Country has not achieved economic stability: Pasha

"Currently there is no macroeconomic indicator which could show that stability has come in Pakistan's economy or is going to be achieved anytime soon, besides an additional four million people would cross the poverty line in the current year." This was stated by former finance minister Dr Hafeez A Pasha while speaking with Anjum Ibrahim at Aaj News' "Paisa Bolta Hai" on Saturday.
The country has not achieved economic stabilization, on the contrary the trend of major macroeconomic indicators registered further negative growth during the last quarter of last fiscal year, he added. Dr Pasha said the first indicator for stabilization is growth in industrial sector, and figures for May 2019 show that the process of negative growth is continuing. The large scale manufacturing sector recorded around 3.5 percent decline in production, which indicates that industrial production has not stabilized.
The second indicator to judge economic stabilization is inflation, but last month's figures show that consumer price index has crossed 9 percent and has registered a further increase this month, he noted.
According to the State Bank of Pakistan (SBP) report inflation may further rise and may go to 11-13 percent which is why SBP allowed? A one point increase in policy rate, showing that stability is yet to come, Dr Pasha stated.
He added that inflation would depend on how much the local currency depreciates in the current financial year. Under the IMF programme it is projected to depreciate by 27 percent if the current account deficit is to be reduced. But as expected the depreciation may be more and in such a case inflation would cross the 13 percent mark and may touch 18-20 percent by end December 2019. He acknowledged that inflation may register a downward trend and come down to 11 percent by end June 2020.
It was earlier stated that budget deficit was 5 percent of GDP during the first nine months of last fiscal year, or that it remained around 1.7 percent in each quarter. But the latest estimates show that during the last quarter (April-June) it increased by 3.5 percent of GDP which is around double when compared to the first three quarters.
Dr Pasha said that another indicator for economic stabilization is the stock market, and it too registered a sharp decline. Despite the country going on the International Monetary Fund (IMF) programme the stock market fell by 500 to 600 points, he stated adding that currently there is no indicator which could show that stability has come in Pakistan's economy.
He further said that current account deficit from January to March had witnessed a remarkable decline of around $800 million on average and reached $2 billion monthly, but during the last quarter (April-June) 2018-19 it increased by one billion dollars.
Dr Pasha stated that the tax revenue target for the current fiscal year is projected to be 45 percent higher than last year, which is next to impossible. He asked: When the GDP growth is projected to be 2.4 percent, how will the revenue target be achieved?
He said that to avoid further deterioration in the living standards of the lower middle class including unskilled labour their income should increase at the same pace as inflation; but unfortunately this is not happening, and Dr Pasha projected around 1.2 million people would become jobless in the current year which, he stated, is worrisome.
He said that around 8 million people were covered under the Benazir Income Support Programme (BISP) and 1.2 million would need to be included in the programme in the current year.
The government was giving a stipend of Rs 1700-2000 per month under BISP which is not sufficient to meet basic needs, said Pasha, adding that all the governments (including provincial governments) have budgeted to spend around Rs 300 billion for poverty alleviation programmes in the current fiscal year which is less than one percent of the total economy and not enough.
The number of people living under the poverty line would cross the figure of four million in the current year-which is the biggest number in the country's history.
He lamented the fact that the government placed an additional burden on the general pubic in terms of indirect taxes, especially on basic utilities.
Dr Pasha proposed that the government increases income tax especially on the farm sector which is currently contributing hardly Rs 2 billion against its income of Rs 1000 billion.