THE GDP growth rate for the last quarter was only about 3.2pc. It was reported to be 5pc for the first quarter of the fiscal year. The government, in its enthusiasm to share only good news, probably overstated the growth rate for the first quarter and had to adjust it in figures for the second quarter. Whatever the reason, the growth numbers are not really portraying any recovery trends.

The Federal Board of Revenue (FBR) is struggling to ensure it is able to achieve its revised targets for revenue collection. It is likely that its efforts will fall short. More importantly, there’s been little effort to work on issues of either broadening the tax base and tax net or removing glaring exemptions/subsidies especially from the income tax system. Agriculturists and traders continue to be under-taxed.

But there have been celebrations for the appreciation of the rupee. Bringing the rupee rate to Rs96-97 to the dollar has been celebrated as an important milestone. What is the increasing value of the rupee supposed to show? Usually appreciation is underpinned by the strength of basic and important variables in the economy. This is why appreciation of a currency is taken to be a signal of the strength of the economy. In this case, the appreciation had nothing to do with the strength of the economy. ‘Gifts’ from ‘friends’ and borrowings from international markets seem to have given us the opportunity to allow the rupee to appreciate. How is this important, and why should this be taken as a sign of the economy’s strength?

Why is the government taking Rs96-97 as a target for the exchange rate? The specific level of the exchange rate is not a policy variable or even a variable of interest. We do want the exchange rate to be relatively stable but a peg, given we are in a flexible rate regime, is not important and definitely not desirable. Does the government really think that Rs96-97 is the equilibrium value of the exchange rate right now? If so, the exchange rate should have stabilised at that value without the need for borrowed and/or gifted inflows. Clearly this is not the case and it does not make sense for the government to try and defend such an exchange rate or to expend energy on maintaining it.

The macroeconomic debate in Pakistan seems to be in a strange place. The government raised $2 billion from international markets through issuing bonds. This is being celebrated. The narrative is that the subscription shows a successful return for Pakistan to international money markets. While this might be a successful ‘return’, why would success at borrowing be seen as either a sign of economic ‘recovery’ or as a success of the policies of the government in power? We are borrowing money from any and every source we can tap: multilaterals, international markets, ‘friends’ and more. This is boosting our foreign reserves and helping us keep the exchange rate stable. But how can borrowing be a sign of good economic policy or of economic recovery?

We just sold the 3G/4G spectrum rights for $ 1.1bn. These inflows will help keep the narrative of stability going for some time. The government has ambitious plans for selling off state entities too. If privatisation of these entities does go ahead as expected, they will also bring in cash. This will allow the government some space to keep the foreign account and exchange rate relatively stable for some time, and also give the government fiscal space. But even privatisation and selling off assets that belong to the people of Pakistan is not a remedy for economic recovery and will not address some of the basic problems the economy faces.

It is in the area of reforms needed at the micro level in the economy where the government is seen to be failing. What has been achieved on the tax reform front? Have the number of taxpayers increased substantially? Have distortions in the income tax and sales tax structures been removed? Has the government been able to remove all the SROs of the FBR or even get rid of the SRO culture within the FBR? Have agriculturists, traders, wholesalers, retailers etc been brought into the tax net? Are people more willing to pay taxes? Has the government been able to convince Pakistanis they need to pay their taxes?

On the trade front, has the government been able to remove some or any of the more glaring distortions we have been living with for decades? Is the auto sector any less protected? More generally, has the government had any success in dealing with problems associated with the property rights regime or contract enforcement? Has the cost of doing business come down? Has the investment climate for domestic investors improved in any way? The answer to these questions appears to be a resounding no. How then can we expect the stability story to continue and how can we take stability on the foreign exchange front to be a sign of economic recovery?

Stability through ‘gifts’ and borrowing is not a macroeconomic policy and nothing to celebrate. If problems — within the economy and at the micro level — that have been dogging us for decades are not addressed, any stability gained through borrowing or even privatisation proceeds will be short-lived.

The writer is senior adviser, Pakistan, at Open Society Foundations, associate professor of economics, LUMS, and a visiting fellow at IDEAS, Lahore.