabilities, exports have grown in quantum terms, the import slow down is due to lower food prices and reduced imports. The State Bank claims that foreign portfolio investment has started looking up in the third quarter of FY02. The Rupee has appreciated and foreign reserves are at an all time high. Why, then the Hindu rate of growth?
3 The True Causes
The Hindu rate of growth is of course not pecuiler to Pakistan. It has spread throughout Africa and most of Latin America.
Joseph Stiglitz, whom the World Bank kicked out as it’s chief economist last year has recently written an illuminating book titled Globalization And It’s Discontents. It shows why destroying Third World national economies currently ranks so high on the American imperialist agenda.
As in other imperialist dominated economies domestic savings continues to fall in Pakistan, from 16.5 percent of GDP in 2000-2001 to 14.7 percent in 2001-2002. Even this exceeds total investment – the private sector too is exporting capital.
Investment decline is accompanied by growing unemployment, which even according to the downward baised government estimates approximates 8 percent. This is of course a major consequence of de-industrialization. All imperialist dominated economies experience sustained de-industrialization. It is not surprising that the rate of growth of large-scale manufacturing fell by almost 50 percent during 2001-2002. The State Bank does not expect any reversal in this trend. In its Third Quarterly Report for 2001-2002 the State Bank notes that “agriculture will remain at the heart of the Pakistan economy for the foreseeable future”. De-industrialization is the deliberate policy choice of the Musharraf government.
It does not of course follow from the policy of de-industrialisation that there will be any investment in agriculture. In 2001-2002 recoveries exceeded disbursements of credit by Rs. 726 million in agriculture. ADB’s recoveries exceeded disbursements by Rs. 2.1 billion in 2001-2002.
External accounts “improvements” are common to all imperialist dominated economies – even the most miserably impoverished, AIDS stricken economies of Africa become capital exporters.
But in 2001-2002, Pakistan’s external accounts “improved” due to several fortuitous, external factors. These include:
Decline in oil prices and in sugar imports
US payments for assistance in slaughtering Afghan Muslims – this amounted to a one off payment of about $900 million.
As the State Bank admits if these two fortuitous gains are netted out the current account surplus would fall from $2.1 billion to $420 million and there would be an overall deficit of over $1.7 billion on the overall balance of payments.
The large increase in workers remittances is mainly due to the persecution of the Muslims in America and the witch-hunt to which their financial transactions are subjected in the Jewish dominated banking sectors of the UAE and America. Remittances from America increased by 384 percent and from the UAE by 122 percent in 2001–2002 – together these account for over 50 percent of all remittances during 2001-2002. In 2000 – 2001 this share had been less than 30 percent.
As against this remittances form Saudi Arabia grew by just 12 percent in 2001-2002. In the case of Kuwait remittances by Pakistanis declined by 47 percent during 2001-2002. It is thus the Americans and the Jews to whom Musharrraf owes thanks – not the economists at the State Bank.
The ineffectiveness of government policy is also illustrated by the fact that while exports rose in quantum terms, during 2001-2002 export earnings declined. This shows that we continue to export low quality, bottom of the market, low priced goods. It also shows that a strong, appreciating Rupee is good for export growth. Exports are neither income nor price elastic. This gain is likely to be lost as the State Bank moves towards capital account convertibility and the Rupee starts to depreciate in 2002-2003.
Investment growth deceleration has occurred despite what the State Bank sees as a loose monetary policy. Net government budgetary borrowings have declined from minus Rs. 26.2 billion in 2000 – 2001 to minus Rs. 28.2 billion in 2001-2002. Net credit to the private sector fell by 49 percent in 2001-2002 in comparison to the previous year. The banks were flush with liquid cash because of State Bank injections in the open market and large foreign exchange purchases. Lowering nominal interest rates cannot stimulate investment demand for the overall monetary and fiscal policy stance is growth strangulating. Market based monetary policy is necessarily ineffective in Pakistan for as several econometric studies have shown investment is interest inelastic in this country.
4.The Future
The budget 2002-2003 gives us an indication of things to come. It’s central message is that the Hindu rate of growth is here to stay and capital outflows from Pakistan will accelerate.
The outline of budget for 2002-2003 was approved by the IMF in November 2001. This was a pre-requisite for the $1.3 billion Poverty Reduction and Growth Facility loan awarded to Pakistan in that month. The budget for 2003-2004 has also been approved by the IMF last year. The PGRF is to be released in twelve trenches after approval by a visiting IMF mission to Pakistan.
The IMF had approved a total expenditure of Rs. 893.7 billion and a deficit level of Rs. 165.7 billion for FY 2003. The IMF expected tax collections of Rs. 559.4 billion, debt servicing expenditure of Rs. 267.8 billion and defense expenditure of Rs. 172.7 billion. Development expenditure according to the IMF letter of intent had to be Rs. 151.8 billion.
The 2002-2003 budget is a very significantly scaled down version of the budget approved by the IMF. Total expenditure is envisaged at only Rs. 742 billion – 7 percent lower than that approved by the IMF. Development expenditure is only Rs. 134 billion – again 12 percent lower than that allowed by the IMF. Tax revenues are 18 percent lower than that expected by the IMF. Defense expenditure is 15 lower than that permitted by the IMF.
On the other hand debt servicing in the 2002-2003 budget is Rs. 289.7 as against Rs. 267.8 billion in the IMF approved budget – i.e. 8 percent higher. The fiscal deficit of the budget is almost exactly similar to that approved by the IMF for 2002-2003. The budget deficit for FY2001 had been as high as 7 percent of GDP.
But except for these “special case” issues imperialism is not willing to give us much more money. The share of external to total resources has fallen dramatically from 39 percent in FY 2002 to 26 percent in FY 2003. Pakistan has saved a paltry sum of Rs. 29 billion only (about $480 million) in its debt servicing payments obligations for FY2003. External assistance in FY 2003 is expected to decline by 35 percent and project aid is worth a trivial $728 million, insufficient for financing a single major project in Pakistan.
The FY 2003 budget is growth strangulating. Total expenditure of the government is 4 percent lower than the actual expenditure during FY 2002. The budget is viciously regressive with the share of direct taxes in gross revenue falling from 23.1 percent in 2001-2002 to 21.9 percent in FY 2002-2003. Inflation during FY 2002-2003 is expected to be 3.9 percent but direct tax revenue is expected to grow by only 1.1 percent. Indirect tax revenue is expected to grow by over 16 percent and surcharges by 12 percent. Government’s own income from property, civil administration, and other receipts is expected to decline by about 7 percent.
Development expenditure has increased by only 3 percent in terms of original estimates for FY2001-2002 and is 12 percent lower than that envisaged for 2002-2003 in the letter of intent approved by the IMF for the release of the PGRF. Defense expenditure is to decline by 4 percent in terms of expenditure undertaken in FY 2002. We intend to spend only about $2.5 billion on defense – about 15 percent of the enemy’s defense budget – despite the rising tide of Indian brutalities in Occupied Kashmir.
The government has announced fiscal incentives – reduction of taxes on corporate and banking income, on investments in the capital market and for restructuring financial investments. These incentives will not enhance private investment since the key to its revival is public investment growth. Investment and productivity cannot rise when the capital goods sector is being destroyed and technological retardation is crippling the economy.
Pakistan’s economic revival requires cutting links with American imperialism and removing ex World Bank officials from key points within the economic administration. Without this the Hindu rate of growth will stay with us forever.
During 1950 to 1991 Indian GNP used to grow at an annual average rate of 3.5 percent V.K.R.V Rao – a leading economist – called this the “Hindu” rate of growth.
During the same period Pakistani GNP grew at an annual average rate of 5.7 percent. Indian annual GNP growth now averages 5.6 percent but Pakistan now has the Hindu rate of growth.
During the Musharraf era (1999 – 2002) annual average rate of growth was 3.3 percent. This was the lowest annual average growth rate over any consecutive three-year period in Pakistan’s history. Yet another “first” for the Musharraf government.
During 2001 – 2002 GDP has grown at the rate of 3.3 percent says the Third Quarterly Report of the State Bank. The Ministry of Finance expects the growth rate to be 3.6 percent. Growth rates estimated in the Survey have been revised downward on an average by about 12 percent during 1996 – 97 to 2000 – 2001. On this basis the State Bank’s estimates seem more accurate and GDP will probably grow by about 3.2 percent during fiscal 2001-2002, well below the Hindu rate of growth.
Even this is doubtful for the Survey shows that 70 percent of the growth in 2001 – 2002 is attributable to the service sector – i.e. public administration and defense, transport and communication, wholesale and retail trade and banking and finance.
As A.R. Kemal Pakistan’s most astute economist shows annual data on service sector components is not reliable. This is particularly so with respect to stock of housing. Defective calculation methods also make the estimation of value added in the transport sector vulnerable to very large margins of error. Estimates of value added in wholesale and retail trade are derived using a commodity flow method which implies application of trade mark ups to the flow of the marketed proportion of domestic and imported goods. Trade mark ups change over time but the Federal Bureau of Statistics adjusts them very infrequently.
All this means that a large proportion of service sector growth is based on unrealistic assumptions. Kemal estimates that in the mid 1990s assumed growth accounted for about 25 percent of the rate of GDP growth in a typical year. It is unlikely that this proportion has fallen significantly in subsequent years.
If service sector growth is “normalized” on the basis of realistic adjustments to FBS assumptions and methodology the rate of GDP growth would fall to 2.9 percent – well below the Hindu rate of growth.
2. Official Explanations
Why the Hindu rate? According to the State Bank and the Ministry of Finance there are two major explanations.
First the drought. This is seen as having accounted for the entire difference in the expected and actual rates of growth of agriculture and electricity and gas distribution.
This is simply untrue, first of all because as the State Bank and the Ministry of Finance admit the impact of the continuing drought was factored into the initial estimations of growth for 2001 – 2002 – and no evidence is presented to show that things turned out to be worse than expected.
Moreover not all crops were affected by the draught, nor was this the case with gas distribution. Sugar production boomed and wheat output was satisfactory.
There is simply no justification for “adjusting” for the drought impact by factoring out the growth performance of the entire agricultural and utility sectors.
The claim that had the drought not occurred, the entire economy would have grown at the rate of growth of 4.7 percent is – to put it mildly – something in the nature of a sick joke and illustrates the technical incompetence of the economists at the State Bank and the Ministry of Finance.
Moreover the continuation of the drought is not an exogenous factor. We have earned Allah’s wrath by participating in the American slaughter of Muslims in Afghanistan, by betraying the Kashmiri Mujahideen and by refusing to dismantle the riba based financial system. Nahoosat (blight) in the form of draught and other natural calamities is a natural and inevitable consequence of adherence to these policies, which arouse Allah’s anger.
Second both the State Bank and the Ministry of Finance attribute the Hindu rate of growth to the aftermath of the counterattack on American imperialism. But again no evidence is presented to substantiate this claim.
Quite the contrary, the State Bank is full of praise for measures taken to turn Pakistan into an American colony – the US has given us $1 billion for helping to slaughter Muslims in Afghanistan. (It is expected to give us more if we assist India in slaughtering Kashmiri Muslims), debt has been reprofiled, the State Bank has reduced external liabilities, exports have grown in quantum terms, the import slow down is due to lower food prices and reduced imports. The State Bank claims that foreign portfolio investment has started looking up in the third quarter of FY02. The Rupee has appreciated and foreign reserves are at an all time high. Why, then the Hindu rate of growth?
3 The True Causes
The Hindu rate of growth is of course not pecuiler to Pakistan. It has spread throughout Africa and most of Latin America.
Joseph Stiglitz, whom the World Bank kicked out as it’s chief economist last year has recently written an illuminating book titled Globalization And It’s Discontents. It shows why destroying Third World national economies currently ranks so high on the American imperialist agenda.
The Hindu rate of growth persists because Pakistan is being turned into an American colony against the will of its overwhelmingly Muslim people. Investors recognize that this is an unviable policy course and will have to be abandoned sooner rather than later (unless of course America succeeds in destroying the Pakistani state before this policy change). That is why total investment declined for 15.2 percent of GDP in 2000 – 2001 to 13.9 percent (a fall of almost 10 percent) in 2001 – 2002. Fixed investment fell to just 12.3 percent of GDP – one of the lowest levels in Asia. Private sector investment declined from 8 percent in 2000 – 2001 to 7.6 percent of GDP in 2001-2002. Public sector investment declined catastrophically from 6.3 percent of GDP in 2000-2001 to 4.7 percent – a fall of over 25 percent. This despite the fact that the national savings rate rose from 15.0 percent of GDP in 2000-2001 to 15.4 percent to 2001-2002. National savings during 2001-2002 were 11 percent higher than total investment. Like most of Latin America Pakistan too is now a capital exporting economy – over $6 billion are exported by the State Bank in the form of foreign exchange reserves.
As in other imperialist dominated economies domestic savings continues to fall in Pakistan, from 16.5 percent of GDP in 2000-2001 to 14.7 percent in 2001-2002. Even this exceeds total investment – the private sector too is exporting capital.
Investment decline is accompanied by growing unemployment, which even according to the downward baised government estimates approximates 8 percent. This is of course a major consequence of de-industrialization. All imperialist dominated economies experience sustained de-industrialization. It is not surprising that the rate of growth of large-scale manufacturing fell by almost 50 percent during 2001-2002. The State Bank does not expect any reversal in this trend. In its Third Quarterly Report for 2001-2002 the State Bank notes that “agriculture will remain at the heart of the Pakistan economy for the foreseeable future”. De-industrialization is the deliberate policy choice of the Musharraf government.
It does not of course follow from the policy of de-industrialisation that there will be any investment in agriculture. In 2001-2002 recoveries exceeded disbursements of credit by Rs. 726 million in agriculture. ADB’s recoveries exceeded disbursements by Rs. 2.1 billion in 2001-2002.
Imperialism is committed to weakening its neocolonial states. Despite (or perhaps because of) induction of technical experts and “scientific” organizational restructuring, public bureaucracies of imperialist dominated economies – the State Bank, the CBR, the Ministries of Finance, Planning and Commerce – remain grossly inefficient. Despite several restructurings and expenditure of billions of Rupees on consultant fees and commissions the CBR has been able to collect only about Rs. 400 billion as tax revenues against an original target of Rs. 457 billion in 2001-2002.
External accounts “improvements” are common to all imperialist dominated economies – even the most miserably impoverished, AIDS stricken economies of Africa become capital exporters.
But in 2001-2002, Pakistan’s external accounts “improved” due to several fortuitous, external factors. These include:
Decline in oil prices and in sugar imports
US payments for assistance in slaughtering Afghan Muslims – this amounted to a one off payment of about $900 million.
As the State Bank admits if these two fortuitous gains are netted out the current account surplus would fall from $2.1 billion to $420 million and there would be an overall deficit of over $1.7 billion on the overall balance of payments.
The large increase in workers remittances is mainly due to the persecution of the Muslims in America and the witch-hunt to which their financial transactions are subjected in the Jewish dominated banking sectors of the UAE and America. Remittances from America increased by 384 percent and from the UAE by 122 percent in 2001–2002 – together these account for over 50 percent of all remittances during 2001-2002. In 2000 – 2001 this share had been less than 30 percent.
As against this remittances form Saudi Arabia grew by just 12 percent in 2001-2002. In the case of Kuwait remittances by Pakistanis declined by 47 percent during 2001-2002. It is thus the Americans and the Jews to whom Musharrraf owes thanks – not the economists at the State Bank.
The ineffectiveness of government policy is also illustrated by the fact that while exports rose in quantum terms, during 2001-2002 export earnings declined. This shows that we continue to export low quality, bottom of the market, low priced goods. It also shows that a strong, appreciating Rupee is good for export growth. Exports are neither income nor price elastic. This gain is likely to be lost as the State Bank moves towards capital account convertibility and the Rupee starts to depreciate in 2002-2003.
Investment growth deceleration has occurred despite what the State Bank sees as a loose monetary policy. Net government budgetary borrowings have declined from minus Rs. 26.2 billion in 2000 – 2001 to minus Rs. 28.2 billion in 2001-2002. Net credit to the private sector fell by 49 percent in 2001-2002 in comparison to the previous year. The banks were flush with liquid cash because of State Bank injections in the open market and large foreign exchange purchases. Lowering nominal interest rates cannot stimulate investment demand for the overall monetary and fiscal policy stance is growth strangulating. Market based monetary policy is necessarily ineffective in Pakistan for as several econometric studies have shown investment is interest inelastic in this country.
Like in other imperialist dominated economies subjected to monetarist discipline inflation has declined. This decline in prices is due to the overall fall in economic activity and rise in unemployment.Moreover it is not clear whether inflation in 2001-2002 is lower than in the previous year for while the CPI and SPI figures for 2001-2002 are based on index with expenditures weights computed in 2000, the 2000-2001 CPI and SPI estimations are based on 1990-91 weights. The composition of the CPI still leaves out much consumption expenditure by the common man and ignores regional differences. The widespread rejection of government claims about inflation rates reflects the defectiveness of the methodology employed in CPI calculations.
Like other imperialist dominated economies Pakistan’s external debt continues to rise.Total external debt has risen from $3.2 billion at end fiscal 2001 to $3.3 billion by end fiscal 2002. External liabilities have declined mainly because foreign currency accounts (FE 45, F33, F25) have been converted into Rupees and US bonds have matured. Foreign capital is not flowering into the country. FDI during FY2002 was $290 million, less than 4 percent of total investment in the country. Net portfolio investment was negative $282 million as against negative $128 million in FY2001. Net long-term capital inflow during FY 2002 was negative $344 million. Net other long-term capital inflow was negative $595 million, official net short-term capital inflow was negative $280 million. The overall capital account deficit increased from $995 million in FY 2001 to $1.09 billion in FY 2002.
When confronted with figures such as these it becomes quite clear that the debt rescheduling and reprofiling agreements are a fraud. Imperialism is tightening its grip on Pakistan. The imperialist strategy is to strangulate growth and accelerate capital outflow from Pakistan by insisting on low growth of net domestic assets of the banking systems major reductions in public expenditure and a build up of useless short term low interest earning foreign reserves.
4.The Future
The budget 2002-2003 gives us an indication of things to come. It’s central message is that the Hindu rate of growth is here to stay and capital outflows from Pakistan will accelerate.
The outline of budget for 2002-2003 was approved by the IMF in November 2001. This was a pre-requisite for the $1.3 billion Poverty Reduction and Growth Facility loan awarded to Pakistan in that month. The budget for 2003-2004 has also been approved by the IMF last year. The PGRF is to be released in twelve trenches after approval by a visiting IMF mission to Pakistan.
The IMF had approved a total expenditure of Rs. 893.7 billion and a deficit level of Rs. 165.7 billion for FY 2003. The IMF expected tax collections of Rs. 559.4 billion, debt servicing expenditure of Rs. 267.8 billion and defense expenditure of Rs. 172.7 billion. Development expenditure according to the IMF letter of intent had to be Rs. 151.8 billion.
The 2002-2003 budget is a very significantly scaled down version of the budget approved by the IMF. Total expenditure is envisaged at only Rs. 742 billion – 7 percent lower than that approved by the IMF. Development expenditure is only Rs. 134 billion – again 12 percent lower than that allowed by the IMF. Tax revenues are 18 percent lower than that expected by the IMF. Defense expenditure is 15 lower than that permitted by the IMF.
On the other hand debt servicing in the 2002-2003 budget is Rs. 289.7 as against Rs. 267.8 billion in the IMF approved budget – i.e. 8 percent higher. The fiscal deficit of the budget is almost exactly similar to that approved by the IMF for 2002-2003. The budget deficit for FY2001 had been as high as 7 percent of GDP.
This quantum jump in the fiscal deficit had been approved by the IMF and the imperialist countries. It included a Rs. 30 billion debt equity swap for preparing the KESC for privatization, issuance of Rs. 22 billion to commercial banks in lieu of their tax refunds again in order to privatize them and Rs. 17 billion defense expenditure to facilitate the slaughtering of Muslims in Afghanistan.
There is no doubt that the IMF and America will be equally tolerant of an increase in the budget deficit for FY 2003 if the justification of this increase is to prepare the ground for selling precious national assets at throw away prices or to facilitate imperialist slaughter in Afghanistan and Kashmir.
But except for these “special case” issues imperialism is not willing to give us much more money. The share of external to total resources has fallen dramatically from 39 percent in FY 2002 to 26 percent in FY 2003. Pakistan has saved a paltry sum of Rs. 29 billion only (about $480 million) in its debt servicing payments obligations for FY2003. External assistance in FY 2003 is expected to decline by 35 percent and project aid is worth a trivial $728 million, insufficient for financing a single major project in Pakistan.
The FY 2003 budget is growth strangulating. Total expenditure of the government is 4 percent lower than the actual expenditure during FY 2002. The budget is viciously regressive with the share of direct taxes in gross revenue falling from 23.1 percent in 2001-2002 to 21.9 percent in FY 2002-2003. Inflation during FY 2002-2003 is expected to be 3.9 percent but direct tax revenue is expected to grow by only 1.1 percent. Indirect tax revenue is expected to grow by over 16 percent and surcharges by 12 percent. Government’s own income from property, civil administration, and other receipts is expected to decline by about 7 percent.
Development expenditure has increased by only 3 percent in terms of original estimates for FY2001-2002 and is 12 percent lower than that envisaged for 2002-2003 in the letter of intent approved by the IMF for the release of the PGRF. Defense expenditure is to decline by 4 percent in terms of expenditure undertaken in FY 2002. We intend to spend only about $2.5 billion on defense – about 15 percent of the enemy’s defense budget – despite the rising tide of Indian brutalities in Occupied Kashmir.
This is a growth strangulating budget and there are no major projects except in the water storage areas. Public investment has virtually disappeared and the PSDP to GDP ratio in 2002-2003 is unlikely to rise above 3.5 percent. This means that the private sector will have to rely on its own resources as net capital inflows – both official and private – are likely to remain negative. The total debt burden will rise as the scope for reducing short-term liabilities has been virtually exhausted. The imperialists are haggling endlessly over debt reprofiling to ensure that we buy every cent of debt relief by mortgaging our sovereignty and sacrificing our national interests.
The government has announced fiscal incentives – reduction of taxes on corporate and banking income, on investments in the capital market and for restructuring financial investments. These incentives will not enhance private investment since the key to its revival is public investment growth. Investment and productivity cannot rise when the capital goods sector is being destroyed and technological retardation is crippling the economy.
But technological retardation and the destruction of large scale manufacturing in Pakistan is on the top of the imperialist agenda – that is why the State Bank envisages “agriculture to continue to play a dominant role in the economy for the foreseeable future”. Imperialism seeks to destroy Pakistan’s technological capability and it’s henchmen dominating the Ministry of Finance and the State Bank have crafted a fiscal and monetary strategy to enable it to do so – hence the persistence of the Hindu rate of growth.
Pakistan’s economic revival requires cutting links with American imperialism and removing ex World Bank officials from key points within the economic administration. Without this the Hindu rate of growth will stay with us forever.
posted by Alghazalians at 10:24 PM
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