There are no two opinions that the present regime had inherited an extremely fragile economy in June 2013. It inherited a nervous private sector, declining investment-both domestic and foreign-slower economic growth, rising unemployment and poverty, and growing income inequality.
It also inherited a large fiscal deficit owing to faltering resource mobilisation effort on the one hand and reckless spending on the other, a looming debt payment crisis with the country heading towards external debt default, rapidly declining foreign exchange reserves, rising circular debt and a severe energy crisis.
These were indeed formidable challenges by any standard which required extraordinary courage on the part of the political leadership to take unpleasant decisions, call for a strong economic team, and demand a focused attention in addressing the above-listed challenges. After two and a half years, we see economic growth ticking in the range of 3.5-3.7 percent (as against the government's "asking" rate of growth of 4.0-4.2 percent), large-scale manufacturing (LSM) growth averaging 3.2 percent; agriculture growing at the rate of 2.8 percent, investment rate remaining stagnant at 15 percent and foreign direct investment nose-diving from $1.45 billion in June 2013 to $0.85 billion in June 2015.
We have seen worsening unemployment situation. The unemployment rate has surged to 8.5 percent in 2014-15 and the unemployment rate of highly educated workforce is now three times above the national average. Unemployment situation has never been so grave in the country's recent history.
We have also seen budget deficit averaging 8.5 percent of the GDP (as against 5.6 percent reported by the government through accounting gimmickries), total public debt remaining at 65 percent of the GDP (perpetually in violation of the FRDL Act 2005), pace of external borrowing gathering storm with over $30 billion loan contracted in just two and a half years, and exports continuing to decline at a threatening pace.
During the period, we have also witnessed tax revenue falling short of the target by a wide margin, and that too, by withholding refunds of exporters, expenditure priorities shifting towards ribbon-cutting (populist) projects, away from human development.
Notwithstanding many failures in two and a half years, some improvements have also been witnessed. For example, nobody talks about the external debt default today, foreign exchange reserves have reached $15.6 billion by end-January 2016 from as low as $6.0 billion in end-June 2013,and inflation has declined from 8.3 percent in July 2013 to as low as 1.3 percent in November 2015. These improvements are heavily indebted to one development, that is, the collapse of international oil and commodity prices.
Heavy borrowing from the IMF and other IFIs, commercial borrowing from traditional and non-traditional sources, Saudi gift and collapse of international prices of oil and commodities have helped Pakistan build its foreign exchange reserves. Weakening of domestic demand owing to prolonged use of "stabilisation first" policies and collapse of oil and commodities prices brought inflation down to a historic low level.
On balance, the present government has failed to revive the economy in half of its tenure. The little improvement that we see today owes heavily to the collapse of international prices of oil and commodities. Almighty God has also provided several other opportunities to our leadership to do good to the country and to its people. Half of the tenure is gone; have we done anything to seize the opportunities in the remaining tenure?
What are the opportunities provided to our leadership? First and the foremost is the improvement of security environment in the country due to the Zarb-e-Azb. The security forces of Pakistan have sacrificed their lives to improve the security environment of the country and given hopes to the people of Pakistan. Secondly, Rangers' operations in Karachi have significantly improved the law and order situation there and restored the confidence of the industrialists, businessmen, traders and most importantly the people of Karachi.
Thirdly, the China-Pakistan Economic Corridor (CPEC) has changed the perception of Pakistan abroad. It has sent a signal to the global investors that Pakistan is open for businesses. For global investors, when Chinese can enter Pakistan with $46 billion worth of projects what are we waiting for? This should certainly encourage other investors to see Pakistan positively.
Fourthly, as mentioned above, the collapse of international prices of oil and commodities has thus far benefited Pakistan immensely in relieving pressures on external balance of payments and helped create a low interest rate environment for the private sector to come forward. Pakistan has thus far benefited to the extent of over $7 billion since June 2014.
Fifthly, we have an extraordinary benign IMF, providing 14 waivers in two years in a three-year programme. Perhaps, never in the history of the IMF, the world has witnessed such kindness. The current programme of the IMF is nothing but doling out resources to Pakistan at a relatively cheaper rate. Instead of economic reviews, the IMF has conducted political reviews, ten in number. No government in the past had ever experienced such a benign IMF.
All these opportunities are knocking at our doors at a time. Is the government ready to seize the opportunities?
Why the government has thus far failed to grab these opportunities to revive the economy? First and foremost is the non-serious attitude of the leadership in running the state. Secondly, too much personalised decision-making has taken over the concept of collective responsibility to run the state. Two/three people are taking the decisions and no cabinet meeting has taken place in the last six months. Thirdly, personal interest has overtaken the national interest. Fourthly, cronyism ("Apna Admi Culture") has never been so pervasive in Pakistan. Fifthly, no effort is under way to improve the country's human capital in general and the quality of the civil servants, in particular.
To seize the opportunities provide by the Almighty God, the leadership will have to change its style of governance, promote meritocracy, make national interest supreme, get rid of "Apna Admi Culture" and personalised decision-making. Most importantly the government will have to take the economy seriously. It must desist from accounting gimmickries and be transparent in policy making.
The last half of the tenure is critical; if the government fails to seize the opportunities provided by the Almighty God, this nation will never forgive the current leadership. We urgently require good policies, wide-ranging economic reforms, right people in right place, and shift in macroeconomic policies, that is, striking a balance between growth and stabilisation.
(The writer is Principal and Dean at NUST School of Social Sciences & Humanities, Islamabad)
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