The announcement of another ambitious Five Year Plan by the Planning Commission last week has raised more questions than answers. The Planning Commission has envisaged a macroeconomic framework in the economy that will grow at 5.4 percent, with the development outlay increased to Rs11.7 trillion. The plan itself looks good on paper, but it immediately raises questions over whether it will have anything to do with actual policymaking in Pakistan. The reality is that Pakistan has been cutting down on its development spending while its GDP growth rate has been falling. If anything, the fiscal situation is likely to get worse before it gets better. The last reports on the budget deficit confirm that the budget deficit has continued to increase despite the massive reduction in development spending. The trouble is that official sources have quoted members of the Economic Advisory Council, who have claimed that the policy framework only works if Pakistan does not accept an IMF bailout. This is a fact. It is clear that any IMF programme would take away the autonomy of the PTI government to develop its own route for Pakistan’s economy.
This then raises a legitimate question over the point of announcing the five-year plan. If the IMF programme is agreed to, then the budget deficit will have to be brought down from the 4.9 percent in the Five Year Plan to 2.9 percent of GDP in the last year of the IMF programme. One wonders how the government will be able to keep a Rs1 trillion allocation for the public sector development programme each year, when the PDSP was brought down from over Rs1 trillion last year to under Rs700 billion this year. It has been encouraging to see that there is sufficient disagreement within the EAC over what the future of macroeconomic planning in Pakistan will be.
The importance of our Five Year Plans lies in developing a national development programme, which sets the macro-framework for economic policymaking in the country. But an IMF structural adjustment programme is also a framework that defines the paradigms of the country’s marcoeconomic policy for the same period. The debate suggests that the government must take more seriously any decision to agree to an IMF programme in the near future. If the government has come up with its own Five Year Plan, then it should look more closely at any decision taken to give up control of economic policymaking to the IMF.
