SBP must tell the whole truth

Mohammad Jamil
State Bank of Pakistan is under obligation to inform public about the prevailing economic situation, and should not conceal facts with regard to state of country’s economy to appease the government. In its reports, SBP has not been telling the whole truth about the economy. It rather raises the aura of optimism about the economic growth despite the fact that the government has failed to achieve its targets with regard to fiscal deficit, balance of payments vis-à-vis exports and imports. In the second quarterly report for FY18 SBP stated: “Pakistan’s economy surpassing last year’s growth rate (5.3%) appears strong…GDP growth is likely to remain slightly below the target of 6% (in fiscal year 2018).
When Pakistan’s external debt is around $90 billion, economic reserves are declining to $12 bn which is not enough to meet imports requirements for three months, the situation can be described as alarming. In a very casual manner, the report stated: “Risks to overall macroeconomic stability have increased due to widening imbalances in the country’s balance of payments. Reserves have already fallen to less than three months of the country’s import bill.” It projected that remittances of $20.5 billion from overseas workers in FY18 would be slightly lower than the target of $20.7 billion; and imports may shoot up to $54.3 billion against the target of $48.8 billion mainly due to heavy oil imports and imports of textile and steel inputs. However, the growth in exports would remain insufficient to finance the gap in current account deficit. The report highlighted that the growth in revenue collection outpaced the increase in expenditures in H1-FY18, which led to a broad-based improvement in fiscal indicators. In view of the above situation, how SBP can talk about improvement in fiscal indicators?
While concluding, it stated that balance of payments challenges warrant concerted and timely measures to preserve the macroeconomic stability and growth momentum. It added that if external challenges are addressed (did not suggest how), other fundamentals are strong enough to put it on a sustainably high growth path. Economic experts are raising alarm that amid declining foreign exchange reserves and weakening capacity to repay, Pakistan’s external debt and liabilities have risen sharply to almost $89 billion at the end of December 2017, reported the State Bank of Pakistan (SBP). Pakistan’s total external debt and liabilities as of December 2017 stood at $88.9 billion, higher by $5.8 billion or 6.9% over six months ago. There was an increase of $13.2 billion in the amount of external debt and liabilities in just one year. Pakistan’s gross official reserves were $18.6 billion, which have already slid to $12.8 billion.
On Thursday, Prime Minister Shahid Khaqan Abbasi opened a three-month window for wealthy Pakistanis to whiten their hidden local and foreign assets at nominal rates from two per cent to five per cent. Simultaneously, he also announced reduction in income tax when the budget is only a few weeks away. However, the much-anticipated amnesty scheme lacks punitive measures for those who do not avail the scheme and keep their assets hidden. There is a mixed reaction to the above measures, and many view it as an effort to whiten the black money. The question is when the government’s tenure is ending on 31st May 2018 and provisions of the budget for 2017-18 will be applicable till 30th June 2018, the government should have left the policy decisions to the next government. Constitutionally, the interim government can make budgetary provisions for two months, and then incoming government could have announced the budget for the rest of the period.