Ambitious economic goals

The Pakistan Muslim League-Nawaz (PML-N) has unveiled its comprehensive electoral manifesto, outlining a comprehensive strategy for reviving the country across several domains.

The party’s manifesto lays out an ambitious goal of reaching a high economic growth rate of 4.0 per cent in FY 2024-25, followed by 5.0 per cent in FY2026, and a further increase to 6.0 per cent over the next three years.

Contrary to this, the World Bank (WB) predicts Pakistan will maintain a 1.7 per cent growth rate in FY24 and 2.4 per cent in FY25. The WB has attributed Pakistan’s modest development to a lack of trust caused by political turmoil, which has resulted in a slow increase in private demand. Achieving the substantial growth promised in the manifesto over the next five years presents a daunting task.

The target is to increase per capita income to $2,000 by 2029 from the current level of $1,460. This becomes even more baffling when you consider the yearly population growth rate of roughly 2.0 per cent, which is among the highest in the world. This places a strain on the country’s resources, infrastructure and social services, slowing per capita income growth.

The manifesto reaffirms its promise to maintain inflation under double digits by the end of 2025. However, considering Pakistan’s net purchase of goods, accomplishing this target relies heavily on international commodity prices. In his book ‘Leading Issues in the Economy of Pakistan’, released in June 2023, renowned economist Hafiz Pasha says that the rupee’s devaluation and the growing import costs led to 53 per cent of the inflation spike in FY2022-23.

The introduction of ‘Darnomics’, a set of policies introduced by the previous finance minister, Ishaq Dar, that may be potentially perilous, might provide an additional barrier to reaching the aim of sustaining low inflation.

The export target for the next five years is set at $58 billion, almost double the existing level. However, historical statistics show a pattern of missed expectations, with the Ministry of Commerce’s Strategic Trade Policy Framework (STPF) 2015-2020 initially aiming for $38 billion and the succeeding STPF-2020-25 having a goal of $57 billion, both of which were not realized.

Notably, the PML (N) vowed in its 2013 manifesto to increase exports to $100 billion; nevertheless, exports fell from $24.5 billion in 2013 to $23.2 billion in 2018, accompanied by a large trade deficit that climbed from $20.5 billion to $37.7 billion during the same time.

The latest manifesto features yet another lofty figure with no clear vision or implementation strategy. No plans are in place to improve Pakistan’s textile sector, which accounts for over 60 per cent of the total export revenue. There is no clear strategy for the expansion of large-scale manufacturing in the party’s document.

The WB estimates 39.4 per cent poverty in Pakistan in 2023, and the PML-N seeks to decrease it to less than 25 per cent in the next five years. In the manifesto, the pro-poor agenda is centred on low inflation and robust economic development. However, given Pakistan’s fundamental economic challenges, weak public-sector management, pervasive corruption, and a foreign policy that encourages excessive reliance on external financial aid, its success is uncertain.

The manifesto, like the prior elected government, emphasizes the creation of 10 million jobs, although it lacks clear measures for stimulating economic activity that may lead to employment.

According to the manifesto, the budget deficit would be managed at or below 3.5 per cent by the end of FY-2028 and beyond. A comparable pledge was made in the 2013 manifesto too to decrease the budget deficit to less than 4.0 per cent, but by the end of the PML-N tenure, the deficit had risen beyond 6.5 per cent. The IMF’s fiscal monitor forecasts a 4.4 per cent fiscal deficit by FY-2028.

The PML-N has set a target for reducing the current account deficit to less than 1.5 per cent of the GDP, which is a daunting task in itself. In 2018, Pakistan’s external current account deficit hit a new high of $18 billion, accounting for 5.8 per cent of the GDP – seven times the $2.5 billion deficit recorded in 2013.

The reduction of both the current account and fiscal deficits relies on shifts in the global and local economic and political situations, as well as the subsequent government’s commitment to fiscal consolidation.

The writer is an assistant professor at Abdul Wali Khan University, Mardan. He can be reached at kamal@awkum.edu.pk