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Daily Times Editorial 11 June 2020

Dwindling growth


It ought to worry the government that the World Bank has just revised Pakistan’s growth projection for this year further down to negative 2.6 percent. It was just this April when the International Monetary Fund (IMF) estimated the figure to settle somewhere around negative 1.5 percent, which sent shockwaves through the economy. At this pace it’s anybody’s guess just where the economy is really headed, given that the number of new cases is rising very fast and another lockdown could well be needed rather soon. If this is what the economy can be reduced to in a matter of only three and a half months, it’s frightening to even imagine what might happen if this pandemic lasts for a couple of years before a vaccine is developed.
Yet it’s not as if Pakistan is the only country in the world facing such a situation. We are at a unique moment in history when almost all countries are about to register zero or negative growth. Pakistan’s problem is made worse, however, because of its huge debt and large population; which also means that a very large number of people live either at or below the poverty line. That is why the lockdown was such a failure. And it’s not immediately clear what can be done to improve the economy. Tax revenue is down for very obvious reasons, trade is reduced to a trickle and remittances are also suffering. Already we are borrowing way too much just to stay afloat. Now, unless here’s a substantial debt write off, and soon because the longer it takes the more will be needed, and we are able to secure yet more funding on top of everything else, the economy could be in for an unprecedented battering. If things are not handled in time, unemployment and increasing poverty could snowball in the not-too-distant future.
The government’s own growth estimates don’t exactly match those of international financial institutions (IFIs). While admitting that we will be in negative territory for the first time in many decades, the government expects the final figure to be something like negative 0.38 percent. There’s no way of knowing which is more likely to be true just yet, but it does help to remember that hardly ever has any of Pakistan’s growth, revenue or expenditure figures ever matched its budgeted estimates. So if the past is any guide, and there’s no reason it shouldn’t be, then there’s a good chance that the finance ministry is groping in the dark and hoping to stumble upon some sort of solution in the next few meetings with the IMF. And till it figures something out, growth is going to remain a problem.


Artificial’ petrol shortage


The government has taken the right decision to take maximum punitive action against any oil marketing company (OMC) found responsible for the recent petrol shortage. Hopefully now regular supplies will be restored, just as the government has ordered, within 48 to 72 hours. The cabinet also rightly noted that Ogra (Oil and Gas Regulatory Authority) and the petroleum division had the legal authority to take action, and hopefully they will not disappoint this time. Yet welcome as all these steps are, they have taken their sweet time coming. It was in the first couple of days of the month that shortages first began to be noticed at pumps, and it had been warned about in the press since weeks before Eid. Why, then, has the government taken so long to get off the mark?
And let’s not forget that this situation would not even have arisen if Ogra had taken the right steps before things got out of control. Ogra did take note of the shortage in the last days of Ramazan, according to news reports, yet no OMC paid much heed to its warnings, after which it appears to have gone silent for some mysterious reason. There were also reports that the petroleum division tried to save the day for everybody by suggesting to the government not to decrease prices in keeping with the international trend. That would not have put any pressure on reserves and nobody would have found out about OMCs not honouring their legal obligations. What is more, oil companies would also have got the opportunity to make up for profits lost to the lockdown; at the cost of the common man, of course.
All things considered, therefore, the government’s remedial steps are welcome but they still fall short of addressing the root of the problem. Marketing companies have made a habit of not lifting required stockpiles to protect their own inventories in the face of depressed prices, and resorting to hoarding in order to protect their own interests. And for some reason they are able to circumvent the official machinery, at the centre of which is Ogra, without a great deal of trouble. So, along with OMCs, Ogra should also be made to answer a few hard questions. Restoring supply at the pumps in three days is an immediate solution, but the government will have to take the trouble of resetting the entire system to make sure there are no ‘artificial’ shortages anymore. *
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