ISLAMABAD: We note with concern that certain international publications have printed fabricated narratives on the state of the Pakistan’s economy and the popularity of the Imran Khan led PTI government. These publications have printed extremely biased one-sided articles, ignoring the views of the government or the independent assessments of its development partners including the IMF, World Bank and the Asian Development Bank, says a press release of Finance Division.
It said inflation has become a global challenge, with the US, UK, EU and all emerging markets facing the highest inflation in the last three decades. Pakistan’s economy is also facing the inflation headwinds due to record high international energy and food prices. However, in line with our vision of a social welfare state the government has provided unprecedented relief measures to the masses through lowering prices of petrol, diesel and electricity and rolling out the most comprehensive targeted food subsidy program across Pakistan covering 20 million households (54% of population). People recognize the steps taken by the government to provide relief to the masses.
That is why we have seen Imran Khan’s popularity rise in the last few months, with the March 2022 IRIS public survey showing that Imran Khan remains Pakistan’s most popular political leader with approval rating off 35% compared to the opposition leaders Nawaz Sharif(20%), Shahbaz Sharif (8%) and Asif Zardari (4%). Hence, we see the opposition is desperately trying to bring down the PTI government by a vote of no confidence through buying loyalties of the elected members of the ruling party and its allies.
This latest episode of political unrest is aimed at crippling the economy at a time when the economy has shown rapid recovery from the COVID pandemic shock, termed by the IMF as the worst global economic crisis since the Great Depression of the 1930s. Effective data driven response has helped Pakistan to control the pandemic and outperform other countries. GDP growth accelerated to 5.4% in 2021, after the pandemic induced contraction of -0.5% in 2020. In comparison, USA economy contracted -4%, EU -8%, India -7.3% and the Gulf States by -5%.
According to the World Bank data, Pakistan outperformed all regional economies during the 2020-2022 COVID period, with the lowest unemployment rate in the South Asia region at 4.3% compared to India 8%, Bangladesh 5.4% and Sri Lanka 5.9%. Record fiscal and monetary stimulus package of Rs 2.5 trillion (6% of GDP or $ 16 billion) was unveiled by the Government in March 2020. The stimulus package focused on emergency cash assistance to 15 million families through the Prime Minister’s EHSAAS program, the largest ever social welfare transfers in Pakistan’s history covering nearly 45% of the total population. On top of this the government has provided free of cost vaccination to over 127 million citizens against COVID.
In the current year the economy is projected to sustain growth of 5% with record exports of $30bn, record remittances and highest ever agriculture farm output. Private sector credit growth has doubled in the current year, as a result of higher manufacturing and services industry activity. Manufacturing sector has posted growth of 7.6% in the current year, and the manufacturing index (QIM) in January 2022 posted the highest ever output recorded. Profitability of the top 100 companies listed on PSX posted the growth of 62% in 2021, the highest growth in the last 10 years.
Unlike previous boom bust cycles, the government is focused on sustainable ‘inclusive’ growth. The key risk of a balance of payment crisis has been pre-empted through early monetary and exchange rate adjustments, and as a result we are already seeing that the current account deficit has started to decline, falling to $ 545mn in February, from average of $ 1.5bn in the previous seven months. Similarly, on the fiscal front tax collections have increased 30% in the current year, giving much needed fiscal space for the government to undertake relief measures against inflation for the public.
Hence, not only is Pakistan’s economy on a sustainable growth path but the quality of growth has also improved considerably due to the ‘inclusive’ or bottom-up approach taken by the PTI government. Inclusive growth entails providing incentives to those middle income households, small farmers, youth, women and entrepreneurs that are marginalized in the current system of trickle down growth. Towards this end the Low Cost Housing program Mera Pakistan Mera Ghar (MPMG) and the Kamyab Pakistan program (KPP) have been a huge success. According to the SBP, over Rs 366bn has been disbursed under the low cost housing MPMG program, benefiting more than 70,000 first time home buyers across Pakistan.
The Kamyab Pakistan Program (KPP) of interest free loans promises to uplift incomes and livelihoods of millions of low and middle income households. These are households that are mostly unbanked, have no access to credit and lack resources to undertake productive economic activity.
However, the recent developments in the international markets threaten the recovery of the global economy including Pakistan. Record high international prices of energy, food and other commodities combined with rising freight costs have hit Pakistan hard, with inflation rising to 12% in Feb 2022. However, inflation is not just a Pakistan specific problem; inflation in the US, UK, EU and emerging markets is the highest in three decades.
As a result, Pakistan authorities have taken unprecedented relief measures to shield the most vulnerable households. The government has reduced taxes on all petroleum products to 0% and frozen prices at the pump to shield consumers. As a result, the domestic consumers are paying Rs 150/ litre on petrol compared to Rs 187/ litre in Bangladesh and Rs 244/ litre in India. Similarly, the low and middle income households have been provided relief on their power consumption by a Rs 5 per unit reduction in their monthly bills. An estimated Rs 300bn relief has been provided to the masses to shield them from the rising international energy prices.
Prime Minister Imran Khan launched the Ehsaas ration scheme in March 2022 to provide relief to over 20 million households (54% of total population) on purchase of essential food items including flour, pulses and cooking oil. These 20mn households will receive these essential commodities at a discount of 30% from the market prices. On top of these measures, the landmark universal healthcare program Sehat Insaf card has been launched in Punjab and certain districts in Sindh and Balochistan in 2022. More than 60% of all households in Pakistan will now get free hospitalization and healthcare, providing savings of Rs 10 Lakh to each citizen.
The above measures taken by the government are unprecedented and never before has any government provided relief of this scale to the masses. As a result of relief measures taken by Pakistan, inflation is likely to decline in the weeks ahead. The latest weekly SPI data shows a 1.4% decline in the index, the first weekly decline in over 7 weeks as a direct result of the relief measures taken by the government. The PTI government is able to fund higher social safety spending due to the tough and unpopular decisions in the last three and a half years.
The PTI government formed in August 2018 inherited an economy on the verge of collapse. Unpopular reforms including a market based exchange rate, reduction in power subsidies and removal of tax exemptions had to be taken to reduce the large twin deficits. These reforms not only enabled us to stabilize the economy but also to build reserves to cushion the impact of external shocks.
Strong diplomacy and active engagement with world leaders and international institutions have also strengthened the economy. The recent success in bringing Barrick Gold Corp back to Pakistan for the Reko Diq project will not only save $11bn in penalties but will also lead to additional $10bn new investment in Balochistan, creating 8,000 new jobs for the locals. Under the PTI government, we have also made significant progress on the money laundering and terrorist financing front, which has saved Pakistan from financial sanctions under the FATF blacklist.
We are confident that Prime Minister Imran Khan will not only defeat the no confidence vote, but will also lead Pakistan into a decade of high growth and prosperity built on his vision of a social welfare state, concludes the press release.
Copyright Business Recorder, 2022