A successor government blaming its predecessor government for all the ills is nothing new. Therefore, Pakistan Muslim League(N) government blaming Pakistan Tehreek-e-Insaf (PTI) government for causing immense harm to economy is not unusual. Both parties are trying to get the best out of it while the public, with no interest in either of the narratives, is suffering.
The nation is looking for solutions and not excuses or narratives.
To ascertain facts, one tends to read or hear the opinion of independent experts. In this case we have one. Truth can be explored in Pakistan Economic Survey 2021-22 prepared by a team of 20 economists. It was issued on 9 June 2022 under the signature of the Economic Adviser to Government of Pakistan with a foreword by the incumbent Federal Finance Minister, Miftah Ismail.
The salient figures extracted from the survey of FY 2021-22 are:
– Real GDP Growth: 5.97%
– GDP Volume: Rs 66,950 billion (vs Rs 55,796 billion in 2021)
– Gross Fixed Capital Formation: Rs 8,992 billion (vs Rs 7,217 billion in 2021)
– Industrial Growth: 7.19%
– Large-Scale Manufacturing (LSM) and mining growth: 10.4% (vs 4.2% in 2021)
– Services: 6.19%
– Agriculture growth 4.4% (vs 3.48% in 2021)
– Per capita income: $ 1798 (vs $ 1676 in 2021)
– Inflation 11.3% (vs 8.8% in 2021)
– Total revenue increase: 17.7% (vs 6.5% in 2021)
– Exports growth: 27. 6%: ($ 26.8bn)
Most encouraging is the growth in LSM, Services and Agriculture. These sectors are employment providers, revenue generation vehicles and food security guarantors. The reasons cited for a good agricultural year are high yield, attractive output prices, supportive government policies, better availability of seeds and pesticides and accessible agri credits. Whereas, the growth in LSM is attributed to rising global demand, easy access to credit and subsidised energy supplies.
Overall, the key performance indicators point towards a trend of growth and improvement over the past years.
On the other hand, however, the state economy is facing serious challenges of which fiscal deficit and mounting debt are red flags. Despite a significant rise in tax contribution, the higher current and development expenditure widened the fiscal deficit to 3.8 % of GDP in FY 2022 (July to March 2022) as against 3% in 2021. The debt position is equally disturbing with:
Public Debt: Rs 44,366bn
Domestic Debt: Rs 28,076bn
External Debt: US $ 88.8bn.
Energy subsidies provided by the PTI government pose significant risks to fiscal sustainability in an already constrained fiscal environment. The weakness in the economy carried forward from the past government escalated on account of the Russia-Ukraine war.
The shocks of the Russian-Ukraine conflict began to hurt the economies of the world in March 2022. The main shock was on account of oil, gas and commodity availability and price, with Russia being one of the key suppliers of the three. Economies around the globe scrambled to safeguard their supplies from alternate sources at a premium.
The newly installed government in Pakistan was caught in the crossfire and it took them too long to comprehend and react to the situation. The oil prices increased and the LNG deliveries committed to Pakistan were diverted to elite countries who have deep pockets to pay whatever it may cost. An opportunity to procure oil and gas from Russia at a discounted price was not explored by the government for reasons not made public owing to whatever reasons. India, Sri Lanka and many others cashed in on this opportunity.
The entire world is in economic turmoil: it is hit by energy shortage, inflation, disruption in commodities and logistics. After many decades, rising inflation is biting the people of the US as well.
The incumbent government needs to move out of the shadow of what the past government did and start working on solutions which so far are non-existent. The government appears to be expending all of its energies only on efforts aimed at working out a deal with the IMF, which is one of the key issues but there are many more serious issues that need to be equally addressed. The market is depressed and confused, the rupee is losing its value, the transactions and cash flows in the market are minimal and even the remittances from overseas Pakistanis have taken a dip.
The national budget rolled out by the government is more of a political and election-oriented national outlay rather than a solution-oriented document to move the country out of its current economic impasse. The IMF has raised objections and the economic team knew that they would do so. Tax incentives have been provided to retailers and importers alike while a tax has been imposed on IT exports which had just begun to pick up. The government employees have been given a 15% increase in salaries while the salaries of employees in the private sector are being curtailed on account of growing business stagnation.
To move the nation out of the present political and economic crises a more serious and meaningful approach has to be adopted by all stakeholders – that is elusive so far.
(The writer is former President, Overseas Investors Chamber of Commerce and Industry)
Copyright Business Recorder, 2022