Response to mof _ business recorder

This reply to the Ministry of Finance (MoF) is in continuation of the dialogue with the ministry, through Business Recorder, which started with the publication of our open letter to IMF on the degree of success achieved in the recently concluded Fund program. To trade definition The MoF has stated that we continue to highlight issues such as economic growth numbers, unemployment, borrowed foreign exchange reserves, declining exports, performance of power sector, FBR’s tax collection, holding back of refunds and so on. Auxiliaries to trade definition We genuinely believe that these are serious economic issues confronting the country, which require urgent and wide-ranging reforms.

With regard to the overstatement of the GDP growth rate in 2015-16, the problem is with the data inputs for quantifying different sectoral growth rates and not with the methodology. Trade cost analysis definition Our research reveals that the growth rate of ten out of the eighteen sectors in the national economy in 2015-16 has been significantly overstated by PBS.

On unemployment numbers, the MOF has claimed that the PBS is using internationally approved methodology.


Definition free trade We are also aware of the fact that the PBS is using ILO consistent definition of unemployment. Definition of home trade But what is inexplicable is why the rate of labor force expansion declined by almost half during 2013-14 and 2014-15 when compared with the previous five years, that is, 0.65 million as against 1.3 million. Trade report definition The PBS has not given any reason for this sudden decline. Definition of trade winds Is it a ‘discouraged worker phenomenon’? Or is it the deliberate understatement of labor force to show a lower unemployment rate? With proper adjustment, the unemployment rate in 2014-15 increases to over 8 percent as against 5.9 percent reported by the PBS.

On building foreign exchange reserves through external borrowing, the MOF continues to use its own definition of debt which has been developed only recently, following severe criticism. Trade area analysis definition We have been quoting the debt numbers which are consistent with historical numbers as well as used by the IMF. Definition of barriers to trade Accordingly, Pakistan external debt and liabilities at end-June 2013 stood at $61 billion and by end-June 2016 they increased to $73 billion, hence an addition of $12 billion. Trade standards definition Pakistan’s foreign exchange reserves have also increased by $12 billion, that is, from $6 billion to $18 billion during this period. Fair trade definition and principles Therefore, the entire increase in reserves has been achieved through external borrowing.

Developments in the first five months of 2016-17 are even more worrying. Definition on trade Net external borrowing has been over $2billion but reserves have increased by less than $500 million. Global trade definition Over $1.5 billion have been used to finance the deficit in the balance of payments. American foreign trade definitions Clearly, this is not a sustainable strategy.

This leads to the discussion on gross external financing requirement for the current fiscal year. By trade definition Our contention is that, as against the IMF forecast of $10.9 billion, gross external financing requirement for the current year would be around $15 billion or 5 percent of GDP. Definition of trade in The MOF has argued that these numbers are based on our assumptions which are not supported by the factual data. Foreign trade zone definition It is indeed surprising when viewed at the back of recent developments. Trade journals definition While projecting $10.9 billion financing gap, the IMF has assumed exports of goods to grow by 3.5 percent, remittances to increase by 1.2 percent, Coalition Support Fund (CSF) of $1125 million to arrive, and FDI to stand at $2597 million.

The factual position is that exports and remittances are down by 3.2 percent and 3.8 percent respectively in the first four months (July – October) of this year; FDI is merely at $316 million (down by 48%) and CSF money is not likely to come. Domestic trade definition Based on the current ground reality and the likely developments in the remaining seven months, our projection of $15 billion gross external financing requirement in 2016-17 is closer to reality.

The MoF has also remarked that we have made false projections in the past that the economy was slipping into deflation which did not materialize.. Economic trade definition What is deflation? It is defined as the persistent decline in general price level. Trade finance definition pdf The rate of Inflation, as measured by change in wholesale price index (WPI), was 6.6 percent in July 2014 and by December 2014, it turned negative and remained negative till March 2016. Yen carry trade definition Further, it remained near zero percent till June 2016. Trade sector definition The most comprehensive measure of inflation remained in the negative zone for sixteen months in a row. Definition for free trade zone Was this not deflation?

On declining exports, the MoF could only come up with “muted economic growth across the globe” for the persistent decline in exports. Definition of international trade pdf In particular, that Pakistan’s major trading partners such as USA, China and the EU are witnessing sluggish economic growth. Definition of domestic slave trade However, exports of Bangladesh have risen by 46%, of India by 2% and of Sri Lanka by 8% between 2012 and 2015. Aids to trade definition During this period Pakistan’s exports collapsed by 11%.Clearly, the debacle in exports of Pakistan is more country-specific and less linked to trends in global trade.

We believe that distortionary taxation to achieve revenue target under the IMF Programme, holding back refunds to jack up revenue and hence create liquidity problems for the exporters, artificial stability in exchange rate created through heavy external borrowing to bolster eternal buffers, and imposition of GIDC are some of the factors that have eroded the competitiveness of our exporters in international market. Modern trade theory definition In short, the government took measures that have increased the cost of production and eroded the competitiveness of our exporters.

The fiscal outcome in the first quarter of 2016-17 also highlights the emergence of serious problems, Tax revenues have increased by only 2%, while non-tax revenues have plummeted by 42%. Structured trade finance definition Consequently, total revenues have fallen by 8% .Net revenue receipts with the Federal Government have declined by 36%. What is slave trade definition For the first time, these are not enough to even cover the costs of debt servicing. Off trade marketing definition Overall, the fiscal deficit in the first quarter has approached 1.3% of the GDP, equivalent to 34% of annual deficit target of 3.8% of the GDP. Definition of a trader It appears that the deficit in 2016-17 may exceed 5% of the GDP.

In conclusion, we request the MoF to keep the dialogue in the professional domain. Trade journals or publications definition Remarks like ‘intellectual dishonesty’, ‘false projections’ and ‘baseless assumptions’ may kindly be avoided.

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