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June 18, 2019

Recent appointment by PM under discussion

Top Story

June 18, 2019

ISLAMABAD: A lot is happening on the political scene, and eyes are also set on the Supreme Judicial Council (SJC) that is presently hearing Justice Qazi Faez Isa’s reference filed by the president. A recent appointment made by the premier is also subject of discussion in different circles, but what will decide the fate of many, including that of the government, is the country’s economy.

Informed sources said an important person had met three senior PML-N leaders at his residence a few months back. The focus of discussion was economy and the important person was warned that the PTI government would further the economic crisis and the situation might lead to an economic disaster.

Later, the prime minister made major changes to his economic team but the economic indicators continue to depress many and what the PML-N leaders had warned appears to be happening in the same way.

Prime Minister Imran Khan though claims that the country has been saved from an imminent default and it has crossed the bad patch, economic indicators as well as official reports and continued devaluation of Pak rupee against the US dollar do not support his view.

In a sharp contradiction to what the PM said, the government has now decided to set up “Economic Security Council” to improve the country’s deteriorating economic situation, particularly in a scenario where some international powers have openly started playing their dirty games for Pakistan’s economic failure.

According to The News report published on Monday, the council will be headed by Prime Minister Imran Khan himself, while Chief of Army Staff General Qamar Javed Bajwa and secretary finance will serve as its members. Three more members will be added to the council.

The deteriorating domestic economic situation and the maneuvers of international powers against Pakistan through the FATF, the IMF and other forums to further the financial woes of the country for an attempt to hurt the only nuclear Islamic state require a unified counter strategy at home.

Two days back, US Secretary of State Mike Pompeo said there was “no rationale” for an IMF bailout that pays off Chinese loans to Pakistan. “Make no mistake. We will be watching what the IMF does,” Pompeo said.

“There’s no rationale for the IMF tax dollars, and associated with that American dollars that are part of the IMF funding, for those to go to bail out Chinese bondholders or China itself,” Pompeo added.

In a related but embarrassing situation for Pakistan, the Manila-based Asian Development Bank (ADB) Sunday distanced itself from a Pakistan government announcement about provision of $3.4 billion budgetary support.

On Saturday, two senior members of government — Dr Hafeez Shaikh, advisor to the PM on Finance; and Makhdoom Khusro Bakhtiar, Planning and Development Minister; had announced that the ADB would provide $3.4 billion budgetary support to Pakistan to help the latter implement its economic reforms and stabilisation.

Unfortunately, at home the PTI government’s effort to improve the economic situation has failed despite PM Imran Khan changing his ace economic team led by Asad Umar. Strangely even now when the PM says that the economic situation is out of danger, two ministries in his government have projected completely different figures for next fiscal year- indicating a mess instead of clarity.

To the surprise of many, the Ministry of planning has forecast 4% GDP growth, while Ministry of Finance has given a figure of 2.4%. Quite a huge gap between the two. Similarly on inflation, the Ministry of Planning is forecasting 8.5% for next fiscal year, while the Ministry of Finance projects inflation between 11-13%. Again a huge gap. Most interesting is that both documents have been approved by the prime minister.

At the end of June 2018, growth rate, which was 5.8% and was projected to go up to 6.2% by June 2019, will come down to 2.4% as per the finance ministry. In absolute amount, it is said that Pakistan’s total GDP has come down from $313 billion to $280 billion — a significant drop. This means the per capita of Pakistanis has gone down by more than 8%. This downward trend, it is feared, is expected to continue till next two to three years.

Last year, the inflation figure was 3.9% and this year it is expected to be 7.5%. According to the Ministry of Finance, the next year inflation will be around 11-13%. It is said that more than four million people have gone below the poverty line in last 10 months. Another five million are expected to go below the poverty line next year and the trend will continue till 2022.

Unemployment is the other major consequence of low growth and high inflation. So far, during the tenure of present government, it is said that more than 1.2m people have lost their jobs. The unemployment process, according to economic experts, will continue in the next few years with more people getting unemployed resulting from poor business environment, high interests etc.

The total debt and liabilities of the country were around Rs30,000 billion at the end of June 2018. This figure during the initial nine months of the present fiscal year had increased to almost Rs35,000 billion.

It increased from 14000 billion over 5 years – a total of 11000 billion. The PTI government’s borrowing is far higher than any government’s in the past. The last 15 years of official data shows that the present fiscal year under the PTI government so far remains the worst in terms of tax revenue growth in the country.

During the martial law of General Pervez Musharraf and while the PPP and PML-N governments, whom the PTI dubbed the most corrupt, were in place the tax revenue growth was several times better than what has been recorded during the first ten months of the present fiscal year.

While the revenue growth percentage for the first ten months of the present financial year is below 3%, this ratio has been considerably high during the last 15 years when even what the PTI called “corrupt” and “thieves” (PPP and PML-N) were ruling the country.

Official data shows that the revenue collected by the FBR in the fiscal year 2003-2004 was Rs510.6 billion. This figure reached Rs3842 billion in 2017-18. The target for the present fiscal year is Rs4,398 billion but by end April i.e. in the first ten months of the present fiscal year the FBR collected Rs2,993 billion. The FBR was to collect Rs3337.7 billion during July-April period of the current fiscal year.

Tax revenues almost doubled from Rs1,900 billion to Rs3,800 billion during the last PML-N government. In four out of its five years, tax revenue grew 20% per annum, while the slowest growth in one year was 13%.

This has happened in spite of massive devaluation and high inflation — two factors that according to experts give natural increase to tax revenues. But even that has not worked for the PTI government. Now under an agreement with the IMF, the budget has proposed an increase of 36% in revenue — the highest in our history. It is said that 70% of this increase is proposed through indirect taxes, which will hurt the poor as well as middle class more than anyone else.

The massive shortfall in the tax revenue is generally linked with the slowdown of economy. But unfortunately after the coming into power of PTI government, businessmen and investors are reluctant to invest, while the devaluation of Pak rupee against dollar has reached a record Rs157.

With such an economic situation, what is acting like adding insult to the injury for the country’s economy is the political instability which refuses to go ever since the coming into power of Imran Khan. Strangely it is not the government but the opposition which is offering the rulers to have an agreement on the charter of economy but it also does not seem to be happening. Instead the confrontation between the government and the opposition is getting worse with every passing day amid some of the political parties considering street agitation and sit-in to oust the government.

As if there were not enough reasons contributing to political uncertainty that continues to hurt the economy, the PTI government filed a reference with the Supreme Judicial Council against Justice Qazi Faez Isa.

This move has enraged the lawyers though a minority in the legal fraternity is not in favour of any protest and wants the SJC to decide the matter. The matter is pending with the SJC. Government sources, who appeared not much confident a few days back when the attorney general appeared before the SJC in the same case, sound assertive today. However, these government sources are not bothered how the regime is contributing to the greater threat of deteriorating economic situation.

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