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Pakistan’s economic problems-III


August 4, 2016

Another standard to judge the performance of the government is the manifesto of PML-N that it presented before the nation in the elections of 2013. In that manifesto, they made more than a dozen promises to improve the economy. They gave a time frame for the improvement. It is the need of the hour that after completing three years, PML-N itself should prepare a chart of the claims that were made and are yet unfulfilled. Opposition parties, media and think-tanks should also work on it. I’ll only draw attention to some important aspects. It was claimed in the manifesto and in the speeches related to it that energy crisis will be given a priority and this issue will be resolved in 6 months to 2 years. Shahbaz Sharif announced changing his name if he did not succeed. The situation after three years is before us. It was promised that a ministry for energy will be established so that water powers, mineral resources and petroleum cannot have separate entities. An authentic energy policy can be made for it.

It was claimed that tax system will be totally changed. It was said that indirect taxes will be reduced. Contrary to it, indirect taxes have been increased. Sales tax that was 15pc before and now it is 17pc or more than that. In the cut motions of Senate in 2013-14, the incumbent finance minister has demanded with all of us that 15pc to 16pc addition in sales tax is very harmful for economic progress and an intolerable burden for the people. It should be taken back. In his government it is 17% or more than that. Direct taxes have been turned into indirect taxes by adopting the method of withholding tax. Finally, public has to bear the entire burden. Now 85pc taxes are indirect in the present tax system. Another problem was the documentation of the economy. Unfortunately, no step was taken in this regard in spite of all the claims of PML-N. The government has adopted the policy of cash flow through the State Bank. This policy is a cause of withholding taxes. As a result cash economy is growing and documented economy is reducing. The latest reports in this connection are quite depressing. In the newspapers of June 20, 2016, the figures of the State Bank about the currency in circulation are extremely shocking and embarrassing. From July 1, 2015 to June 2, 2016 the currency in circulation has an increase of 67pc. Whereas the government has claimed that the growth rate of economy is 4.7pc. It is 3.1pc to 4pc according to independent sources. The students of Economics know that continuous currency in circulation has always remained more than broad money. It is because of the role of the cash economy. A former economic consultant expressed his anxiety and said, “CIC has increased in a great speed in this year. It is painful especially because it has happened in spite of all efforts for the documentation of economy. If we discuss CIC and M-2 comparatively, it will become clear that it was 22.4pc in 2012, 22.3pc in 2013 and 22.6pc in 2014. But in 2015 it again became 22.5pc. It is feared that if the currency in circulation continue to increase, it can rise up to 26pc. Inflation will increase more and more resultantly. It was promised in the manifesto of PML-N that growth rate will be increased and it will be 7pc or 8pc at least. The exports will be given more importance. Practically imports are flourishing and exports are at a standstill. As I have mentioned before that this condition is not only in 2015 but it was the same in 2013 also. No effort has been made to prosper the exports and to low the level of imports. There were high expectations after getting three years tariff relief from 28 countries of the European Union. But practically no great advantage was achieved.

Pakistan Economic Survey 2015-2016 says: “The performance of Pakistan in the field of exports is extremely disappointing.” They have been decreasing for 18 months. Exports were only $15.6 billion since July 2015 to March 2016. These exports were $17.9 billion in the previous year. The review of Dr Manzoor Ahmad in an English-langue daily of Pakistan also makes the devastating condition clear. “It will be for the first time in the history that the exports of the country will be less at the end of the regime of a government than the beginning. Compare the damaging situation and the dream of the Trade Ministry and Planning Commission to enhance the exports up to 150 billion dollars annually under the vision of 2025, namely an increase of 24pc annually. It appears that there is no harmony among the Ministry of Trade, Finance Ministry and the Planning Commission. Everyone has its own way and this is so called strategy of economic progress. There are some more aspects of manifesto that can be discussed but I confine my analysis to these points and leave the viewers to decide whether the government is successful or unsuccessful.

Economic performance and our constitution

The most important tool to judge the budget and economic performance of the government is our constitution which is an embodiment of national objectives and aims. The clause 2 and 2A of the constitution express the key role of Islam. The clause 3 set the aim to wipe out the injustice and inequality from society. The clauses of 31, 37 and 38 of the constitution clearly mention the economic reforms, the implementation of Islamic economic rules and a developing, prosperous and justice based system. These were the aims that were described by Quaid-e-Azam and Allama Iqbal in their different addresses. Allama Iqbal, in his letter of May 28, 1937 to Quaid-e-Azam, expressed his views about an economic system based on Shariah Islam. Quaid-e-Azam in his addresses on different occasions made clear the features of economic system of Pakistan especially in the 13th session of All India Muslim League that was held on April 24, 1943 in Delhi. After the independence, while inaugurating Walika Textile Mills on Sep 27, 1947, and in his last address that he gave on the occasion of the inauguration of State Bank, he explained his views clearly. In a verse Allama Iqbal stated the whole idea that the real aim of Islam was to relieve the man from the dependence of man, from deprivation and injustice. The loyalty to the constitution of Pakistan and the achievement of the aims of Pakistan Movement is only possible if we make such a strategy for the economic progress of Pakistan that covers the aspects of justice, prosperity and well-being of the nation. The real failure of the government and Parliament is that they could not prepare the exact vision of economic development. It could not make a strategy to get the fixed targets.

The Western system of economy was imposed in the name of globalisation and liberal economy. The role of the economy in the state has made suspicious. Landlords and capitalists have taken the control of the government and it is being announced that business is not the job of the government. The reality is that it is not the job of the businessman to rule the country. He runs the state as his business. Consequently, these people cannot get rid of a specific mindset. The tragic end of this mindset is Panama leaks. It is the duty of the government to bring peace and prosperity in society, establish the system of justice and equality in economic, social and political fields. State is not a spectator but a decisive power. It has to play a positive role in collective affairs.

The success or failure of the ruling party depends on it. If we review the all four budgets through this aspect and the policies that this government has adopted, then the situation seems very serious. There is no clear idea of economic destination. Personal interest is being preferred than the collective interest. There is a lack of strong policies. There is no cooperation among the different ministries. We do not see harmony in cabinet also. That’s why no concrete plan could be presented at national level. There are no cabinet meetings even after several months. There has been no regular cabinet meeting for eight months. Planning Commission has become a useless thing and no mid-term plan has been given for a long time.

It was the vision of Planning Commission that it will make a five years plan in the perspective of a long term plan. This plan will consist of objective research on one side and on the other side all the institutions of economy and state will present a model of realistic planning. Then it will be reviewed independently and with a professional skill. Planning commissions shall be established not only at Federal level but also at Provincial levels. Federation will assist the provincial planning commissioner in capacity building. PIDC will work as a research wing of the Planning Commission. The deputy chairman of the Planning Commission had been the head of it. Now PIDC has become an independent educational institution that is awarding degrees and the Planning Commission has deprived of its research wing.

A key role of the Planning Commission in whole economic policy, strategy and to determine the priorities is important. But now finance ministry has all authorities. Finance Ministry and Planning Commission have become two separate islands now. It is the demand of the constitution that State Bank should be a really independent institution. It should make the fiscal policy but the reality is that State Bank has lost its identity very long ago. It is not independent now but it has still its policy.

Another important institution is the Council of Common Interest whose role has become more important after 18th Amendment. It should be more effective to improve the system of federation. But it has also been suspended practically. According to the constitution, it should be in session in 90 days but months have passed and there is no session. If any session is held then it is without preparation. Decisions are made without thinking deeply. Parliament and Senate played a great role and FBR was made an independent institution. It was a department of Finance Ministry before.

The Committee of Senate for Finance and Economic Progress presided by me, prepared a report of 80 pages in this connection and FBR was made a division. But no signs can be seen today. Similarly, Statistical Bureau was made an independent institution instead of a department of Finance Ministry on the resolution of Senate and Parliament, so that facts and figures could be presented before the government, Parliament and the nation. Policy making could be based on facts without political pressure. All was done in papers but not practically. Figures are not free from the political interference. That’s why the figures that are presented by economic survey and the budget are considered as doubtful.

The literary circles and the research institutions expressed their views about the economic growth of 2015-2016 in such words that are not a pride for the government and the nation. If we know the facts about the economic growth of 2015-2016, definitely we’ll be shocked and depressed that what we are doing with facts? If international institutions and think tanks do not rely on our given figures, then we deserve it. We forgot that there can be difference of opinion but facts should be above board. What is the percentage of truth in the claim of 4.7pc growth rate, we can understand by reading the following report. 10 days before publishing the report of Economic Survey in newspapers on May 21, 2016, a report of Shahbaz Rana was published and wasn’t denied. “The government has the target of achieving 5.5pc growth rate in the previous fiscal year. 7pc growth rate was needed to absorb the addition in youths. If the speed of growth becomes less, the result will be an increase in unemployment. According to the sources the bureau chief of the facts and figures of Pakistan Asif Bajwa informed the Finance Minister Ishaq Dar that the growth rate for 2015-2016 is near 4.2pc. Bajwa also told Mr Dar that the reviewed figures of the previous two fiscal years are below than 4pc. Dar did not accept these figures and asked to review them again.

When Bajwa Sahib was contacted, he neither accepted nor rejected the meeting. Bajwa Sahib expressed his views while talking to a reporter. He said figures keep on changing and the temporary growth rate for 2015-2016 is 4.7pc. The former economic consultant of Finance Ministry, Dr Ashfaq Hassan Khan asked, “When there is reduction in the production of agriculture sector and the private and governmental investment is also very low, then the question arises how we can get 4.7pc growth rate? He further said that their own figures show that growth rate was no more than 3.5pc in the previous year. If we consider all aspects, we’ll come to know that government selected the growth rate which was 4.7pc. This rate was better than the 4pc of the previous year. It was also better than the estimated 4.5pc of the IMF.

(To be continued)

The writer is ex-minister of Zia era, former Jamaat-e-Islami senator and heads Institute of Policy Studies in Islamabad

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