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November 7, 2018

What we borrowed and what we built


November 7, 2018

Three months after being installed in power, the PTI still hasn’t given up its proclivity for U-turns, baseless accusations, self-serving hypocrisy and untruthfulness.

Take, for instance, the issue of national debt and external debt. No less than PM Imran Khan has misstated facts multiple times and his minions have lied loudly and repeatedly about the actual situation. And in painting a far more precarious situation than exists, they have forced the markets and the economy into a downturn. The economic downturn that started during the last few weeks is directly the result of false and irresponsible statements by the PTI leadership.

PM Khan has claimed that national debt when General Musharraf gave up power in 2008 was Rs6 trillion and that when the elected government of the PML-N left office it was Rs30 trillion. I find the choice of PM Khan’s initial date at the beginning of the democratic transition to be interesting. Is he trying to defame democracy? Is he suggesting that Gen Musharraf’s was the golden period for Pakistani economy? Does he not remember the massive debt remission and restructuring the West gave us for help in the Afghan war? Does he not understand the human and economic price this nation has paid, and is still paying, due to that war?

Readers will remember that Imran Khan supported Gen Musharraf’s referendum but, according to Gen Musharraf, when he refused to pre-allocate 100 seats to the PTI in the 2002 elections, Khan started to oppose him; so much for democratic credentials.

PM Khan and his ministers are also not telling the nation that our national income (as measured by GDP) has increased during the last democratic decade from Rs10.6 trillion in 2008 to Rs34.4 trillion in 2018, an increase of Rs23.8 trillion in 10 years. I know these are all nominal numbers but then so are the debt numbers being shared by the PTI leadership. With one big difference. I am giving factual numbers.

The actual gross public debt in June 2013 was Rs14.25 trillion and it increased to Rs24.95 in June 2018. That’s an increase of Rs10.7 trillion in five years or an increase of Rs2.14 trillion per year. The false number the PTI gives – Rs30 trillion – is just that: false. I think it comes from adding to public debt other elements including external liabilities of private and public-sector enterprises, foreign liabilities of foreign direct investors in Pakistan, provincial government loans for commodities operation, etc.

No economist in the world uses this definition. The number economists use is the gross public debt number that I have given which includes the government’s total local and total foreign debt. In fact, many economists use a number called net public debt which subtracts from the gross debt the money held by the government in its bank account. And this is also the definition of debt favoured by the IMF and is part of our public debt law. But I have given here the larger gross public debt number to avoid any unnecessary inconsistency.

Our external debt, which is included in the public debt number I gave above, in June 2013 was $48.14 billion. It increased to $70.24 billion in June 2018, an increase of $22.1 billion in five years. This means the net yearly increase (after paying off the principal that becomes due) in debt during the PML-N period was $4.42 billion.

PTI leaders came back from Saudi Arabia recently very happy after having borrowed $6 billion. This then leads me to make two very easy predictions. Despite all their hoopla about austerity and not increasing public debt, both the PTI’s total and external borrowings will be higher this year than the average increase in the PML-N’s tenure. More specifically, the PTI government this year will borrow more than Rs2.14 trillion and their net external borrowings will also surpass our average of $4.42 billion.

PM Khan is repeatedly threatening to conduct audits of all our budgets and carry out accountability. As someone who’s proudly served my country in various positions in the previous government, I request him to stop threatening and actually carry out the forensic audit. But then again he also threatened the TLP will the full writ of the state and we all know how that turned out. Still, as an economist and a politician, I hope he conducts the audits and makes the reports public. This will not only give a lie to his false accusations but I know that audits are a useful exercise and we will hopefully learn a few things from them.

Readers must be wondering what we did with the Rs10.7 trillion we borrowed over five years. That wasn’t loose change. It was a huge sum – about Rs2.7 billion more than the PPP borrowed. So here is a brief accounting. In five years we transferred to the provinces more than Rs9.1 trillion compared to Rs4.6 trillion rupees transferred by the PPP government. That’s an extra Rs4.5 trillion right there.

There’s more: PM Nawaz Sharif was in a hurry to develop this country and build its infrastructure. So we spent more than Rs2.6 trillion on public sector development projects. What did you get from it? You got two power plants in Balloki and Haveli Bahadur Shah, producing 1200 MWs of power on gas with the world’s most efficient turbines. (A third one at Bhikki was set up by the Punjab government). We also started building two nuclear power projects near Karachi. We built 1700 kms of motorway and miles and miles of highways, especially in Khyber Pakhtunkha, Gilgit-Baltistan and Balochistan. Large European democracies have difficulty undertaking so much road building in such a short span of time as we were able to do in Pakistan.

The Neelum-Jhelum hydro project was started by Gen Musharraf and remained unfinished under the PPP. The PML-N, under Mian Nawaz Sharif, completed it. We completed the Tarbela 4th extension, another project envisaged by Gen Musharraf. The Nandipur power project was left rotting at the Karachi port because the then PPP law minister, Babar Awan, had an issue with it. Again, it was completed by the PML-N. The Lowari tunnel under the Hindukush mountains was inaugurated by PM Bhutto – not Mohtarma Benazir Bhutto, but Zulfikar Ali Bhutto in September 1975. This too was completed by the PML-N last year.

In the last five years, the US drastically cut our CSF payments and we were able to meet most of our defence needs indigenously, including the successful campaigns of Zarb-e-Azb and Raddul Fasad. We also spent over Rs400 billion on income transfers to the poor, again double that of what the PPP did. But for full accounting I am anxiously awaiting the results of the PTI’s audit report and with it a vindication of how the PML-N fulfilled its fiduciary responsibility to this nation.

The writer has served as federal: minister for finance, revenue and economic Affairs. Twitter: @MiftahIsmail

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