Anatomy of hundred days

Slowly but steadily, the government seems to be coming back on to the right track

The PML-N government has completed hundred days of its rule and seems keen to showcase its achievements during that period. The parties in the opposition, intellectuals and media are also equally interested in conducting a critical appraisal of the claims being made by the government. Though hundreds days are too short a period to expect tangible and substantial results from the policy initiatives of the government and give judgment on their success or otherwise, they surely could act as a touchstone for judging trend-setting impact of those actions.

There could be a difference of opinion on how far the government has been able to surmount the inherited challenges and the likely repercussions or benefits of the policies put in place, but one thing that was beyond any reproach was the dedication, commitment and honesty of purpose with which the government has strived to grapple with those issues and its unswerving quest for plausible and long term solutions of those challenges. While the impact of the endeavours to restore normalcy in Karachi and Balochistan and the strategy evolved to deal with TTP would require longer periods to prove their impact, the efforts to tide over the energy crisis, rebuilding the economy and putting it on the path of sustained economic growth, have already started showing discernible and verifiable results.

As promised by the government it successfully met the deadline of 60 days to retire the circular debt of Rs500 billion that led to the addition of 1700 MW of electricity to the system, easing the power outages to a great extent. As a consequence of prime minister’s visit to China, a commitment has been made by the Chinese power generating companies to invest US$ 6 billion in the energy sector projects in Pakistan during the next five years. The proposed building of the Economic Corridor and other mega projects also promise infinite economic benefits for Pakistan. Resolute efforts are underway to fast-track the installation of 10 coal based power plants at Gadani with a cumulative power generating capacity of 6,600 MW. Plans are also on the anvil to produce 10,000 MW of electricity in the next five years through coal based power projects and other renewable energy resources, designed to changing the energy production mix and producing cheaper electricity in the future.

With a view to rebuild the economy and ensuring sustained growth process in the country, the government through its budget for 2013-14 launched initiatives to address structural imbalances, broadening the tax base, raising the GDP growth rate from three percent to seven percent, enhancing the investment to GDP ratio from the present 10 percent to 20 percent with greater emphasis on attracting foreign investment, reliance on export-led growth, promoting small and medium size industries, elimination of subsidies in phases and relying on targeted subsidies to save the poorer sections of the society and keeping inflation at a single digit.

It was the result of these reforms that the government was able to successfully negotiate a bailout package of US$ 6.6 billion with the IMF which in itself is a proof of the confidence that the Fund has in the success of the economic policies of the government. The significance of clinching this deal lies in the fact that Pakistan badly needs an overall financing requirement from external sources to the tune of $11.5 billion during the current fiscal year. To meet these requirements, Pakistan is also contemplating to approach World Bank and the Asian Development Bank to raise $4.7 billion besides envisaging $4 billion through private investment and privatisation proceeds. Pakistan already owes a payment of US$ 3 billion to IMF this year from the previous loan and the new loan will mostly be utilised to pay for that.

Economic experts believe that the IMF deal apart from saving Pakistan from default on its debts, would also help in stemming the confidence crisis, check capital outflows, improve foreign exchange reserves situation, ease pressure on exchange rates besides encouraging foreign investment. It would also encourage other international lending institutions to extend loan facilities to Pakistan. In fact the impact of this deal is already visible. Standard Chartered Bank has offered to raise Pakistan bonds in the international market and to provide credit line for a multi-million dollar Neelum Jhelum project. According to a State Bank report, foreign direct investment has increased by 100 percent during the last two months as compared to the corresponding months of the last year.

Pakistan successfully arranged a two-day “US-Pakistan Business Opportunities Conference” jointly organised by the US and Pakistan government in June in Dubai, which was attended by representatives of investment companies of Pakistani, US and United Arab Emirates with a view to identify new business opportunities in Pakistan that waited to be exploited. A substantive and immediate outcome of this initiative was that at the end of the conference, Pakistan Private Investment Initiative was launched which would set up two new private equity funds solely for further expanding Pakistan’s dynamic and fast-growing small and medium sized businesses and industrial concerns.

The US will provide $24 million for each fund which will be equally matched by the contributions from Abraaj Group and JSPE. Initially the pooled funds will be in the vicinity of $100 million which are expected to grow manifold into hundreds of millions of dollars. Small and medium sized industries invariably are the backbone of the economy of any country owing to their size and the employment opportunities that they generate with minimal effort. The US and Japan owe their economic progress to the vital role played by the small and medium sized industries.

Pakistan is also striving hard to find new markets for its products and seeking preferential treatment by the EU countries under the Generalised System of Preferences (GSP). In the recent past, UK and some other European countries lobbied for WTO approved duty free access to EU markets for Pakistani products. During the visit of the Prime Minister of UK David Cameron to Pakistan in the last week of June, Prime Minister Nawaz Sharif requested him to have Pakistan included in the GSP Plus, recently approved by the European Parliament on the recommendations of the European Commission. According to the Danish Ambassador in Pakistan, the European Parliament in its meeting scheduled for December was likely to grant GSP Plus status to Pakistan. All the foregoing developments surely constitute encouraging portents for the future economic progress of the country and testify to the fact that economy has been put on the right path.

The writer is an academic.