The Economic Survey, a document presented with much fanfare by the finance minister a day before the budget speech, lost its significance this year not because it contained July-March macroeconomic data while Pakistan Bureau of Statistics (PBS) had released sectoral growth projections for the year based on more up-to-date data, but because the projected growth rate of 3.94 percent, a source of pleasant surprise to the government, took a back seat to the deafening public clamour for inclusive growth.
This clamour was sparked by the persistent rise in the Consumer Price Index (CPI) on the one hand and rising poverty levels on the other. CPI increased by 10.9 percent year on year in May 2021 compared to 8.2 percent in the comparable period of 2020 and the government’s insistence that the rate declined from 11.1 percent in April 2021 as indicative of a downward trajectory met with no visible appreciation given the 10.9 percent raise in May prices was over and above those in April. Sensitive Price Index (SPI) rose by 19.7 percent in May 2021 compared to 21.3 percent in April 2021, which failed to arrest the persistent erosion of the purchasing power of each rupee earned by the lower income groups who spend a larger percentage of their income on SPI items, particularly food items.
Poverty levels were sadly not a feature of the Survey though it provided a 30-page chapter on social protection measures detailing Prime Minister Khan’s signature Ehsaas programme and cited a survey carried out by PBS, not available on PBS website, of the pre-pandemic working population of 55 million declining to 35.4 million (conveniently lumping all job losses as pandemic-related and not distinguishing those who lost their jobs due to the severely harsh contractionary monetary and fiscal policies from 12 May 2019 till the onset of the pandemic in March 2020). Today all but 2.44 million have been reemployed, so claims the Survey due to the government’s stimulus package. However lack of labour exchanges in the country as well as a large number of transients have made calculation of unemployment in this country a difficult task at best.
The Borgen Project, a non-profit reputable US organization, claims that poverty rose from 31.3 percent in 2018 to 40 percent by end 2020 (after the disbursement of the Ehsaas emergency programme) – or a rise of 18 million people below the poverty line, not challenged by sources in the Social Protection Division. The Survey claims that per capita income rose by 5.8 percent in 2019-20 and 2020-21, but the widespread lament of lack of inclusive growth prevails.
The Khan administration continues to accuse previous administrations massive corruption and flawed policies as well as the mafias operating in the private sector for all existing economic woes ranging from load shedding to rising prices of food items to the recent horrendous rail accident – a view that found considerable traction during its first year and a half in power. However with nearly three years into its five-year tenure complete this argument is losing its grip on the general public. This is with particular reference to: (i) an unsustainable budget deficit during its entire tenure – 9 percent in 2018-19, and 8.1 percent in 2019-20. The Survey projected 3.5 percent July-March 2021 compared to 4 percent in the same period of last year (as per Economic Survey of the year before) however it remains to be seen whether the government’s projected expenditure and revenue is an over-optimistic assessment as has been the norm in previous year or is actually realized; (ii) domestic debt rose to 25.5 trillion rupees in March 2021 from 16.4 trillion rupees in June 2018 - a highly inflationary policy; however the Survey notes that total debt servicing of external debt was 6227 million dollars (July-March 2021) against 7116 million dollars July-March the year before (as per Survey 2019-20). Not included in this year’s figure is the debt relief by the G20 which Pakistan has availed. Be that as it may, total debt servicing in 2019-20 was 11,075 million dollars which indicates that the total for this year may well be in double digits as well; (iii) the Survey notes that Pakistan’s strategy to reduce its debt burden includes commitment to run primary surpluses (which has effectively implied raising reliance on debt), maintain low and stable inflation (clearly a target that remains elusive), support measures that support higher long-term economic growth (major input expected by Shaukat Tarin in the budget to be presented today) and follow an exchange rate regime based on economic fundamentals – a welcome deviation from the usual IMF jargon in use by the State Bank of Pakistan of interventions during disorderly market conditions.
The Survey acknowledges that due to increasing population growth Pakistan is facing difficulty in optimal social spending, i.e., healthcare, education, housing and unemployment, etc., with Covid-19 simply aggravating the situation – a condition experienced by other countries as well. However, this does not explain why the column of social indicators including health, education, labour force – employed and unemployed, crude death rate July-March 2020-21 remained vacant in the Survey 2020-21.
The Survey notes growth in several major crops including wheat, sugar, rice and maize and a decline in the cotton crop however two elements need to be highlighted. First, the growth is due to higher acreage under cultivation of these crops while cotton crop acreage was reduced and second, in spite of bumper crops the government has been importing wheat and sugar due to prevailing market imperfections which need to be dealt with.
Manufacturing registered a growth of 8.7 percent and construction 8.3 percent in the current year – on the back of the stimulus package which provides ample justification for Tarin to renegotiate with the IMF on utility charges, not rely on petroleum levy to generate revenue and maintain more accommodative fiscal and monetary policies.
Copyright Business Recorder, 2021
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