“It is better to offer no excuse than a bad one” — George Washington
Prime Minister of Pakistan, Imran Khan’s address to the nation on February 28, 2022, was nothing but another repeat telecast of his previous speeches. Since assuming power in August 2018, the Prime Minister (PM) has been consistently accusing previous governments of all the issues currently faced by the country. The ruling coalition government of Pakistan Tehreek-e-Insaf (PTI) has proved its inability beyond any doubt of properly diagnosing the country’s major economic woes, what to speak of applying the correct remedies to fix them. The incompetence, demonstrated by PTI government, is unprecedented. It cannot be camouflaged with a policy blame game. The incumbent government has failed to acknowledge that most of the key members of the federal cabinet hail from the previous regimes having track record of failures. The most notable examples of this irony include, amongst others, the ministries of finance/revenue and foreign affairs.
In his address, the PM admitted that inflation during the five year (2013-18) rule of Pakistan Muslim League (Nawaz) was in the range of around 5%. The comparison chart, presented by PM, clearly showed that since2018 inflation has risen significantly. According to Monthly Review on Price Indices (January 2022) by Pakistan Bureau of Statistics, inflation reached the alarming level of 13%. Undoubtedly, public pressure has been increasing due to failures on economic front and rising inflation. The popularity of Imran Khan declining among the masses due to these factors as evident from subsequent election results, ranging from national assembly to local bodies. Major allies of the PTI government have also recently expressed their reluctance to carry the baggage of incompetence and failures on different fronts, especially as the next general elections are fast approaching.
In the above backdrop, the PM announced some measures to offset the impact of inflation that include reduction of Rs 10 per liter in prices of petroleum products, reduction of Rs 5 per unit in electricity bills, besides promising to keep these unchanged till the next budget. He also announced tax incentives for certain class of persons/areas. In the perspective of challenges faced by Pakistan on domestic and external fronts as well as assurances given to the International Monetary Fund (IMF), these measures/moves, according to many experts, are more of populist nature than based on prudent economic/fiscal principles. These steps, many in the right direction, would have been highly appreciated, if coupled with withdrawing tax concessions of billions of rupees available to the rich and mighty to fund concessions/subsidies. Pragmatic approach is not visible in the so-called relief/incentive package to boost the economy through long-term sustainable economic growth and offering new avenues of generating equitable revenues and drastic cut in wasteful and non-developmental expenditures to reduce the burgeoning fiscal deficit as suggested in Budget FY 22 and taxation, Business Recorder, May 28, 20.
Reckless borrowing by PTI Government is apparent from the data issued by the State Bank of Pakistan in Pakistan’s Debt and Liabilities-Summary (June 2020 to December 2021). Total domestic debt/liabilities as on June 30, 2018 were Rs 29.879 trillion, which increased to Rs 51.724 trillion as on December 31, 2021. Similarly, total external debt reached the alarming level of US$130.6 billion as on December 31, 2021 from US$ 95.2 billion as on June 30, 2018. The Premier, while offering various incentives, should have explained the terms and conditions agreed with the IMF, highlighted in its staff report, regarding electricity and energy. With circular debt as on December 2021 reaching Rs 2476 billion, the IMF showed its concerns on subsidies offered. It is noted with concern that electricity theft has been increasing alarmingly. According to media reports, electricity theft in Khyber Pakhtunkhwa alone has touched Rs 5.57 billion at the close of 2021, where PTI is in power since 2013.
Reduction in electricity prices by Rs. 5 per unit is a good step. However, no efforts have been made till today to counter electricity theft and undertake fundamental structural reforms in the energy sector. Pakistan needs to shift towards renewable sources like solar and wind, but unjustified sales tax of 17% was imposed with effect from January 15, 2022 on solar panels, etc., highlighted in Repercussions of ‘mini-budget’, Business Recorder, January 28, 2022. It is yet not clear how this relief of Rs 5 per unit will be extended across different consumption categories. However, the IMF has been stressing for aligning power tariffs with cost recovery levels, for which regular implementation of tariff adjustments is being done — the government is repeatedly revising energy prices under the name of tariff adjustments or fuel price adjustments.
The PTI government has still not devised a strategy to effectively check the accumulation of power sector arrears and to arrest wastage of resources. There has been significant increase of Rs. 1328 billion in circular debt during the last 40 months of PTI government. In the face of such a critical position and rising geopolitical tensions, mere slashing of electricity prices, without measuring its impact and lack of resources to fund subsidies, can have further negative impact on the deteriorated currency value—our rupee has lost more than 50 percent of its worth since this government took power.
(To be continued tomorrow)
(Huzaima Bukhari & Dr. Ikramul Haq, lawyers and partners of Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS), members Advisory Board and Visiting Senior Fellows of Pakistan Institute of Development Economics (PIDE). Abdul Rauf Shakoori is a corporate lawyer based in the USA and an expert in ‘White Collar Crimes and Sanctions Compliance’. They have recently coauthored a book, Pakistan Tackling FATF: Challenges and Solutions)
Copyright Business Recorder, 2022