Where the new government stands
One of the major negatives for the sitting governments all over the world is that they invariably are the victim of the syndrome of ‘disadvantages of incumbency’. No matter how good and imaginative their policies are, there are always people out there who consider it their scared duty to cavil at them and make a conscious effort to ferret out inadequacies in those initiatives out of context. The other disadvantage is that the incumbent governments, for some inexplicable reason, also suffer from lack of credibility. The combination of these two factors makes it really difficult for the governments to defend their policy options. This phenomenon is more pronounced in developing countries as compared to the developed nations.
Pakistan presents a quintessential model of this phenomenon. The present government has hardly completed six month of its incumbency and it is already being subjected to an undeserved opprobrium for its failure to turn around the economy and surmounting the other inherited challenges without making an honest effort to evaluate its endeavours in their proper context. The major thrust of the criticism on the government relates to the economic situation of the country. Perhaps it would be pertinent to have a cursory glance at the state of the economy when the PML-N government was installed, to understand the real worth and value of the policies put in place to address the maladies afflicting the economy.
It is a known fact that the present government inherited a severe energy crisis which was one of the major factors responsible for triggering economic meltdown. The economy was in complete shambles. Budgetary deficit stood at 9% of the GDP and the country had an internal debt liability of Rs14.3 trillion. It faced a huge budget deficit and its overall financing requirement on external front stood at US$11.5 during the current fiscal year. The country was likely to default on the payment of loans with all the accompanying negative fall-out for the country and hence needed to be addressed on top priority basis.
An objective appraisal would reveal that the government without wasting any time took a prudent decision to approach the IMF for US$ 5.3 billion loan package for the next three years with an upfront payment of US$ 3 billion to repay the IMF loan due to be paid during the current financial year. That loan was not only successfully negotiated but the IMF during an evaluation exercise has also endorsed the measures taken by the government to restructure the economy and reforms aimed at expanding the tax base and other measures to address the economic afflictions. The government is in the process of raising US$ 4.7 billion from the World Bank and Asian Development Bank besides raising US$ 4 billion through private investment and privatisation proceeds.
The government was convinced that the only way to revive the economy required attracting foreign as well as internal investment and broadening the tax base. The first budget presented by the government envisaged reducing the budget deficit from 9% of the GDP to 6%, measures to reduce government expenditures, bringing more and more people into the tax net, providing incentives for the foreign investors in the form of tax holidays and infrastructural amenities. With a view to generate employment within the country the government launched a programme to advance loans to youth up to Rs2 million to start their own business which is likely to play a significant role in reducing unemployment among the skilled and educated young men.
Recently, another package has been announced to encourage private investments whereby the government has exempted an investment of up to Rs25 million from scrutiny as to its source, made in the construction industry, Thar Coal projects in Sindh and mining projects in Balochistan and Khyber Pakhtunkhawa provided that the sources are not hit by Narcotics Act of 1977, Anti-Terrorism Act of 1977 and anti-money laundering laws. A number of other incentives were also announced to promote culture of paying taxes.
The government has retired the circular debt and there is a discernible improvement in regards to power outages. Prime Minister Nawaz Sharif has been making frantic efforts to seek assistance and support of other countries in regards to promoting foreign investment, especially in the energy sector. In this regard, he has visited a number of countries, though his detractors have failed to acknowledge the utility of these visits. China is helping us in a big way to tide over the energy crisis and the Chinese companies are expected to make an investment of US$ 6 billion in this sector over the next five years. The government is giving top priority to changing the energy production mix by switching over to coal based power production and other renewable energy resources. Power producing companies have been asked to switch over to coal based power generation. Work on ten new coal based projects with a cumulative production potential of 6,600 MW has already been initiated at Gaddani in Balochistan.
Prime Minister Nawaz Sharif has recently also performed the groundbreaking ceremony of the largest civil nuclear power plant designed to generate 2,200 MW of electricity and revealed that six more such projects would be launched in the near future. As a follow-up of his visit to the US and the agreements reached with the US government, a delegation visited US recently to discuss its investment in the energy sector. All these positive outcomes of his visit to foreign countries in themselves constitute an authentic snub for those who look askance at these sojourns and also provide a ranting proof of the seriousness with which the government is approaching the issue of energy shortage and revival of the economy.
Another very positive aspect of the foregoing measures is that the jobs created through foreign and domestic investments in the industrial sector will also lead to enhancement of government revenues through taxes by broadening the tax base and bringing more and more sectors into the tax net; a prescription that economists of all hue agree on ungrudgingly. There are however some difficulties being faced by the masses in the short run as a consequence, like revisions in the energy prices, withdrawal of subsidies across the board and resort to a programme of targeted subsidies but the dilemma is that they cannot be avoided. When the steps taken by the government start creating their impact and the projects start operating, the situation will certainly ease. It is an inescapable reality that building a prosperous future does entail some sacrifices and hardships.
Malik Muhammad Ashraf is an academic. He can be contacted at: ashpak10@gmail.com.