Pakistan Shinning - Propaganda or Reality

As elections approach, the Musharraf Government is frantically beating the drums of its fictional economic miracle of the past half a dozen years. This is painfully reminiscent of similar media projection attempted by the erstwhile BJP Government with its "India Shining" propaganda before the marginalised masses sent it packing.

Given how our proponents of the American Capitalist model have successfully enriched the already wealthy at the cost of grinding poverty of the masses, a similar fate surely awaits this Government...that is, if free and fair polls like those of 1969-70 can be assured.

The purpose of this article is to confirm, with irrefutable facts and figures gleaned from the Government`s own sources, that our long-suffering masses have been had royally by the present dispensation. And, the best way to demolish the Government`s "Pakistan Shining" propaganda is to demonstrate that economic progress should mean broad-based welfare, not that of the elite, which is what the Government implies when it speaks of economic growth.

ACCORDING TO ITS SPIN-DOCTORS, INDICATORS OF GALLOPING ECONOMIC PROGRESS SINCE OCTOBER 1999 ARE THINGS LIKE:

1 GDP growth averaging 7 percent per annum over the past 3 years...please ignore the misery of the three years before that!

2 Per capita income doubling to USD 800, perching us precariously on the bottom rung of middle-income countries instead of rubbing shoulders with the poorest nations of Africa.

3 Foreign exchange reserves of USD 13 billion...up from less than half a billion in 1999...never mind the fact that it still represents barely 5 months of imports.

4 Flood of 9/11 motivated inward remittance (likely to hit USD 5.5 billion this year) and Foreign Direct Investment (perhaps as much as USD 3 billion) eager for a share in phenomenal returns available to risk capital in this country.

5 And, the KSE-100 index leaping tenfold from 1,200 to 12,000 propelling market capitalisation to over PKR 3.5 trillion.

BEFORE WE ANALYSE THE ABOVE-MENTIONED PERFORMANCE MEASURES, PLEASE NOTE THAT THE GOVERNMENT WISHES THAT YOU SHOULD IGNORE OTHER EMBARRASSING STATISTICS SUCH AS:

1 Official Consumer price inflation of 9 percent per annum ...100% higher than it was in October 1999.

2 The largest trade (USD 12 billion) and current account (USD 5.5 billion) deficits, both in absolute as well as relative terms, in 60 years history of the country.

3 Serious crime statistics reflecting 100% growth over the past 6 years...with suicide bombings, and citizen disappearances, a la Latin America, now commonplace.

4 Provincial disenchantment and disharmony, secessionary mayhem across Balochistan, and Taliban resurgency in NWFP...all grim reminders of a national fabric being torn asunder.

Surely, if the Government wishes to take credit for its so-called achievements, it must acknowledge that its own policies have also saddled the nation with the horrors summarised above. Now let us commence demolishing the icons of Government propaganda one by one.

That the country has enjoyed annual GDP growth averaging 7 percent per annum over the past three years is in fact a "white lie". For the uninitiated, some background first. There is a simple economic concept called the "Capital Input-Output Ratio". Put simply, it states that annual GDP growth cannot be greater than a third of the ratio of incremental capital formation to GDP. In other words, if our annual savings run around 10 percent of GDP (14 percent if we include inward remittances), then by the wildest stretch of imagination, our maximum GDP growth cannot exceed 4.7 percent per annum.

So, when this Government claimed that our GDP grew at 8.6 percent during 2004-05, it implied that during 2004-05, national savings (domestic plus inward remittances) allowed us to invest at a breathtaking rate of 25.8 percent of GDP...a whopping white lie! With perhaps the lowest saving rate in the world, Pakistan is simply not capable of achieving such high rates of investment. But, if you were to talk to the Government`s spin-doctors, they will likely tell you that because of our great efficiency in re-investment, Pakistan`s Capital Input-Output ratio is not 3:1 but closer to 2:1. In other words, we can achieve greater growth with less than 50 percent of the resources as compared to the rest of the world. How cute?

Now for some hard proof of number-juggling by this Government, whose economic managers, ironically enough, are wont to accuse their predecessors of manipulating figures.

THE FOLLOWING DATA IS GLEANED FROM THE FEDERAL BUREAU OF STATISTICS AND SBP INTERNET SITES (ALL FIGURES IN PKR BILLION):





Fiscal Years 2002-03 2003-04 2004-05 2005-06
GDP at current factor cost 4,823 5,532 6,548 7,450
GFCF (Gross Fixed Capital Formation)/td> 736 845 1,087 1,421
Less: Consumed in the year (depreciation) 391 428 480 580
NFCF (Net Fixed Capital Formation) 345 417 607 841
Maximum possible incremental GDP (1/3) 115 139 202 280
As percentage of GDP 2.38% 2.51% 3.09% 3.76%


So, dear reader, our paternalistic Government is guilty of outright lies. Our economy...even in these best years as claimed by the Government...has never grown at rates over 2-4 percent per annum. In fact, if we account for the 2.1 percent per annum annual growth in our population, in per capita terms, the economy has remained almost stagnant! How can it get away with such flimflam, you say? Well, because in its smugness it knows that in a nation where actual literacy is less than 5%, how many know the meaning of Input-Output ratios? The answer is Zero.

Let`s next examine this Government`s claim of having doubled per capita income to USD 800 over the past 6 years...a theme that both the PM and President breathlessly harp on. One can, of course, forgive the President`s naivete as they don`t teach the concept of compound interest at the Pakistan Military Academy in Kakul.

However, the PM, who rumor has it is a business school graduate, should know better...for a number to double in 6 six years signifies an annual compound growth of 12.25 percent. Alas, this kind of stellar growth has not even been achieved by China! Conclusion? Another white lie of course.

The real mechanism of the Government`s flummery was, however, quite mundane. First, it began by restating GDP for the benchmark year 1999-00 from USD 460 per capita to USD 650 per capita on the pretext that every country in the world periodically readjusts its accounting base year. Now, with this clever device out of the way, it simply applied its inflated annual growth rates of recent years (see above) and bingo...you have a per capita GDP of USD 800. Isn`t that clever? But, there is another hidden trickery here.

The USD 800 per capita is by itself an inflated number in another sense. It is derived by dividing our 2005-06 dollar GDP of USD 124 billion by a deflated population figure of 155 million. According to CIA World Facts (www.cia.gov), our actual population as of June 2006 was 166 million. Therefore, dividing USD 124 billion by 166 million yields a per capita income of USD 747 and not USD 800. So, we are still very much a basket case country in the happy company of the poorest nations in Africa.

Two serendipitous devices are keeping us afloat...ongoing inward remittances, debt relief and Aid from the West which desperately wants to prevent our slipping into an Afghanistan style chaos.

The story of our foreign exchange reserves is simplicity itself. Till mid-2001, our precarious foreign exchange position was legion. We still had the same 4 weeks of reserves that we had in October 1999. Then fortune smiled. 9/11 happened. The U.S. Government began its famous crackdown on currency flows. This was followed by persecution of Pakistani origin wealth in USA. The net result was that all dollar flows to USA that were wont to seek safe haven there began pouring homeward. From USD one billion or even less per annum, our annual remittances have today reached USD 5.5 billion per annum. In sum, over the past five years, this incremental inflow has exceeded USD 16 billion. Should it then be any surprise that our Foreign Exchange reserves are today USD 13 billion? The question is, how can this Government take credit for events engineered by Al-Quaida and President Bush?

However, the story doesn't end there. All these massive dollar inflows needed an outlet. In a country possessed of zero manpower skills, broken down infrastructure, high cost of doing business, obstructive bureaucracy, and political chaos, would you invest in productive assets with payback of 5-10 years? Of course not. Is it any wonder that real estate prices quadrupled and the stock market went up by a factor of 10? Today land prices in choice locations of KDA / Defense in Karachi and similar locations in Lahore and Islamabad are at par with Manhattan in New York. Why? Because there are no other options unless you wish to keep your money in banks at rates that yield negative returns of 4-5% per annum.

The country's entire industrial sector is today in shambles. Our exports of textiles, leather goods, and hand-knotted carpets…between them traditionally accounting for 80% of annual exports…are in steep decline. And what does the Government do? It waxes eloquent about our burgeoning growth in auto sector that produces overpriced shoddy products that will likely die a natural death given a whiff of international competition.

Countries do not develop by having international fast food chains mushrooming in every nook and cranny. Nor do they prosper by giving a cell phone to all and sundry. Economic growth is achieved by leveraging off national assets that provide a country with an internationally competitive edge. In our case it can only mean one thing...our abundant natural mineral resource, fertile land and abundant river waters. This is where we need to invest heavily...not in I.T., telecom, or even oil and gas. Do you know that we have 4 billion tons of test-proven coal reserves, but produce only 4 million tons per annum? Our coal power generation is barely 4% of total power production whereas in next door India it is 70%.

The economic reasons for a comprehensive Coal Policy makes eminent sense. In terms of energy content (calorific value), our sub-bituminous coal averages 9,000 BTUs per pound vs twice that for crude oil. With current crude prices averaging USD 440 per ton (USD 60 per barrel), we could be saving USD 220 dollars for every ton of indigenous coal production that replaces imported oil. But, lets not be even that ambitious in the short run. If we could simply replace import of 3 million tons of furnace oil with 6 million tons of local coal production, that alone would trim our current USD 7 billion annual oil import bill by 20%!

In terms of industrial economics and employment generation , the comparison is even starker as I discovered first hand while visiting Saeedullah Niazi, an old school friend, who mines coal in the salt range. Today, our private sector mines sub-bituminous coal in Quetta and Khewra (in the Salt Range) and sells it to brick kilns for PKR 3,000 per ton. Its current crude oil price equivalent is thus USD 100 per ton (or USD 14 per barrel of oil). Simple arithmetic tells us that even if the Government paid a 100% cash subsidy to producers for every ton of coal mined indigenously, it would save USD 240 dollars for each ton of furnace or crude oil thus replaced.

Huge coal reserves in Thar (Sindh) were discovered 25 years ago. However, no Government has since been able to muster the USD 3-4 billion infrastructure investment needed to bring this easy 10-12 million tons per annum production valued at over USD 2 billion per annum onstream. It is unlikely that this Government will do so either. Who wants the headache of adding PKR 120 billion to annual GDP?

Two years ago, when international oil prices began rocketing upwards, like many of its predecessors, this Government too momentarily awoke from its slumbers. It announced great plans about tripling our national output of coal in 2-3 years by the simple device of forcing large power users like power stations and cement factories to use coal instead of expensive imported furnace oil.

Of course, this announcement greatly militated against the interests of our industrial lobby. It immediately swung into action claiming that our indigenous coal had low BTU and high sulphur content, which would entail large investments in scrubbing towers...an outlay the industry was reluctant to undertake. Predictably, the Government knuckled under and instead of promoting local production of coal, it made import of coal duty free. So, instead of reducing the national import bill paid in hard currency, it did just the reverse. Thus, today we have over 80,000 tons of imported Australian coal sitting on the docks in Karachi at landed cost of USD 70 (PKR 4,200) per ton.

Will the Government take courage and introduce a Coal Policy anew? Absolutely not, because that would mean an explosion in real private sector investment, real job creation and public welfare on an unprecedented scale! It's much easier to juggle statistics for the same media effect. Get it?

And what do we tell the uprising coal miners? Keep drudging to eke out an existence with antiquated methods as did your forebears for the past 60 years, and please abandon all hope of any Government ever coming to your assistance in the interest of national economic development.




Pakistan Shinning II - Propaganda or Reality II

n the part I of this series I set out to expose the hollow slogans of this Government, especially its tall claims of the great strides in economic development that have occurred over the past 6 years. Using officially published data, I had demonstrated how the story of our phenomenal GDP growth was nothing more than number juggling.

The present dispensation remains as clueless as its predecessors when it comes to analysing the primary drivers of economic growth in our country. In this writeup, I intend to focus on the single most important driver of economic development for any country and suggest a possible course of action that can truly set us on the path of sustained development.

For those who may have missed my last article, its main thrust was that, in the entire history of human endeavour, there is no precedent of any nation having developed economically without consistently saving and reinvesting a substantial portion of its annual GDP. The stellar growth of the Asian Tigers (Hong Kong, Singapore, South Korea, Taiwan, and Malaysia) and Mainland China during the past 25-30 years is witness to this phenomenon.

All these countries displayed rates of saving and investment in the region of 25-35 per cent per annum...which, using standard Capital Input-Output ratio of 3:1 translated into annual GDP growths of 8-10.5%. It is no wonder then that their GDPs grew from 500% to 1000% over this timeframe. Even India, a relative newcomer on the scene, has been able to achieve similar success over the past 10-12 years.

For Pakistan, despite the Government`s attempts at obfuscation, utter failure is confirmed by our recent official data encapsulated below:








Fiscal Years (amounts in PKR billion) 2002-03 2003-04 2004-05 2005-06

GDP at current factor cost 4,823 5,532 6,548 7,450

GFCF (Gross Fixed Capital Formation) 736 845 1,087 1,420

Less: Consumed in the year (depreciation) 391 428 480 580

NFCF (Net Fixed Capital Formation) 345 417 607 840

Maximum possible incremental GDP (1/3) 115 139 202 280

As percentage of GDP 2.38% 2.51% 3.09% 3.76%


So, all that talk of our economy having grown at 7% p.a. over the recent past is nothing but hogwash.

For the last fiscal year on record, ie 2005-06, the components of the Gross Fixed Capital Formation reported at PKR 1420 billion have roughly been the following:

1. Domestic Savings @ 9.6% p.a. 715
2. Inward remittances (USD 5.25 billion) 315
3. Foreign Direct Investment (USD 3 billion) 180
4. Foreign borrowing and Official Direct Assistance (USD 3.2 billion) 210
-----------------------------------------------------------------------------
Grand Total 1,420
As percent of GDP 19.06%


If we are ever to achieve sustained GDP growth in excess of 7% per annum (which ensures a doubling of GDP every 10 years), then we need to target a GFCF ratio of 35-40% per annum. Obviously, of the resource heads mentioned above, the only one that any Government can directly influence, and one that should be the mainstay of any economy over the long run, is the first one, ie domestic savings.

Our performance on this measure, at under 10% per annum is one of the lowest rates in the world. There is absolutely no precedent in history where a country with such low rate of savings has shown high rates of GDP growth. It is a mathematical impossibility. We simply need to double this number, and in quick time too.

What keeps us from achieving a sustained annual domestic savings rate of 20% plus? The simple answer is "an anti-savings Government policy". First let us examine the various saving options available to ordinary citizens.

1. Hoard it as cash...because it is derived from undocumented trade or from illegal sources;

2. Keep it in a saving account in a bank or in some National Savings Scheme;

3. Invest it in real estate; or

4. Use it for punting on the Karachi Stock Exchange.

For most of the 80`s and 90`s, people preferred to buy high yielding (14-16% p.a.) National Savings Certificates. During the same period, national inflation ran around 10-12% p.a. This gave savers a real return of 2-4% per annum. In fact, thousands of middle-class retirees and savers simply lived off their savings which successive Governments were glad to soak up to finance budgetary deficits. The rate of domestic savings, accordingly, fluctuated between 12-15% p.a.

However, when this elitist Government took over in 1999, its priorities were quite different. It sought to lower its borrowing costs by forcing small savers to foot the bill...first by drastically slashing returns on National Saving Schemes, and secondly by allowing scheduled banks to lower returns on savings accounts to practically zero. As the then SBP Governor maintained, "my mandate is to recapitalize and revive domestic banking". What he left unsaid was, "by robbing poor and middle-class households".

Proof of the foregoing can easily be gleaned from the data on scheduled banks presented below:









Calendar Years (amounts in PKR billion) 2003 2004 2005 2006

Bank`s Networth (Capital plus reserves) 129 151 194 336

Compound annual growth of Bank`s Network 17.1% 28.5% 73.2%

Customer Deposits 1793 2161 2662 3,000

Customer Loans & Advances 1170 1589 2044 2,409

Net Interest Spreads (per annum) 7.50% 5.28% 6.56% 7.51%

Global average Net Interest Spreads 3.00% - - -

Excess spread earnings of Pakistani banks 4.50% 2.28% 3.56% 4.51%

Post-tax earnings at Savers` expense 37 24 46 67 173


In a nutshell, over the past 4 years, PKR 142 billion or 42% of banking industry`s current networth of PKR 336 billion is derived from ripping off their hapless savers. Is it any wonder that today our banking industry is the darling of Karachi Stock Exchange? The situation is so scandalous that even the new SBP Governor has taken note and made threatening remarks in an effort to induce banks to give their depositors a fair return on their savings.

However, as mattes now stand, with inflation around 9-10% per annum, and average deposit rates still stuck at 3-4%, bank savers are losing upto 6% of their yearly savings. Under these circumstances, do you suppose our national savings rate is likely to increase or decrease?

The recent profile of the other pillar of domestic savings, ie National Savings Schemes, is no better. In the decades of the 80`s and 90`s, domestic savings under this head were growing at a fast clip in excess of 10% per annum. Recent data of this source of national savings is given below:




Fiscal Years (amounts in PKR billion) 2002-03 2003-04 2004-05 2005-06

In current Rupees 982 984 940 934

In inflation adjusted 2001-02 Rupees 893 856 783 718


Could one imagine a more pathetic snapshot of retrogression? And, yes, this is the consequence of the Government`s conscious elitist policy to enrich the well-off at the expense of the poor and middle class. The added bonus is that it also lowers the Government`s borrowing cost on its PKR 2.5 trillion worth of domestic debt in which NSS figures shown above are reflected as "Unfunded Debt".

Since I often receive emailed feedback from my readers complaining that I only pen critiques without offering viable solutions to issues, let us now focus on the latter in as much as our abysmally low rate of national savings is concerned. And because the two major repositories of our national savings are the banking industry on the one hand, and National Savings Schemes on the other, my suggested solutions are also in two parts.

THE BANKING INDUSTRY: As regards the banking industry, the SBP Governor`s veiled threats of disciplinary action notwithstanding, I tend to agree with the industry`s view that apart from jaw-boning the Governor can legally do precious little to rein in the industry`s rapacious practices.

However, I am sure that the Governor is aware of the fact that a similar situation had arisen in UK some years ago. There, on recommendations of the FSA, the British Government had imposed a special one-off tax on the industry`s super-profits. I suggest that the Governor request the Government to pass special legislation to do the same and to impose super taxes on banking incomes covering the period described above. This will in one fell swoop bring banks to their senses, while contributing billions of Rupees to Government coffers.

NATIONAL SAVINGS SCHEMES (NSS): The other day, while visiting a friend of mine, who happens to be a senior bureaucrat in the know of things, I learnt some interesting facts. We all know that the bulk of funds in NSS are locked up in term deposits such as Defence Saving Certificates and Mahana Income Certificates.

With coupon rates on these schemes still in the region of 10-12% p.a., the Government is of the impression that they are expensive sources of funding its budgetary deficits. In actual fact, because a vast majority of these term funds are encashed before maturity, their holders suffer penalties for premature encashment.

I was told that taking premature encashment into account, the real cost of NSS averages around 6-7% p.a. Now, with inflation running 50% over this rate, the Government`s public debt is in fact shrinking in real terms. This is confirmed by the snapshot of inflation-adjusted NSS balances noted above.

If one accepts Government data and takes account of the 35% cumulative real GDP growth over the past 6 years, NSS balances should today have been 35% higher, ie at least of the order of PKR 1.3 trillion instead of being a shade under 1 trillion. The easiest and simplest solution for the Government is to immediately raise the yield on standard NSS offerings described above in a manner that ensures savers a positive, inflation adjusted, return.

This does not mean that it should simply raise its rates on longer term deposits to 12% p.a...which is where they are already...but to a target rate that accounts for the fact that premature encashment habit of the average saver usually shaves 3-4% per annum from the coupon yield of these schemes. In other words, the Government needs to enhance these rates back up to their levels of 2001-02. That is the price one has to pay if the goal is to raise the level of annual national savings back to at least 14-15% immediately.

NOVEL NEW SCHEME: However, the foregoing initiatives may not be enough, and for a very good reason too. If one looks at the profile of deposits in the banking industry, it becomes apparent that over 70% of banking deposits are either current accounts (that pay no return at all) or savings deposits (with average yield under 3.5% p.a.).

In the absence of any competitive threat for these core deposits, banks have no reason to change their predatory pricing. For the average household that perforce maintains savings accounts at banks to draw funds as and when needed there is really no viable alternative. What I am about to suggest is one such alternative.

Readers, especially those who happened to have travelled to USA in the early 80`s will recall a seminal development in the financial markets spearheaded by the famous brokerage firm Merrill Lynch. It was called the Cash Management Account, or CMA. It was simply one`s brokerage account at Merrill Lynch on which Merrill Lynch credited daily interest income at the going money market rate (the rate at which banks borrow overnight money from each other).

In a very short time, everyone and his uncle too had a CMA account earning income at the going market rate. This put the entire banking industry under the gun. It could not ignore Merrill Lynch`s challenge, and had to follow suit or risk losing its customer base.

I suggest that the Government use its NSS franchise for a similar initiative. The mechanism is simplicity itself. All that NSS needs to do is to authorise a bank (or banks) of its choice to accept deposits into so-called CMA accounts and to issue depositing customers checkbooks with the NSS logo and to credit these accounts daily with a return equal to the going money market rate.

Of course, all inflows to these accounts would be immediately credited to the Government`s consolidated fund, which would be periodically debited for amounts equivalent to normal customer withdrawals and the contractual credit of daily mark-up. For its services, the partner-bank of NSS can be reimbursed a negotiated fee, say a quarter of one percent on balances handled.

Since savers would no longer need to maintain idle cash balances for daily kitchen expenses, I believe that through this device, the average rate of national savings will jump by at least 2-4% per annum.

DOING AWAY WITH TAX ON SAVINGS: Finally, we come to the issue of taxing savings. Nothing could be more detrimental to inculcating a national savings habit. The Government taxes savers` mark-up earnings at a rate of 10% per annum (in fact 10.4% p.a. if one accounts for the factor of quarterly compounding).

Since savings accounts in the banking industry hold around PKR 1.2 trillion worth of customer deposits that on average earn 3.5% p.a., mark-up credited is of the order of PKR 42 billion of which Government takes away PKR 4.2 billion. Surely, the Government can do without this piddly amount if withdrawal of such a tax can boost the level of national savings by several percentage points.

And if the Government chooses not to do so, it should at the very least exempt all NSS accounts including the suggested CMA accounts from such a levy.

And as long as we are borrowing one American idea (CMA accounts), we might as well borrow another one of their successful models. To promote rapid infrastructural development, US lawmakers authorised city and town governments to issue tax-exempt bonds to individual (non-corporate) savers.

These instruments, known in financial market jargon as "Muni`s" (short for Municipal Debt), remain the mainstay of urban development. For Provincial Governments that are forever cribbing about the paucity of Federal transfers from the common revenue pool, this would immediately create a low cost of investible resources. The added bonus would be a significant rise in national rate of savings.

To conclude, in the humble opinion of this scribe, our economy has no hope of catching up with economic growth rates currently enjoyed by China, India, and the Asian Tigers as long as our national rate of savings remains in the pits. And, it is not enough to force the banking industry to give a fair shake to its depositors.

Proactive policies and initiatives need to be taken to ensure a positive outcome in quick time through a thorough revamp of NSS with introduction of savings boosting schemes like the CMA account and tax exempt Municipal Bonds. With a PM who has spent the better part of his life in the service of Citibank, these suggestions should not pose any conceptual difficulties.




Pakistan Shinning III - Population and Literacy


Having already spoken of two principal drivers of economic growth, i.e. a country's marginal rate of saving (and its mirror image of investment) and natural endowments (land, water, and minerals), in this piece, I wish to focus on the next two most important determinants of any nation's prosperity in general and its standing in the overall pecking order among nations. These are, first, its population (including its age profile and gender composition), and second, even more significantly, the level of education of its citizenry. Taken together, these two factors heavily influence a country's long-term economic welfare. Firm and clear understanding of the former should guide planning decisions for deploying appropriate levels of capital in targeted growth strategies, while the dynamics of the latter can temper our ambitions as regards the limits of our competitive abilites. It will be shown that, on both counts, this Government is as clueless as all its predecessors, and that it merrily continues down the path of obfuscation and flim-flam, churning out cooked up and logically unsupportable data to fuel its propaganda drive which has a one-point agenda, namely, clinging on to power come hell or high water.

Although our last population census was conducted in 1998, and the next one is not due till next year, we have access to some indisputable historical facts. First, as per census records, in 1951 the country's population (of what was then West Pakistan) stood at 35 million. And, secondly, that it had mushroomed to 131 million in 1998. Whereas I buy the first assertion of population (because it jives with pre-partition population censi of present-day Pakistan), our enumerators' contention of this sea of humanity numbering only 131 million in 1998 is an obvious understatement. Why? Simply because it implies a low-ball compound annual growth rate of barely 2.85% per annum for the 51 years interregnum between 1947 and 1998. This is untenable because it ignores the basic fact that our median family size was 9 at partition (parents and 7 children). It has progressively declined by 50% to current universally acknowledged level of 6.5 (parents and 4.5 children of whom 2.1 represent population replacement and 2.4 its annual growth).

The secular population profile projected by our Federal Bureau of Statistics implies that our median family size at partition was 7 and not 9. By this device, the 1998 census understated our population by exactly 11 million. However, the international community was never fooled. Any number of websites you visit ( e.g. www.cia.gov. and www.unesco.org) will confirm that Pakistan's population in June 2006 was 166 million and that it is presently growing at 2.4% per annum.

Depending on which domestic source you wish to rely upon (SBP, Federal Bureau of Statistics, or any one of several other Government websites), the official version of current population is 151-155 million or thereabouts…thus continuing with the 11-15 million number deflation first propagated by the 1998 census. There are several theories regarding this conscious understatement. The most widely held belief is that it was the Punjabi bureaucratic mafia in Islamabad that wished to under-represent true populations of the other three provinces in order to deny them their lawful share in federal revenues.

Yes, our population, come June 2007, will be nearly 170 million, and yes, before another ten years are out, and despite an optimistic rate of decline in population growth assumed by the Government (charitably accepted by your scribe for years 2007 and beyond), our head-count will exceed the 200 million mark to overtake Brazil as the 5th most populous country in the world.

Through these columns, we humbly request this Government to please amend its official data even if it means that our GDP per capita will fall short of 800 dollars...a figure which, for its propaganda effect, the minions in Islamabad have projected as a magical number... graduating us into the ranks of middle income countries.

By the way, it is a rather invidious ask because, if the Government succumbs, it will have to restate several other statistics such as literacy rates, school enrollments, and such like...issues which we are now equipped to address.

Lets begin by reviewing another popular Government canard, i.e. the state of our education in general and basic literacy in particular. We are told that the current national literacy rate is close to 60%. However, this claim is made tongue-in-cheek. Like Alice In Wonderland redefining words to mean whatever she wanted them to mean, this Government has redefined the internationally accepted meaning of literacy (understood as an ability to read and write) to mean something quite novel. In its lexicon, literacy is defined as the ability to sign ones name in English or any other vernacular. By this definition, my chauffeur who does not know his alphabet, is literate because he has learnt the penstrokes that depict his name

Now aren't you glad that we already have the population chart above from which to mathematically derive our real literacy rate? How? Its really simple. All we need to start with is the 5-10 year age group at partition, endow it with a progressively rising rate of literacy to reach what the Government claims is a fact today, i.e. a net primary enrollment rate of 56% (83% gross enrollment rate less 27% dropout rate to account for the 7-8 million children out of school that the Government grudgingly acknowledges). The logic of this derivationis that every 5-years age bracket minus natural mortality in the age-group progressively graduates into the next age bracket as we scroll down through time. Thus, the 4.9 million 5-10 year-olds of 1947 will find themselves among the half a million survivors in 65-70 years old group in 2007, with only 50,000 being literate. The right diagonal triangle of this diagram is blank, and for an obvious reason. Barring the odd old fogey who is still around, these 80 plus years old former citizens of this land of the pure are already six-feet under.

According to the irrefutable logic of this chart, by reading left to right against the all-important current year of 2007, we note that literate Pakistanis number 50 million or 29% of total population. However, adult literacy is barely 14% ... placing us in the happy company of the five least educated nations on earth as per the amended EFA data shown below:

Country Adult Literacy
Djibouti 39%
Senegal 38%
Gambia 17%
Pakistan 14%
Burkina Faso 13%


Doesn't it make nonsense of the current political slogan of "Parah Likha Punjab" mouthed ad nauseum by none other than the Chief Minister of the province? I know, his likely response would be, "but we are still better than Burkina Faso". So, unless it redefines literacy to include the educated who are now deceased, the Government cannot claim a national literacy rate over 32% and an adult literacy rate exceeding 15%!

Incidentally, even the high 29% overall literacy rate mentioned above has been made possible by the brave assumption that our compound annual growth in literacy has been 4% above the population growth rate for each year after partition...in itself a very bold assumption because we have never deployed sufficient resources to this effort! Also, if the Government wishes to massage this number to a higher figure, it can only do so by claiming that its education expenditure as a ratio of GDP has been higher than that of previous Governments, and hence, the growth rates of literacy during the past half a dozen years have been greater than those in previous decades! Would you buy such an outrageous claim? Because if you would, then have another look at the Government's own data for education expenditures given below (source: PES).

Current Rupees billion 2001 2002 2003 2004 2005 2006

GDP (MP) 3,871 4,095 4,481 5,142 6,129 7,320
Education Allocation 76 79 90 121 135 163
Actual Expenditure (80%) 61 63 72 96 108 130
% of GDP 1.57% 1.54% 1.60% 1.87% 1.76% 1.78%


According to the Auditor General's report to the Public Accounts Committee, actual expenditure out of budgetary allocations over the last 15 years has averaged from as low as 45% in some years to as high as 80%. Let us be generous and say that it was uniformly 80% throughout. Where does that leave us? At a level of educational spending anywhere between 1.5% to 1.8% of GDP. This is one of the lowest ratios in the world. Jolted by recent global condemnation on this performance measure, the Government has now solemnly declared that in future it intends to raise education expenditures to at least 4% of GDP. Don't hold your breath. Remember its an election year!

There is no precedent in history of any nation demonstrating double-digit (or even high single digit) GDP growth while spending next to nothing on its human capital. Apparently, the present Government has discovered the philosophers stone. Or else, how could it claim high GDP growth rates with one of the most illiterate populations on God's earth? At least one thing is certain. Our spin-doctors could have taught Goebbels a thing or two!