Challenges: role of NEC & NDC — I

The biggest challenge faced by the State of Pakistan as defined in Article 7 of the Constitution of Islamic Republic of Pakistan, not merely for governments in centre or provinces, is monstrous rising tide [in the words of Prime Minister Prime Minister “tsunami” ] of debt servicing and burgeoning debt burden, both internal and external. In view of phenomenal increase in debt servicing, the economic viability of State is at stake that also poses a threat to national security. The debt trap, we are caught in, is not only vicious, but pushing the State towards bereavement-trap, for which remedial measures on war footing are required. In these critical days, when businesses and masses are suffering immense difficulties due to economic toll of Covid-19, the political parties in Opposition are at daggers drawn against the ruling coalition government in the centre, whereas the circumstances require unity and political stability to meet challenges on all fronts, especially economic. The data relating to consolidated federal and provincial fiscal operations for the first six months of the current fiscal year, show that after debt servicing, the State lacked even sufficient own resources to meet entire defence spending that was less than the corresponding period of the last fiscal year.

The Ministry of Finance on February 3, 2021 released Summary of Consolidated Federal and Provincial Fiscal Operations, 2020-21, for the first half of the current fiscal year according to which even part of defence spending is now funded by borrowing. It is catastrophic—a serious situation showing extreme weakness vis-à-vis debt sustainability that has reached 87 percent of the GDP. The heavy negative impact of mindless and costly borrowing, both external and internal, resulted in 15% increase in debt servicing, with fiscal deficit going up to Rs 1.4 trillion.

Total tax revenue collection by Federal Board of Revenue (FBR) from July to December 2020 was Rs. 2.2 trillion and after transferring the shares to provinces under 7th National Finance Commission (NFC) Award (Rs. 1280 billion), the net available to federal Government from tax and non-tax revenue (Rs. 861.6 billion) was Rs. 1.79 trillion that could not even meet the two major heads, debt servicing (Rs. 1475 billion: domestic Rs. 1357 billion and foreign Rs. 118 billion) and defence (Rs. 486.5 billion).

The Ministry of Finance in Annual Debt Review & Debt Bulletin for FY2019-20 issued to comply with section 7 of the Fiscal Responsibility and Debt Limitation Act of 2005 covering the second year of the coalition Government of Pakistan Tehreek-e-insaaf (PTI) admits that the public debt increased from 85% of GDP to 87.2% as against the limit of 60%! According to a Press report: “For a developing country like Pakistan, a debt-to-GDP ratio below 50% is considered sustainable. Anything above this threshold is counted as dangerous in the long-term, according to independent economists”.

The above confirms that the remaining months of the current fiscal year and budget making for fiscal year 2021-22 will pose extraordinary challenges for which all the governments, federal and provincial, need to follow Article 156(2) of the Constitution that says: “The National Economic Council shall review the overall economic condition of the country and shall, for advising the Federal Government and the Provincial Governments, formulate plans in respect of financial, commercial, social and economic policies; and in formulating such plans it shall, amongst other factors, ensure balanced development and regional equity and shall also be guided by the Principles of Policy set out in Chapter 2 of Part-II”.

Unfortunately, none of the political parties in power or opposition is recognising the severity of the situation and idea of ‘Charter on Revival of Economy’ is a mere cliché. This is the worst one can expect from legislators (senators and members of National and Provincial Assemblies). They are completely oblivious of their responsibilities towards citizens and are betraying their voters. They are not at all serious in starting focused parleys on how to overcome difficulties of millions living below poverty line. None of them has produced any plan for overcoming daunting challenges on the fiscal front amid the Covid-19 endemic and global meltdown of economy that is also affecting us as well with rising cost of living and increasing energy/fuel charges in days of misery faced by majority of the population. The tiny number of ultra-rich is least pushed about the stark realities where millions paying taxes are finding it difficult to meet both ends meet.

Those who matter in the land are also showing apathy by not calling emergent meeting(s) of National Development Council (NDC), established by Prime Minister Imran Khan in June 2019 as its head, and Chief of Army Staff as one of its members with the aim of accelerating “economic growth and improve coordination among the provinces and the federation”.

According to a notification issued by the Cabinet Division [which is not available on its website: https://cabinet.gov.pk], the newly formed body “will set policies and chalk out strategies for development and also provide guidelines for improving regional cooperation. The chief ministers will also be invited to the council’s meetings”. It was further said that NDC would also approve long-term planning for national and regional connectivity.

According to the notification [No. 4-13/2019-Min-1 dated 13th June 2019] from the Cabinet Secretariat, the NDC is to be convened at the Prime Minister’s Office, comprising the following members:

1. Prime Minister - Chairman

2. Federal Minister for Foreign Affairs-Member

3. Federal Minister for Finance/Advisor to the Prime Minister on Finance-Member

4. Federal Minister for Planning, Development and Reform-Member

5. Federal Minister for Commerce/Advisor to the Prime Minister on Commerce, Industries & Production and Investment-Member

6. Chief of Army Staff-Member

7. Provincial Chief Ministers, Prime Minister of AJ&K and Chief Minister of Gilgit-Baltistan (on invitation)-Members

8. Any additional minister/head of strategic body (on invitation)-Members

9. Secretary to the Prime Minister-Member

10. Secretary, Foreign Affairs Division-Member

11. Secretary, Finance Division-Member

12. Secretary, Planning, Development & Reforms Division-Member

13. Additional Secretary, Prime Minister’s Office-Secretary Council

According to a Press release of August 8, 2019, the following details are available of the maiden meeting of NDC chaired by the Prime Minister:

“Development plan of Balochistan, Master Plan of Gwadar, Creation of CPEC Authority and Accelerated Development Plan 2019-20 for erstwhile FATA/merged districts was discussed during the meeting. A detailed presentation was made on the development plan of Balochistan that included measures to further improve security environment in the province especially the border management, improving the writ of state and sectoral development of critical sectors for socio-economic betterment of the people of province. The meeting was informed that the past neglect of the province, lack of connectivity and economic integration, security challenges and underutilization and mismanagement of resources contributed towards poverty in the province. A study of utilization of development budget for past 08 years revealed that out of total expenditure made on the development of the province, approximately 45% was wasted due to pilferage. It was decided that every possible effort shall be made to enhance annual development spending of the province over next 09 years enabling the province to overcome development challenges, reduce budget deficit and enhance its revenue generation capacity. Discussing various sectoral development plans, the meeting was informed that communication and infrastructure projects such as completion of M-8 Motorway project, construction of 819 km Chaman-Quetta-Karachi Motorway, Basima-Khuzdar Road and 124 km Awaran-Bela Road project would significantly improve connectivity and communication infrastructure in the province.

On development of coastal areas of the province, the forum approved, in principle, undertaking feasibility studies for port at Gaddani and establishment of Special Economic Zone at Hub. The forum also approved constitution of National Coastal Development Authority for development of tourist resorts and promoting tourism along the coastal areas of the province including Jiwani, Gawadar, Pasni, Makola, Ormara, Kund Malir, Hingol Park and Miani Hor.

On development of ports, the forum endorsed the proposal for development of 08 landing sites and promoting local boat industry including provision of 10,000 Green Boats. On strategy for development of mines and mineral resources of the province, the forum was informed that the province will be divided into four zones (Chagai Zone, Quetta-Duki, Khuzdar-Lasbella and Coastal Zone) and appropriate model will be put in place to encourage private investment in large-scale mining.

On development of Oil & Gas sector, the forum was apprised on efforts being made to develop 4 new blocks i.e., Block-28, Zhob, Zorgarh, Jandran & Kohlu for exploration, in addition to carrying out seismic survey at 30 onshore sites. The meeting was also briefed about various plans for improvement of agriculture and water-management in the province.

The forum approved, in principal, constitution of CPEC Authority for ensuring fast track implementation of CPEC projects. Discussing development of Gwadar and Master Plan of the city, the forum approved, in principal, the conceptual framework of Gwadar Special Economic District. The forum also discussed, in detail, Accelerated Ten Year Development Plan for erstwhile FATA. The forum reiterated the commitment of the Federal Government to ensure availability of allocated funds, timely releases and special dispensation for procurement of specialized execution agencies (NESPAK, FWO, NHA) and facilitation for screened NGOs to operate within merged areas for smooth and uninterrupted development of the merged areas”.

(To be continued tomorrow)

(The writers, lawyers and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS))

Copyright Business Recorder, 2021