The lost years By Cyril Almeida | A must read article on the state of our economy

[moadhia]

Anyone who supports these PPP and PML-N should be hanged . Clearly they have no idea what economics means and how a country is run.

Since Hafeez Sheikh had to deliver his budget speech from the parliamentary snake pit, he had to take the sting out of his words. –File Photo​

In time, these will be known as the lost years. Hidden among esoteric terms like ‘resource mobilisation’, ‘fiscal consolidation’ and ‘macroeconomic stabilisation’ is a simple, but scary fact: there is no political will to pull the country out of the economic crisis.

Hand on his heart, Hafeez Sheikh knows this. As do the authors of the Economic Survey. To their credit, they’ve all but said so in various ways. The Survey is actually quite blunt, perhaps because the authors knew that few politicians would bother to read even the executive summary. (It’s 10 pages of easy-to-understand, hard-to-stomach facts.)

An excerpt: “… without a resolution of Pakistan’s perennial structural challenges, such as raising the level of domestic resource mobilisation or promoting higher productivity in the economy, growth and investment will continue to be constrained, and the growth prospects volatile.”

Translation: Pakistan’s history of yo-yo growth — boom and bust — will continue if the government does not act now, except in future the troughs may be deeper and longer.

Hafeez Sheikh was also forthright, but since he had to deliver his budget speech from the parliamentary snake pit, he had to take the sting out of his words:

“Pakistan’s public-sector enterprises are inefficient and have very poor management, generating huge losses which are then passed on to the economy and the budget. Power-sector enterprises alone cost the exchequer around Rs180bn in FY2009-10 while Railways, PIA, TCP, Passco, Steel Mills, NHA and Utility Stores add an additional Rs65bn…. Not dealing with this issue makes our entire budgetary process and expenditure control unmanageable. It also leaves no room for development expenditure.”

Translation: public-sector enterprises are a time bomb in the belly of the mother ship, the federal government; do nothing to reform them, and we’ll all go down.

Since his political bosses care little about Rs250bn budgetary holes, Sheikh had to stick to the usual vague pledge to ‘restructure’ PSEs on an ‘urgent basis’.

(Thus far the government has actually done the opposite, saddling already inefficient PSEs with thousands of more employees in the hope of convincing voters it cares about workers. By playing politics and ‘saving’ some jobs, the government is in fact jeopardising the jobs of the workers who are really needed — an imploding business has little use of any worker.)

The laconic finance minister did though manage a dig at one of the state’s chief tormentors. When Sheikh promised that inefficient PSEs would no longer get state money, everyone including Raja Pervez Ashraf, thumped their desks, prompting Sheikh to wryly observe that Ashraf was clapping the most enthusiastically. Ashraf, of course, is the man responsible for the sector that has hoovered up Rs180bn of public money in the last year alone.

Yet, in the upside-down scheme of things that is Pakistan, it’s men like Ashraf and not Sheikh who ultimately call the shots. And anywhere you go in Islamabad, you hear the same thing about the men who are calling the shots: do they even get it?Some, rightly, give the credit to the government for taking the politically unpopular step of telling Pakistanis they must pay something approaching the true cost of things like electricity. But there is an equally vital next-step, reforming the power sector so that a) there is more electricity in the system and b) the electricity is produced at a cost that is objectively normal, as opposed to the Pakistani abnormal.

The real worry is that little has happened at the reform stage. How is it that electricity costs can go up by up to 60 per cent in a couple of years and yet the sector be faced with an unprecedented crisis in March-April? Peak summer months, OK, maybe that’s understandable; but post-spring? Even keeping hydel power at zero for those months, there ought to have been enough electricity in the system.

The answer lies in that vague term every Pakistani knows and wants but doesn’t know how to get: good governance. There are three stages in the electricity supply chain, generation, transmission and distribution. All Ashraf and his buddies have been interested in is the generation side of things, RPPs, IPPs and the like.

Yet, no serious study of the power sector has identified generation capacity constraints as the fundamental problem at present. Sure, we need to be able to produce more electricity going forward, but the crisis over the last few years has been more fiscal than physical. Circular debt, recovering dues from consumers, slashing ‘leakages’, poor fuel-mix choices, bad management, the list is endless. And the cost is staggering. The Economic Survey estimates the energy shortfall cost the country two per cent in GDP growth last year. Two per cent is the difference between abysmal and average.

But there was Ashraf during the budget speech, clapping loudly and smiling broadly. He’s a large part of the reason so many ask, do they even get it?

Ah, but we’ve seen this before, some argue dismissively. In the ’50s, in parts of the ’70s and the ’80s, during the ’90s, we’ve heard all the doom and gloom before. And yet, here we are. This too shall pass.Except it’s not quite like the past any longer. Pakistan’s problems are bigger than they’ve ever been. The debt is bigger, the expenses are higher, the costs are larger and the revenues are lower than they’ve possibly ever been.

For decades there was a silver lining in Pakistan’s economic problems: we were a rounding error on the balance sheets of the big boys. A few billion sprinkled here, a few hundred million pumped there, and voila! The big boys didn’t blink, and our small base enabled fairly quick rebounds.

But now foreign bankers and ministers take a look at our numbers and go quiet. It’s not quite so easy anymore.

Bah! We have militants and nuclear weapons, don’t we? They won’t turn off the spigot as long as we have those, some argue.

Perhaps. But, as gently pointed out to me by a diplomat, there’s a difference between having militants and nuclear weapons and having militants with nuclear weapons.

That distinction is likely to be lost on people like Raja Pervez Ashraf. Which is why others are asking, do they even get it?

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http://www.dawn.com/wps/wcm/connect...r/columnists/cyril-almeida-the-lost-years-160

 

[greywolf]

First of all ... I don't know how can I express my true feelings over what you said in the start ... some truth it is.

Secondly, this article says the things one can only think and then wander around for the right words ... but here they are ... all of them. A very perfect, true and applausibly assimilating portrayal.

Ah, but we’ve seen this before, some argue dismissively. In the ’50s, in parts of the ’70s and the ’80s, during the ’90s, we’ve heard all the doom and gloom before. And yet, here we are. This too shall pass.Except it’s not quite like the past any longer. Pakistan’s problems are bigger than they’ve ever been. The debt is bigger, the expenses are higher, the costs are larger and the revenues are lower than they’ve possibly ever been.

For decades there was a silver lining in Pakistan’s economic problems: we were a rounding error on the balance sheets of the big boys. A few billion sprinkled here, a few hundred million pumped there, and voila! The big boys didn’t blink, and our small base enabled fairly quick rebounds.

What he said about Hafeez Sheikh's knowledge with his hand on heart ... is very scary. Because I have been sensing that particularly this government wanna do things, complete its term and then fled the country. They are doing things they know would leave them no retreat, at least, not in Pakistan.

And the part I quoted here ....

Dear me, the more I read about the corruption, the more I read and listen and watch about nurturing relations in politics and state affairs ... the more I observe heart-rendering bombs being exploded by our rulers ... the more it adds to my sense of guilt. They are so brazen and without inhibitions just because of us pakistanis. I don't know how can I spill my heart out here on this page ... the stupefication has dried my memory. We are torpedoeing towards bankruptcy ... by God, will we ever wake up ? I wonder actually what would it take to drag us out of our homes ... Every piece of land that any provincial government auctions or sells or leases marks a new wound. They are briskly eating up our assets ... soon we would be left to provide for us with a whale lot of debt over us and they will be lighting up their mansions abroad they all have already. I better stop typing ... because my mind is going fused.

 

[greywolf]

I think this article needs to be read, re-read, discerned fully well ... rehearsed and even learnt by heart ... I don't know why you guys have shown such a cold response to this but I think this is THE MOST IMPORTANT ISSUE at this time and in coming times.

 

[moadhia]

greywolf, I think people have a hard time understanding how economics or economy works in the first place. So typical of us, we want a messiah to save us and get rid of our problems. No wonder we keep bring back these fools to power.

Think about it brother, people with fake degrees are responsible for devising the economic plans of this country. We keep cursing United States, but thhe fact is that their dollars have kept this country afloat otherwise we would have been bankrupt sometime ago. Our awam has been turned into freaking beggars, they keep coming up with these stupid ass Benazir funds. Giving 1000 rupees to familiies. What the hell ?!?!

This is their band aid fix for infaltion.

 

[greywolf]

greywolf, I think people have a hard time understanding how economics or economy works in the first place. So typical of us, we want a messiah to save us and get rid of our problems. No wonder we keep bring back these fools to power.

Think about it brother, people with fake degrees are responsible for devising the economic plans of this country. We keep cursing United States, but thhe fact is that their dollars have kept this country afloat otherwise we would have been bankrupt sometime ago. Our awam has been turned into freaking beggars, they keep coming up with these stupid ass Benazir funds. Giving 1000 rupees to familiies. What the hell ?!?!

This is their band aid fix for infaltion.

Actually ... tell you what ... you are right. This is a core issue ... because countries that are internally strong can't be disturbed or bedazzled by external forces. After all, US has been playing its dirty games in this country for quite some time now but they have never been so successful.

Soviet Union is the most ideal, luminous and bright example before our eyes that I reckon most of us are aware of and many of us have witnessed. What a superpower that was ... they could bear the burnt of wars, missions, espionage entourage, race for global control with US ... but economy broke them down. If Soviet Union can't bear the burnt of ailing economy I don't think we should be very optimist about Pakistan and say, "we have seen that before ... all that gloom and doom" ... no no no ...

Kyrgzstan revolution is also a very meaningful example ... but they don't have nuclear arsenal or neighbors like india or 7th bigger army of the world ... so IMF is trying to punch its claws in them afresh ... though Turkey is deviantly upbraiding against it ... but if Pakistan comes to that. We won't be able to show our faces to Hadrat Quaid RA on the day of judgment.

{I am gonna make a copy of this article and spread it as much as I can ... perhaps I will even add a caption to make it a little understandable for those who don't have the knick of economy.}

I think we need to discuss this matter more as this topic needs full exhaustion. It is better to appear ignorant and ask questions than be a damn fool when these jokers use technical terms and inject us with the most sour medication.

 

[greywolf]

I think he uses too many thick and complicated terminologies in this article that could have not been understandable for the most "innocent" readers ... for instance, he says, "For decades there was a silver lining in Pakistan’s economic problems" ... now I am not sure if many people can understand that he is talking about deficit chart graph which has a problematic evidence appearing as a line in the graph which is thickening every three months until there is no graph left but the huge shadow that used to be a silver lining. And went on to say "and our small base enabled fairly quick rebounds" ... by small base he means small traders that are taxed under a targeted category and the deficit is met. So the people of Pakistan have always been making up for the irregularities and deficits in yearly budgets ... of course, thats where "supplementary grants" come from. They used to need this making up in their yearly budget but then it started happening every three months frequently enough to burn the people in the flames of inflation and price hikes. Now I am sure if electricity unit is sold for a 100 rupee per unit to the people, they would want even more because they are just spending without a road map and when they see there is no more, they bring in another semester budget.

I must applaud this man ... he writes "But now foreign bankers and ministers take a look at our numbers and go quiet. It’s not quite so easy anymore" which speak volumes in a couple of sentences. Since all the major stake holder are running in losses, PIA, Steel Mills, Railways, Information, Telecom, Petroleum ... you name it ... I wonder where they are gonna get their insulation from ? But actually I don't wonder, it was a tricky statement, they are surely looking forward to crush people as much as they can ... and since they got time in their term and they gotta spend time too ... so they are also bringing in more IMF loans as well. Now if they complete their term ... well, I don't know what to say.

 

[moadhia]

greywolf, there is a reason why our government never spent enough money on the education sector. Think about it, a third world country like us can be a nuclear power ( our leaders had the vision to make us a nuclear power), but we dont have the vision to build our education institutions and keep a stable inflation rate in this country. If everyone understood what was being conveyed in this article, who in their right minds would elect these buffons.

I am just praying for mid term elections, so we can change things around (hopefully for the better).