- Before it is too late
The PTI government is well into sixth month of its rule in the centre, Punjab and KPK supported by a friendly set-up in Balochistan. But it has not been able to undertake any worthwhile legislation to improve governance, stem the rot in the domain of economy, create a cordial political atmosphere which is of pivotal importance in regards to socio-economic development of the country and improving the well-being of the masses.
Though it has announced grandiose plans like creating 10 million jobs and building five million houses for the low income groups but the reality is that these steps seem the dream of a lunatic in view of the state of the economy at the moment which admittedly is in a very precarious position.
Conceptually nobody in his right mind can take an issue with mega initiatives like that which have the potential to put the economy on the path of sustained development. I also had made favourable comments when they were announced. The task force on the housing project has estimated that the implementation of the housing project would require rupees sixteen trillion. That is a big money by any stretch of imagination and is surely neither available at present nor would be coming forth in the near future. From that perspective it is an ill-conceived initiative. Creation of 10 million jobs is also dependent on revival of the economy.
The predictions by the international lending and rating agencies also present a very dismal picture about the state of our economy in the next two years. The IMF has lowered its 2019 economic growth forecast for Pakistan and the region by 0.3 percentage points to 2.4 percent before recovering to about three percent in 2020. Fitch downgraded Pakistan’s rating from B to B negative in Decembers 2018 and its predictions for future revealed last week are also not very encouraging. It has predicted that the SBP will have to devalue rupee against US dollar again in the coming months as the currency will remain under depreciatory pressures with weaker external finances. It has warned Pakistan of larger economic distortions and greater pain in future for seeking unconventional funding sources to avert the balance of payment crisis and little appetite for austerity and economic reforms. The SBP in its first quarterly report has also admitted that the country may not be able to achieve the projected growth rate 0f 6.4 percent and has accordingly trimmed its forecast to 4-4.5 percent citing under performance by the industrial sector, slashed spending on development projects and high rate of inflation which has badly affected consumer industries due to decline in the purchasing power of the consumers.
The official rate of inflation may be 6.17 percent but the reality is that it is much higher than it in the real market. The budgetary deficit which is considered to be the mother of all economic woes, according to international rating agencies is six percent of GDP and could touch the figure of 10pc if we include the circular debt, losses to the PSEs and losses in the gas sector. That points to an out of control situation.
The painful reality about the prevalent political landscape in the country is that it has inbuilt avenues of corruption which encourages a culture of graft and entitlement
It is pertinent to mention that Imran Khan and his party stalwarts have been criticising and reviling the PML-N government for excessive borrowing and failing to provide relief to the masses. Ironically after assuming power the PTI government is also pursuing the same course with increased velocity. According to reliable sources the PPP government borrowed an average of Rs5 billion a day for five years between 203-2018. The PML-N government borrowed at an average of Rs7.7 billion per day. The PTI government during the last five months has been borrowing at an average of Rs15 billion per day. The economists fear that during the current financial year the government may be forced to pay 50pc of all the taxes collected by FBR which would be a record in the financial history of the country.
Fitch has rightly warned Pakistan of larger economic distortions and greater pain in future for seeking unconventional funding sources to avert the balance of payment crisis. First of all the money promised by friendly countries is not a grant or assistance as it has only been given to correct the balance of payments position in the short run. The investments promised will also take long time to materialise and contribute to the economy. The Sakuk and Euro bonds and ’Pakistan Banao Bonds’ for Pakistani expatriates are actually the loans which will further add to the debt burden and will have to be paid in the future. The ability to pay them back is also inextricably linked to the health of the economy and the productive potential generated by the borrowed money in case it is prudently expended.
The mini-budget or the reforms package which the finance minister prefers to call reforms package provides very little relief to the poorer sections and most of the economists have dubbed it as friendly to the business class. An eminent economist commenting on the mini-budget said, “It has taken the country further away from economic stability. The strategy of the government, it seems, is to skirt the challenges and ease the payments pressure by using support from friendly countries. This is a myopic strategy, good perhaps for a government which may have only a year in office”.
One thing which is conveniently neglected by the managers of the economy is that economic progress of a country invariably depends on political stability which encourages the investors both internal and external to make investments and propel economic development. The PTI government instead of making earnest efforts to promote a culture of political accommodation and political harmony seems in a confrontational mode with the major political parties in the name of accountability which like the exercises undertaken by the previous government very much gives the impression of a scripted witch-hunt.
Accountability is must to ensure good governance and creating congenial atmosphere for nudging economic activity in the country provided it is across the board. The process has zero credibility in view of the fact that only the opposition leaders are being targeted and there is no move to rope in the corrupt judges, bureaucrats, generals and those whose names appeared in the Panama leaks. It is surely aggravating ambience of political instability which could undermine the efforts designed to revive the economy and move towards good governance.
The painful reality about the prevalent political landscape in the country is that it has inbuilt avenues of corruption which encourages a culture of graft and entitlement. Almost all the politicians and legislators on both sides of the aisle are the beneficiaries of that corrupt system and have made fortunes by exploiting it. The senate elections and the way the independent legislators were lured and trapped to join PTI after elections for forming the government at centre and in Punjab are the most despicable examples of power grabbing by all means. The PTI government, which is hanging by a thin thread in centre and Punjab, needs lot of rethinking before the impetuous conduct of its ministers and fortunes hunters like Sheikh Rashid take the things to a point of no return.