Economy: PML-N is amiss

It would be an understatement to say that PML-N’s economic agenda has gone astray. After the petrol crisis, many folks feel a complete governance breakdown is imminent. While some folks may be venting at the state of affairs qualitatively (cursing and what not), the Islamabad-based free-market think tank, Prime put a number yesterday on the PML-N government’s economic management: 5.2 points out of 10.
This is the fourth version of Prime’s manifesto tracking report, covering the period June 2013-December 2014. The aggregate score has been arrived at after analyzing progress on 82 economic targets mentioned in the PML-N manifesto. The three broad areas are economic revival (57 targets), energy security (22 targets) and social protection (3 targets). A value from 0 (lowest) to 10 (highest) is assigned to each target based on Prime’s assessment on relative progress achieved on policy and legislative development, institutional reforms, and implementation.
To be fair, the 5.2 mean score is an improvement over the previous, one-year reading of 4.33, released back in July 2014. Moreover, the two key areas of “economic revival” and “energy security” have both received improved scores over the same period (see illustration). The “social protection” area has also ameliorated over the previous reading.
But the social protection score – which is relatively higher, mainly on account of large budgetary allocations and spending on social safety nets – distorts the overall picture. To make better sense of the scorecard, one must look at the average of economic revival and energy security targets. Arguably, these two themes require substantive reforms in multiple areas and are among the hardest nuts to crack.
That average of the two areas in the 19-month period comes out to be 4.55 – that is, 46 percent, thus failing to cross even the passing threshold. This average is better than 4.13 seen after the one-year period. But this is very little improvement, considering that more than one and a half years have passed.
What the Prime’s assessment shows is that reforms have either been absent, too little, or misdirected, so far. There is no respite on the energy crisis front. Loadshedding hours are long and gas outages are also regular now. Meanwhile, the utilities are getting costlier. Investment is going into energy projects but result is not apparent so far. However, the federal government is expectedly big on infrastructure spending, with most of the development happening in urban areas to the exclusion of suburban and rural areas, noted Prime authors.
In the current political and security environment, the fate of economic revival hangs in the balance. But Prime doesn’t buy the government’s line that their economic agenda has been derailed lately; rather it asks the government to look inwards. The reforms advised by Prime in its fourth tracking report include many that are already in the PML-N’s economic agenda. But the question is: has the ship of reforms sailed already?

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PML-N Economic Scorecard

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(selected indicators; scores/10)     Dec-14     Jun-14

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Economic revival                        4.6       4.33

GDP growth                                5        4.6

Budget deficit                         4.45       4.35

Inflation                              5.13       4.12

Govt. borrowing                           7          8

Infrastructure                            5        4.5

Tax reforms                             2.9       3.27

Energy security                         4.5       3.93

Nepra reforms                           3.5       4.25

Discos reforms                         5.25       5.83

Gencos reforms                            2          4

Circular debt elimination               3.6       3.63

Renewable energy                        8.5        8.5

Social protection                       6.5       6.25

Overall score                           5.2       4.84

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