Public attention to economic woes successfully distracted

However, a PTI government functionary claimed that soon the situation will change as country’s exports are going to have a boom which will bring progress and prosperity. He said that the government was implementing a well-though-out economic policy that will bear fruit in not so distant future.

By Ansar Abbasi
January 20, 2019

ISLAMABAD: Politically the PTI is perhaps partially successful in diverting people’s attention from the worrisome economic downslide of the country during its five months tenure by repeating the mantra of “Chore”, “Daku” (thief, dacoit) for the opposition, but in actual this strategy hurts the economy more.

Missing no opportunity of picking up fights with the opposition, trying to beat each other to provoke the opponents and looking for reasons to raise the political temperature have been the hallmark of the Imran Khan-led PTI government’s strategy so far. It did help the PTI supporters and voters to avoid looking at the fast pace with which the things are getting from bad to worse on the financial side, there is no legislative work done during the last five months, PTI’s agenda of reforms and institution building remains the low priority and even governance is in disarray particularly in the largest province.

Advertisement

However, what the ruling party’s top leadership failed to understand so far is the point that its policy of confrontation is paying it less but hurting it more. No matter what extra-ordinary solutions Finance Minister Asad Umar bring in to correct the economy, nothing would work till such time the PTI leadership changes its strategy for political stability which is pivotal for investment and economic growth.

However, a PTI government functionary claimed that soon the situation will change as country’s exports are going to have a boom which will bring progress and prosperity. He said that the government was implementing a well-though-out economic policy that will bear fruit in not so distant future.

According to the Global Economic Conditions Survey (GECS), Pakistan’s economic confidence fell sharply in the final quarter of 2018 as it continues to struggle with macroeconomic imbalances. The latest edition of GECS from the Association of Chartered Certified Accountants (ACCA) and Institute of Management Accountants (IMA) through a global poll of 3,800 accountants found Pakistan’s economy to be amongst the lowest in the South Asian region. This survey was first carried out in 2009. The level of business confidence in Pakistan is the second lowest in last 10 years. According to official figures, the total increase in debt between July 2018 to November 2018 is Rs2.24 trillion. This comes to Rs15 billion per day increase during PTI tenure. During last tenures of PML-N and PPP, the per day increase in debt figure were Rs7.7b and Rs5b respectively. Part of the total increase in debt during this period is related to borrowing from the SBP. Total borrowing during July to December 2018 from SBP was Rs1.43 trillion. This is almost five times higher compared to 2017 same period which was Rs288 billion.

Total debt increase in five years of the PML-N tenure was around Rs10 trillion which is an average of Rs2 trillion per year.

Compared to Rs10 trillion debt increase in five years, the PTI is expected to increase debt of more than Rs10 trillion in just three years.

Similarly, the circular debt has gone up from Rs1.14 trillion by end of June to Rs1.362 trillion by November end -- an increase of around Rs300 billion. This figure was given by secretary power Irfan Ali in public accounts committee meeting recently. This shows the speed with which circular debt has gone up during the PTI government, is also unprecedented.

The stock market performance in this quarter (Oct to December) is said to be the worst in last 10 years. Even otherwise, it is said that due to shattered confidence of businessmen and investors, the economy has come to a grinding halt.

Despite the fact that the PTI government got unprecedented financial support from its friends like China, Saudi Arabia and UAE, the SBP reserves continue to fall.

The most negative stakeholders have been the foreign investors. Every week since the PTI has come into power, foreign investors have been selling their stakes and getting out of the Pakistani market. The government is also badly failing in its promise to enhance tax revenues as the shortfall in collection in first half of the current fiscal year has widened to Rs175 billion, signalling a slowdown in the economy and underscoring the need for taking immediate corrective administrative measures.

The policy rate (rate at which central bank lends to commercial banks) of SBP, it is said, was 5.75 percent at the end of PML-N tenure. Since then it has gone up to 10 percent which is the highest in last five years. This policy rate hike combined with devaluation of rupee has added another Rs700-800 billion to our debt servicing.

According to experts this additional expenditure can either be balanced by additional taxes, which will further kill the purchasing power of the people, or cutting government expenditure which does not seem likely. In addition to above impact, the policy rate increase will directly increase interest rates thereby making cost of borrowing more expensive. Foreign direct investment slipped by 19 percent during July to December 2018.

With such serious economic conditions, the PTI government direly needs to rethink its strategy to create conditions which are conducive for business and investment. It can’t be done with everyday fights with the opposition.

Advertisement