Deficit disorder

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The PTI has squarely blamed its predecessors for the economic mess and it was justified for it to a large extent, but it could no longer take shelter behind this excuse. From now onward, it has to fully take the blame for whatever was wrong with the economy

The finance ministry’s data for the last quarter of the previous fiscal year is out completing the picture for the whole financial year, which is very scary.

While some reports suggest it was the highest in four decades others say it was highest in the entire 72 years of the country’s history.The fiscal deficit means the difference between the income and expenditure of the government and previously whenever country recorded a high fiscal year, the main contributor to this rise has been big development expenditures.

But the Pakistan Tehreek-e-Insaf (PTI) government, which has been in power for the past one year, has cut down development expenditure but still it ended up with worrisome fiscal deficit figures. The main reason for this high fiscal deficit was sharp decline in revenue collection.

The previous government was said to have set unrealistic revenue target for the past fiscal year but if it was so the PTI government should have rationalised the target as it ruled the country during the last three quarters of that financial year.

The PTI’s first finance minister Asad Umar announced two mini-budgets and he could have rationalised the target, though he brought down the revenue target but still his government miserably failed to achieve the revised target.Rather for the first time in country’s history, the country collected revenues less than the previous year.

For the current fiscal year, the PTI government has set an ambitious target of Rs5.5 trillion and everyone would be very minutely scrutinising the government’s performance in this regard.

Massive devaluation under the present government as well as in the final months of the last government also contributed strongly towards increase in the fiscal deficit. Moreover, consistent rise in policy and interest rate by the State Bank of Pakistan also contributed to a rise in fiscal year which encouraged the government borrowing at the cost of cutting borrowing by the private sector.

A few weeks ago, the governor of the central bank Reza Baqir had announced that the government would no longer be borrowing from the central bank and one would hope that the government would stick to its commitment to allow the private sector to borrow the money to give impetus to economic growth which has almost stagnated.

In fact, the first year of this government was very turbulent on the economic front because most of the time it was found to be groping in the dark, trying to put in place an economic policy to confront the daunting challenges on this front. It was one of the reasons that Asad Umar was shown the door and was replaced by Abdul Hafeez Shaikh to lead the economic team.

The PTI has squarely blamed its predecessors for the economic mess and it was justified for it to a large extent, but it could no longer take shelter behind this excuse. From now onward, it has to fully take the blame for whatever was wrong with the economy.

When this government took power it was facing the challenge of reversing or at least containing the burgeoning twin deficits – current account as well as fiscal deficit. The government did succeed in substantially decreasing the current account deficit that was hovering around $18 billion.

The reduction in current account deficit was attributed to curtailment in the imports. Though it led to a fall in current account deficit, it also resulted in a slowdown in economy as well as growth. The government should now concentrate on efforts to raise exports as it would help accelerate the economy and generate revenues essential for the growth of foreign exchange reserves.

The government policies on spurring growth in exports have not yet produced results substantially though a high-level meeting chaired by Prime Minister Imran Khan recently noted an increase in exports.

The government also needs to improve its revenue collection to bring fiscal deficit under control. It needs drastic reforms in revenue collection machinery particularly in the Federal Board of Revenue.

On its so-called austerity drive, the government has so far played with galleries by taking populist decisions like sale of buffalos and cars at the PM House but what actually it needs to do is to drastically increase its non-development expenditures.

The country is facing too serious economic challenges which could not be confronted through theatrics alone. The prime minister needs to personally lead the economic team to handle the problems faced by the country and he needs to give more attention to the economy than to the politics.

It seems he has relegated his powers to his economic team made up of technocrats, while devoting all his attention totally to the politics particularly with regard to handling political opposition. The prime minister needs to reach out to the opposition to evolve a strategy to deal with the economic problems, without compromising on accountability process that should be across-the-board and fair, as no single political party or government alone can handle these problems.

The corruption cases against opposition leaders should be left solely to the judiciary to adjudicate and the government needs to set up a working relationship with the parliamentary opposition to tackle the problems faced by the country.

The opposition cannot be simply wished away as it controls a provincial government and enjoys considerable political clout in other provinces including Punjab, politically the most influential province of the country. The government also enjoys razor-thin majority in the National Assembly and is in minority in the Senate.

So in order to ensure smooth running of the government as well as of the country, there is no other alternative for the government to establish good working relationship with other political parties. The daunting challenges faced by the country on economic, security and foreign affairs fronts warrant government to show more sobriety and seriousness in its conduct.

The government has so far arrested the economic downslide after managing funds and bailouts from the friendly countries and International Monetary Fund (IMF). However in order to address the deep-rooted economic malaise on permanent basis through homegrown solution, it has no other choice but to evolve a broad national consensus on how to tackle these problems.

The writer is a seniorjournalist based in Islamabad