By Mansoor Ahmad
Former federal finance minister Dr Salman Shah has said wrong decisions taken by the present regime has led to the economic meltdown and pointed to the cancellation of GDRs worth $4 billion of five public sector companies at a time when MCB raised $850 million by selling 20 per cent of its shares abroad.Talking to The News, Dr Salman Shah said the rulers were begging around the world for an immediate relief of $4 to $5 billion while they were sitting on public assets worth over $425 billion.
He pointed out that the capital market, which was at its peak of 15,700 points in April, had crashed. At the boom time, he said, Global Depositary Receipts (a bank certificate issued in more than one country for shares in a foreign company) for National Bank, Habib Bank, Kot Addu Power Company and Pakistan State Oil were planned to be offered to foreign investors.
These GDRs and foreign exchange bond, which were cancelled by the new regime immediately after assuming power, were worth $4 billion, he added.
That money, he said, could have provided the government with required fiscal space, adding there would have been no need to borrow from the State Bank had the amount, equivalent to Rs250 billion, been realised.
Who took the decision to cancel the GDRs, he wondered and said when private sector bank MCB was able to sell 20 per cent of its shares at Rs470 to collect $850 million, then why public sector companies were stopped from offering their shares in foreign markets.
“Now share values of all these enterprises have melted by 40 to 50 per cent.” That one wrong decision had a cyclical impact on the entire economy, he added.
He said increased government borrowing from the central bank created inflationary pressures and the country was deprived of foreign exchange worth $4 billion which put pressure on foreign exchange reserves. The depletion of foreign reserves, he added, exerted pressure on the local currency.
He said negative economic indicators impacted the buoyant capital market which caved in as investors saw a bleak economic future of the country. The investors, he added, realised that the new regime had no economic plan.
He said besides losing foreign investments worth $4 billion the country also saw flight of capital worth a similar amount. He termed the handling of economy by the present regime ‘mismanagement of the highest order’ and said it would require a lot of efforts and prudent policies to take the economy out of the present mess.
Shah said the economic managers and their advisers were still following economic theories of the 20th century, adding “they do not understand the globalisation process which is taking place all around.”
He said the trade deficit was the result of high oil prices and the gap could be bridged with foreign inflows and selling of non-liquid government assets from which it was earning nothing. Exports would ultimately pick up after adjusting to new realities, he anticipated.
Source: The News, 28/9/2008