EAC constitutes body to address IFIs concerns
The International Monetary Fund (IMF) and the World Bank got alarmed and expressed grave concern and no confidence in the “manipulated” GDP growth of 4.1 per cent for outgoing fiscal year 2009-10 worked out by the Federal Bureau of Statistics (FBS) and then approved by the National Accounts Committee (NAC), a senior official at Finance Ministry confided to The News.
The official said: “Adviser to Prime Minster on Finance and Revenue Dr Hafeez A Sheikh is also perturbed at the 4.1 per cent GDP growth for current fiscal 2009-10, which has been shown at higher side by the FBS by reducing the reference growth base of the last financial year 2008-09 to 1.1 per cent from 2 per cent.
“Dr Sheikh is currently finding himself in a difficult position before the international financial institutions (IFIs) about explaining and defending the ‘so called’ 4.1 per cent GDP growth.
The 4.1 per cent GDP growth issue is deliberated in length in the meeting of the Economic Advisory Council (EAC), which met here with Dr Hafeez A Sheikh in the chair.
“The EAC to this effect has decided to form a committee on evaluating the national accounts and GDP growth data. The committee, headed by Dy Chairman, Planning Commission, Nadeemul Haq, comprises of Dr Ashfaq Hasan Khan, Dr Rashid Amjad, Saqib Shirani and Dr Ijaz Nabi.”
The meeting is to be held wherein the FBS top officials would be facing the music as the ways and means FBS has used to increase the projected growth of 4.1 per cent for ongoing financial year would be challenged.
In 2007-08, the projected GDP growth was 5.8 per cent, which was reduced to 4.1 per cent by FBS so that base could be tumbled to show increase in the projected growth for 2008-09, which was fixed at 2 per cent. Now the FBS has reduced reference base growth again to increase the projected growth of current fiscal at 4.1 per cent.
In the EAC meeting, Dr Ashfaq Hasan Khan, former DG Debt and Adviser to the Finance Ministry; Dr Rashid Amjad, Chief Economist of the Planning Commission; Saqib Shirani, Adviser to the Finance Ministry, doubted the GDP growth worked out by FBS.
“They questioned the growth of 15 per cent shown by FBS in construction sector, particularly when the public sector development programme of the Federal Government has been slashed to one-half and the private sector construction activities are at near standstill.”
“So much so the financial releases, the official at the Planning Commission said, to the mega projects of Balochistan, have also been reduced substantially despite the clear announcement of the Federal Government that the releases to Balochistan projects will not be reduced under ‘Aghaze Haooq Balochistan’ package. Moreover, in the private sector, no remarkable construction is underway which is why the domestic cement consumption has also tumbled manifold.”
“The projected growth of 4.1 per cent for current fiscal is also questionable, keeping in view the declining rate of investment, high inflation and interest rate, large fiscal deficit, armed conflicts, wars, political instability, corruption, absence of rule of law, high poverty rates, rising debt burden, and weak infrastructure will have negative effects on economic growth.”
“Saqib Shirani told in the EAC that he asked the FBS in National Accounts Committee (NAC) to double check the projected growth in the construction sector, particularly keeping in view the deteriorating security environment, crippling impact of power shortages and mismanagement, persisting double-digit inflation and a higher interest rate environment,” the official said.
However, the EAC press release issued says:” The government takes the suggestions made by the members of Economic Advisory Council very seriously, and these ideas would be reflected in our economic policies.”
This was stated by Dr Abdul Hafeez Shaikh, while chairing the EAC meeting here Saturday afternoon. Addressing the meeting, the adviser to PM on Finance said that the government takes the EAC as its partner and would like to share all economic related information with it in a transparent manner.
He appreciated the competing points of views expressed by the members of the Economic Advisory Council on various issues concerning the national economy. Referring to the difficulties faced in budget making process, Dr Hafeez Shaikh said that today’s budgets cannot be prepared in close door environments.
These days, we have Parliamentary Committees, an enlightened media, economic experts like members of the EAC and the international donors, who not only keep scrutinizing government’s economic policies, but also openly discuss various aspects of the national budget. That is why the government wants to share its policy matters with a forum like EAC and would welcome concrete proposals and feedback from the EAC members.
The EAC discussed a number of issues concerning the national economy, including proposals for the new budget, VAT and other taxation issues, public sector expenditure, expenses on the war on terror and documenting the national economy.
The EAC decided to form a committee on evaluating the national accounts and GDP growth data.
Earlier, the EAC was briefed on the strategy and challenges for the next budget and updates on national growth by the Ministry of Finance.