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June 12, 2019

PTI govt continues giving lame excuses on missing targets


June 12, 2019

LAHORE: The federal government has almost unveiled the entire budget through various briefings, and the letter of intent written to International Monetary Fund (IMF) requesting a three-year loan facility. There is no rationale that explains the possibility of achieving budgetary targets, particularly the tax revenues.

This government failed to achieve any of the budgetary targets for the year 2018-19. It is a lame excuse that the targets were fixed by the previous government and were unachievable.

Had it been so, the government should have revised these targets to realistic levels while presenting two mini budgets. They tinkered with the taxation measures and even slashed the development budget substantially.

Every economic planner knows that reduction in development expenditure has an impact on growth. The budgetary targets fixed by the previous regime were narrowly missed because of changes made in the budget twice during the ten months’ tenure of this regime.

It is pertinent to note that during the first two months of this fiscal (when caretakers were in power) the exports increased by 5.5 percent and the revenues were not much off the target.

All hell broke loose when the new government assumed power. However, let bygones be gone, and this government should learn from its mistakes.

After assuming power, the present regime neither formulated its economic policy nor pursued the one that the previous government had designed. There was no coordination between the economic ministries.

During PML-N era, Ishaq Dar was de-facto head of all economic ministries. Another factor that played a vital role in economic decline was the handling of bureaucracy by the present regime. Bureaucrats were humiliated publically and presented handcuffed in courts even before they were indicted by the law.

Resentment in bureaucracy ran deep. Then there was very frequent shuffling of federal secretaries. Changes were made in finance, water and power industries for more than two times in the last 10 months. The NAB factor created fear among the officials that preferred to sit on files and delayed decisions unduly.

Even in case of essential purchases, the bureaucrats remained reluctant to place order fearing that someone at another station might not have quoted lower price that could invite NAB wrath.

This uncertainty ensured that the targets remained elusive. Rulers have to be firm, but consistent, something the ruling party lacks.

Dar was averse to subsidising textiles that led to decline in exports. But the exports started rising in the last year of PML-N government when the textile exporters realised that there would be no reprieve from the state.

The new government never realised that basic textiles was operating on obsolete technology and was unable to compete globally on its own. Reality in Pakistan is that power and gas costs are almost always higher than regional level.

On the top of that the exporting industries were operating on machines that consume 40 percent higher electricity than their efficient counterparts operating in competing economies. The entrepreneurs were fully aware of this handicap, but were confident that they would hoodwink the rulers into providing them subsidies.

It is worth noting that so many politicians and economists openly wonder that while the textile mills continue to go sick, the life style of their sponsors exceptionally improves.

This shows that they had resources stashed somewhere which were earned from textiles in good times, but machines were not upgraded as successive governments willingly booted the bill of their inefficiencies through subsidies and facilitations (which are not without cost). Finance Advisor Hafeez Shaikh was the only person in this regime who realised the futility of facilitating the textile millers. The proof of futility was provided by the textile exporters themselves.

They could not increase exports despite 40 percent decline in rupee value since December 2017 and massive gas subsidy provided to exporters in Punjab. These mills survived on the strength of this subsidy or they would have gone out of production.

Those that modernised their factories reaped the benefits of efficiency as well as the government subsidies and facilitation. Exports of only basic textiles would suffer if all subsidies were withdrawn, while exports of efficient textile units would grow along with exports in other sectors. For textiles it is simply a question of scale up or die.

Most of the targets fixed for next fiscal are overly ambitious. How those targets would be achieved is not explained by economic planners.

Let us hope that this time around they do not miss the targets by wide margins. They cannot continue to pass on the blame to the previous government.

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