Environmental Scanning
Business --- Viewpoint
Everyone in Pakistan well as many sitting thousands of miles away, the business community too is waiting to exhale. And so, all that’s visible in the run up to the precise moment – General Elections 2013 – are lots of breathlessly red faces.
Generally, election year produces diametrically opposing reactions within the public and private sectors. While the incumbent seeks to woo fickle voters through last ditch spending (think: poverty alleviation, development projects, etc.), the private sector often buries its head and its wallet in the sand until the storm of unpredictability has passed. Consequently, the business outlook for 2013 will remain depressingly unexciting until the new government settles down.
The global recession isn’t going away anytime soon and the IMF recently cut global growth forecasts for 2013 to 3.6%, down from its earlier estimate of 3.9%. Although the Pakistani Government is doing its best to convince anyone who will listen that it is going to manage ‘four’ percent growth in the coming year, nobody is really convinced.
The Government doesn’t really have the money to spend. Public revenues – proposed tax amnesty schemes notwithstanding – are low; the fiscal deficit is 8.2% and, to make ends meet, the Government is borrowing heavily from the banking sector. For decent growth, the Government needs a tax-to-GDP ratio in the vicinity of 16%; all it can muster at present is 9.1%.
While inflation has finally been brought into the single digit realm, few are deluded enough to imagine it will last. First, global commodity prices (particularly oil) are still heading upwards. Second, with just enough forex reserves left for three months of imports and no bilateral or multilateral donor rushing to save Pakistan from Islamabad, the rupee is poised to come under serious pressure. (In November alone, Pakistan had to repay a staggering $616 million to the IMF.) Third, the Government has the State Bank printing Rs 1.5 billion a
Everyone in Pakistan well as many sitting thousands of miles away, the business community too is waiting to exhale. And so, all that’s visible in the run up to the precise moment – General Elections 2013 – are lots of breathlessly red faces.
Generally, election year produces diametrically opposing reactions within the public and private sectors. While the incumbent seeks to woo fickle voters through last ditch spending (think: poverty alleviation, development projects, etc.), the private sector often buries its head and its wallet in the sand until the storm of unpredictability has passed. Consequently, the business outlook for 2013 will remain depressingly unexciting until the new government settles down.
The global recession isn’t going away anytime soon and the IMF recently cut global growth forecasts for 2013 to 3.6%, down from its earlier estimate of 3.9%. Although the Pakistani Government is doing its best to convince anyone who will listen that it is going to manage ‘four’ percent growth in the coming year, nobody is really convinced.
The Government doesn’t really have the money to spend. Public revenues – proposed tax amnesty schemes notwithstanding – are low; the fiscal deficit is 8.2% and, to make ends meet, the Government is borrowing heavily from the banking sector. For decent growth, the Government needs a tax-to-GDP ratio in the vicinity of 16%; all it can muster at present is 9.1%.
While inflation has finally been brought into the single digit realm, few are deluded enough to imagine it will last. First, global commodity prices (particularly oil) are still heading upwards. Second, with just enough forex reserves left for three months of imports and no bilateral or multilateral donor rushing to save Pakistan from Islamabad, the rupee is poised to come under serious pressure. (In November alone, Pakistan had to repay a staggering $616 million to the IMF.) Third, the Government has the State Bank printing Rs 1.5 billion a