ISLAMABAD: In the three years of the PTI government’s rule, the country’s economy has nosedived with indicators like trade deficit, double-digit inflation, interest rate and debt of the country reaching an unimaginable level, causing a huge surge in the economic miseries of 220 million countrymen, Senator Saleem Mandviwalla, the author of the white paper on the current economic state of Pakistan, said on Sunday.
While chargesheeting the government, he said that 50 percent devaluation of Pak Rupee in the three-year rule of PTI government has triggered a massive wave of inflation across the country, as coal, furnace oil, liquefied national gas and diesel are imported for power generation, while the fuel cost is a pass-through item. More importantly, the import of edible oil, pulses, wheat, sugar and other food items has triggered a hike in inflation, causing unrest among the masses, he added.
Mandviwalla, in the white paper, said that the country’s expenditures have increased to Rs7.5 trillion from 4.2 trillion with a massive increase of mark-up payment of Rs3,000 billion due to the untimely re-profiling of government debt by the PTI government.
He said the external debt and liabilities inherited at $95 billion have gone up to $127 billion, adding the country has never witnessed such a high debt in the period of three years of any previous government.
He said the PPP government, during the period from 2008 to 2013, jacked up the debt of the country by Rs8 trillion to Rs14.292 trillion from Rs6.127 trillion, while the PMLN government increased the debt by Rs10 trillion to Rs24.953 trillion from Rs14.292 trillion during the period from 2013 to 2018. However, the PTI government has increased the debt of the country by Rs16 trillion in just three years, which is the biggest increase in debt piled up in the history of Pakistan. The PTI government has increased the debt of the country to Rs40.973 trillion from Rs24.953 trillion, he added.
He also held the government’s economic policies responsible for an increase in inflation, saying that the higher rate of inflation is attributable to expansionary monetary and fiscal policies, supply shortages, market distortions and the beginnings of the upsurge in the international commodity prices. It has been the wrong policies of the government, which have fueled inflation almost at double the rate compared to the neighbouring countries, he added.
He said Pakistan’s inflation rate is higher by five to 10 percentage points as compared to its regional countries, adding that this is mainly due the devaluation of rupee by 50 percent (Rs50 against one US dollar), poor performance resulting in an increase in the administered prices of energy as part of the deal with the IMF and wrongly pumping excess cash into the economy by the government with an astronomical rise in the budget spending, especially the current expenditure rising from Rs4.2 trillion inherited by the PTI government to Rs7.5 trillion in FY22.
He also said that Pakistan, under the PTI government, has remained in a high fiscal deficit of nearly nine percent of the GDP for the first two years and then seven percent in the third year, resulting in massive increase in the debt-to-GDP ratio. During the first three years of the PTI government, the tax-to-GDP ratio has decreased to 9.2 percent from 11.2 percent, he said.
Mandviwalla took the government to task in the white paper, pinpointing the fact that Pakistan’s economic managers have badly negotiated the IMF programme, in which instead of taking measures of taxing the rich, the sales tax at 17 percent has been imposed on the poor people of Pakistan. Buying daily essentials, like milk for children, medicines for aged people and books and gadgets for students, is not in the range of a common man, he said, adding that almost Rs2,000 billion new taxation has been levied on different sectors by the PTI government.
He said the Parliament’s supremacy is mocked by the prime minister and laws and amendments are now passed with the help of ordinances, likewise the SBP autonomy bill was passed by the cabinet in April 2021 without reading and bypassing the Cabinet Committee for Disposal of Legislative Cases (CCLC). Passing of the bill in its current form will worsen the already non-existent coordination of the Ministry of Finance and State Bank of Pakistan, he added.
Most recent data, used in the white paper, shows an alarming picture of the economy, according to which, the trade deficit now stands at $25.5 billion and this can increase to massive $50 billion in FY 2022, which will be 16 percent of the GDP. Pakistan’s economic security is at risk as the need for gross external financing would cross $26 billion and would be hard to fund.
The white paper, mentioning the state of the energy sector, said that the circular debt, which was at Rs1,150 billion in 2018, has doubled to Rs2,450 billion in the PTI’s tenure. Line losses have increased manifold and eventually there are no new power generation projects till date and all the structural issues in the energy sector are unattended. The current crisis of gas in the country is due to the fact that the government failed to make any new LNG terminals in the country and the government had also failed in the North South Gas pipeline, due to which the industry in Punjab was suffering almost 250 million dollar export loss in the month of December 2021, the white paper said.
The white paper said Pakistan, like other oil importing countries, was also supposed to be a beneficiary of low oil prices and low LNG prices during FY2020. However, it was again a failure of the government not to secure oil and LNG at cheaper rates. This has resulted in the shortages of gas being witnessed in the winter of 2021. Had the government made forward contracts when the LNG was only at $4, it would have saved the country billions of dollars of exchange of payments. The government, in its quest for cheaper gas, refused the LNG at $4 and bought it at $30. Pakistan, which produced close to 4,000mmcfd of gas in 2018, produced only 3,200mmcfd in 2021 which shows an 18 percent drop in the local production.
It also said that zero privatization and zero improvement in the state-owned enterprises have resulted in the increased losses of nearly 500 billion annually. PIA was prohibited from flying to Europe and the USA. Railway accidents increased with citizens losing their loved ones. A single accident in October 2019 claimed the lives of 74 people and petrol crisis hit the country, adding to masses’ woes.
Mandviwalla said that the government is trying to hide behind the Covid-19, which is not the reality as the government has received huge financial assistance of $1.4 billion in the name of Covid-19 from the IMF.
“Pakistan also got from the G20 relief of interest and principle payment totaling $3.7 billion to its economy. However, nobody has any calculations where this money was actually invested,” he said.