CAD focus vs GDP neglect (IKnomics Hit) :
“کرنٹ اکاؤنٹ خسارہ” CAD: ایک صاحب کی دکان خسارہ میں چل رہی تھی- ایک دن انہوں نے فاتحانہ اعلان کیا کہ پچھلے مہینہ انہوں نے CAD خسارہ پر قابو پا لیا! پوچھا وہ کیسے؟ فرمایا “بڑا آسان تھا، بس دکان بند کر دی، تمام ملازمیں کو فارغ کر دیا، تمام ضروری اور غیر ضروری اخراجات بھی ختم کر دئے، کرنٹ خسارہ زیرو!”
جی ڈی پی GDP گروتھ:
ایک صاحب کی دکان خسارہ میں چل رہی تھی- ایک دن انہوں نے فاتحانہ اعلان کیا کہ انہوں نے CAD خسارہ پر قابو پا لیا! پوچھا وہ کیسے؟ فرمایا “بڑا مشکل اور تکلیف دہ تھا، میں نے ایکسپرٹس سے مشورہ کر کے اپنے بوسیدہ سسٹمز کو تبدیل کرنے کا فیصلہ کیا، اس انویسٹمنٹ کے لئے مجھے قرضہ لینا پڑا جس سے نئے سسٹمز خریدے اور دو سال لگا کر تمام بوسیدہ سسٹمز تبدیل کئے، فضول اخراجات ختم کئے، پراسیسز آسان کئے، اب میرے کسٹمرز بھی خوش ہیں ان کو بہترین پراڈکٹس کم قیمت پر، کم وقت میں آسانی سے دستیاب ہیں، کاروبار میں اضافہ ہوا، نئی پراڈکٹ لائنز شروع کیں، ملازمین کی تنخواہوں میں اضافہ ہوا، نئے ملازمین کو جاب دیں، کرنٹ خسارہ منافع میں تبدیل ہو گیا!”
Over the last 3 years IKnomics policies has crippled the economy whilst propoganda machine trumpets false economic principles related to magical properties of CAD while denigrating GDP.
Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, GDP functions as a comprehensive scorecard of a given country’s economic health. It encapsulates growth in economy due to growth of business, production, services, and the resultant employment opportunities.
On the other hand, Current Account Deficit or CAD is the difference between the money coming in due to exports and the money going out due to imports. It is no where in world used as indicator of economic health of country. CAD only tells you about the ability to service external debt, as such it is only in Pakistan’s IMF dictated “IKnomics” that CAD was used for measuring health of Pakistan economy during first 3 years of IK with disastrous consequences.
The single minded focus on IMF CAD related policies were responsible for the crash of GDP from 5.8% to – 0.4%, reduction in jobs over the last three years by over 5 million, and increase in inflation (too much money chasing too few goods), and hemorrhage of economic sentiments.
IK should have curtailed luxury imports without impacting raw materials for our production. Instead of clamping down hard on smuggling and significantly increasing duties on luxury items, IK tremendously increased the exchange rate and utilities costs while simultaneously going after the small and micro businesses, which resulted in decrease in production and increase in prices of all the inputs, increasing the prices of outputs, reducing the viability of many businesses and their shutting down.
Ability to service debt is measured as a percentage of the productivity of economy (i.e GDP). A country with high GDP growth can sustain larger debt. This is similar to a person earning 100k can service a larger debt than a person earning only 10k. There are several countries with higher debt to GDP then pakistan but that is not a problem for them. For example Japan has around 200% whereas Pakistan is around 50%. Over here IK increased the policy rate to 13.5% that made the local debt servicing the largest single item of our expenditure around half of all expenditure even more than military expenditure!
One must read the history of how government investment in infrastructure (GDP growth ) got USA out of the global Great Depression. This came to be known as Keynesian Economics that is taught in every Economics 101 course in the chapter on overcoming recession. See this
https://www.popularmechanics.com/technology/infrastructure/a24692/fdr-new-deal-wpa-infrastructure/
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