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Monday March 04, 2024

Manifestos, economy and bluffing

The country is finding it difficult to manage external debt and paying back the debt and interest on it

February 05, 2024
People walk past flags of Pakistan´s political parties displayed for sale at a market in Lahore on January 13, 2024, ahead of the general elections. — AFP
People walk past flags of Pakistan´s political parties displayed for sale at a market in Lahore on January 13, 2024, ahead of the general elections. — AFP

Pakistan is only a few days away from the elections 2024. The political parties are playing the usual tricks and are running their campaigns by criticising the past governments or opponent parties. Even PDM parties, who were partners a few days back, are now maligning each other.

Ideally, the manifestos should be comprised of two parts: past performance and future programmes. Past performance is completely ignored in the manifestos. The political parties always say they are answerable to the common people, and the elections will decide their fate. But, they never share their past performance. How will people make them accountable in the absence of data?

The PPPP is promising to provide 300 free units of electricity in addition to decades-old slogan of free bread, clothing and housing. The party claims it has solutions for all Pakistan’s problems. PMLN is promising a complete overhaul of economy and free electricity. It claims it has a magic stick to overturn the situation and will manage the investment. The PTI took a leaf from the old book of politics and is playing with emotions, too. Like the PMLN and PPPP, it presents itself as a victim.

They are presenting programmes that cannot be materialised. The analysis of the manifestos and statements of PPPP and PMLN leadership shows they are committing to providing 300 free units of electricity to weakest cadres of society. Will it be possible? Let’s analyse the ground realities and economic health to find out the answer.

First, according to latest estimates, about 40 percent of population is living below the poverty line (96 million are trapped in poverty). If we take the average household size of eight persons, 12 million households (total number of households in Pakistan is 40 million) will fall into this category. Almost 25 percent do not have access to electricity. It means there are 9 million households that would be given the subsidy according. If we take the average cost of a unit of Rs30, the government will have to pay Rs81 billion per month. That means the circular debt will shoot up within no time. Pakistan is already facing the worst circular debt crisis in the energy sector. It is exhibiting an upward trend. It is estimated circular debt was Rs5.73 trillion in 2023, which makes it 5.4 percent of Pakistan’s national GDP. It is more than Rs1.5 trillion than the figure Pakistan shared with the IMF.

Second, does the economic health allow Pakistan to dole out this package? No. Stagflation has captured the economy, and the country is struggling to find a way out. The debt crisis has trembled country’s economic and social fabric. Pakistan’s public debt was more than Rs63 trillion in 2023. The country is finding it difficult to manage external debt and paying back the debt and interest on it. This year, Pakistan has to pay back $25 billion, and we do not have many options.

Third, are PPPP and PMLN serious about providing this subsidy? The facts point in the opposite direction. If it was so easy to provide free electricity, then why did the PDM government not take advantage of this opportunity? PMLN and PPPP were both leading the government, and there was no opposition. They could have provided this subsidy and secured votes. Instead of providing relief, both the parties were at the forefront of increasing prices under the pressure of IMF. Thus, it seems like a fake promise.

Fourth, will the IMF allow the new government to take this decision? No, rather the IMF will push to increase the prices. The interim government has already increased energy prices. Thus, they will increase the prices of gas and electricity to overcome the problem of circular debt.

Let’s suppose the new PPPP or PMLN government will be able to convince the IMF and go for a reduction in prices. Then, from where will they pay to IPPs? Pakistan has already committed to paying them according to their capacity, whether the country uses electricity or not. It will result in a dual-edge problem. The government will have to manage rupees one trillion to provide sub-subsidy.

It will further increase the prices. They are already paying the price of government’s solar panel policy. Rich people are installing solar panels, which is lowering the government’s revenue. The government is increasing prices to fill the gap because it has to pay IPPs. It is feared the implementation of a free electricity policy will further increase the number of poor.

Here is a question: What is the fault of the middle class or class marginally above the poverty line? Why should they pay for the mistakes of PPPP or PMLN? Manifestos promised to accelerate growth and put the economy back on track. These promises are unreal. It is an established fact the economy can neither be destroyed nor recovered in a short span of time—five years. There would be no turnaround in the short run.

A business-enabling environment and good governance are prerequisites to turn around the economy or accelerate growth. Unfortunately, Pakistan lacks the both. The successive governments have deteriorated country’s governance system and business environment. When these parties come to power, their leadership acts as king. They feel they are not answerable to anyone and always ask the people to wait for the next elections.

Pakistan has developed a habit of wasting opportunities for pity political interests. The country is still unable to exploit the full potential of the China-Pakistan Economic Corridor (CPEC), especially the agreed industrialisation process and agriculture modernisation under the CPEC.

In conclusion, the political parties need to be mindful that we are living in the age of information and people’s journalism, and they need to be careful while making promises and avoid digging ditches for themselves.