EDITORIAL: Prime Minister Imran Khan has expressed his satisfaction at the performance of his team (consisting of 28 federal ministers, four ministers of state, four advisors to prime minister and sixteen special assistants to prime minister) not only by what has been achieved in three years but what is likely to be achieved after all envisaged projects are on line (including the expansion of the Ehsaas programme and the completion of the under-construction dams in ten years).
The recent Business Confidence Survey rolled out by the Overseas Investors’ Chamber of Commerce and Industry (OICCI) that shows a 59 percent gain in Business Confidence during the last year is surely a matter of great elation and satisfaction for the prime minister as indeed it should be. OICCI represents the collective view of over 200 major foreign investors that are operating in Pakistan that contribute nearly a one-third of the country’s tax revenue.
However, it increasingly appears that the Prime Minister’s speech was directed more at his supporters than the general public given that he did not deal with the major issue – inflation – that continues to plague the poor more than the rich. He appeared flippant in his claim that inflation has led to greater income for the poor farmers, a claim not backed by his own team’s assessment that the middlemen/aarthis continue to not only keep the poor farmers hostage but also gobble up a major share if not the entire rise in market prices. His rationale notably that the rise in the number of motorcycles can be sourced to the rise in wealth of the poor farmers does not take into account the fact that there has been a rise in vehicle purchases as those who had deferred purchases due to the lockdown began to buy. The increase in rural extreme poverty too belies this conclusion. If indeed the government had succeeded in disseminating wealth to poor farmers through higher inflation then the point of the Kissan (farmer) Card, another scheme that implies a new burden on the taxpayers in a philosophically contentious context, becomes redundant.
The Prime Minister further claimed that the data is accurate unlike the data presented by the then finance minister, Ishaq Dar of Pakistan Muslim League-Nawaz (PML-N). The widening gap between consumer price index, a monthly estimate that includes energy (electricity and gas) and sensitive price index that consists of 51 essential items (calculated weekly at the price set by the government at Utility Stores - with many items not available or of poor quality) should be concerning. And the constant rise in utility rates is unlikely to stop as fuel adjustment and quarterly adjustments are not within the purview of the Finance Minister’s pledge that he will not increase the electricity rates (as only base rates are). Inflation accounts for the erosion of the purchasing power by more than 15 percent in three years.
The inordinate focus of government in dealing with the challenge of poverty through the Ehsaas programme, a well-managed programme nevertheless, requires a revisit because it fails to take account of the rise in poverty numbers (due to his team’s economic policies pre-Covid-19 as well as the aftermath of the pandemic) and the rise in the monthly allocation under Benazir Income Support Programme is insufficient to enable the beneficiary to procure the same amount as in 2018. And of concern to him should be the fact that while the Federal Board of Revenue (FBR) has projected an additional 385 billion rupees collection due to 8.2 percent domestic inflation and 236 billion rupees for GDP growth of 5 percent for the current year the actual collections last year with GDP of 4 percent and inflation of 9 percent fell far short.
Sadly, the PTI government like it its predecessors remains focused on total tax collections as opposed to its pre-government pledges when it used to claim that it would reform the FBR and raise reliance on direct taxes as they are based on the ability to pay principle rather than indirect taxes whose incidence on the poor is greater than on the rich – a feat that it claimed would be effortlessly achieved because ‘taxpayers believe that the PTI led by Imran Khan will never misuse the money’. Reliance on indirect taxes continues and in this context it is relevant to note that reliance on petroleum levy (PL) has increased to 610 billion rupees in the current year’s budget (though the government has reduced it recently for political reasons) against 160 billion rupees budgeted in 2017-18.
The Prime Minister talked at length about his sentiments while seeking to borrow from foreign countries; however, he did not mention the rise in total indebtedness during his tenure – a highly inflationary policy. External debt rose from 95 billion dollars in 2018 to 116.5 billion dollars (the past two to three months’ official data has rather suspiciously not been uploaded) out of which 19.5 billion dollars was used to pay past loans and around 5 billion dollars for budget support and domestic debt rose from 16.5 trillion rupees in 2018 to over 25.4 trillion rupees till March this year.
Budget deficit has persistently been over 7 percent, an unsustainable level leaving the government’s claim of a tightening of the belt ludicrous, another highly inflationary policy. And with a falling rupee since May 2021 – from 153 to one dollar to over 165 to one dollar – imports of palm oil and petroleum products, two key kitchen items, is likely to fuel inflation further. And of course, given that the budget was calculated at the rate of 153 rupees to one dollar the rupees erosion implies budgeted figures are no longer in synch with reality.
While the government persistently takes credit for handling the Covid-19 pandemic much better than other countries of the world and rightly acknowledges the negative economic fallout of the pandemic yet its positive impacts are ignored which include: (i) the extremely tight monetary and fiscal policies from May 2019 to March 2020 which showed no empathy for the poor were abandoned; (ii) export orders were diverted to Pakistan (from India and Bangladesh); and (iii) remittance inflows rose dramatically like in other regional countries, particularly India. It is unlikely that either of these positive features would be sustainable unless there is a dramatic improvement in delivery.
A question that would not have surfaced had the three-year ceremony of the Pakistan Tehrik-e-Insaaf (PTI) government not been held was about the administration’s performance to date in comparison to the pledges made by the Prime Minister before being elected by not only members of the opposition, who can be easily dismissed, but by non-partisan sector experts – including no police reforms in Punjab on the same pattern as in Khyber Pakhtunkhwa which PTI claims was the reason for the party sweeping the 2018 polls in the province, no local bodies elections, no improvement in the performance of state-owned entities (SOEs), and no reduction in reliance on borrowing.
A bigger disappointment is the absence of action on two of the primary planks of the PTI manifesto. An effective local government structure fully empowered and financially autonomous remains conspicuous by its absence. Not only has there been no progress in this direction but the existing local bodies have been dissolved before they could complete their tenures. Despite repeated orders by the courts there has been no progress in that direction. The prime minister has his heart in the right place and appears keen to implement the needed reforms but for some reason has not been able to so. He had generated and raised peoples’ expectations to unrealistic levels without realizing the impediments to his objectives and the difficulties inherent in disturbing the status quo, particularly with the added baggage of constraints of coalition governance. In this newspaper’s view, the performance of the PTI-led coalition government in three years of its five-year constitutional tenure can be aptly summarised in one sentence: There’s a lot more to do, but so far, so good.
Copyright Business Recorder, 2021
Comments
Comments are closed.