Road to stability bumpy with missed fiscal targets, skyrocketing prices

LAHORE: The government after a year in power faces triple pressure of satisfying the IMF on missing the taxation and fiscal deficit targets; the electorate on sky rocketing prices, and businesses on continued increase in cost of doing business.

Though the economic managers claim that the things are moving in right direction, the reality on ground tells a different story.

Primary deficit has ballooned to 3.6 percent of the GDP against government commitment of containing it to 0.6 percent of the GDP. The debt (loss) of public sector enterprises increased 47 percent by June 30, 2019.

Large scale manufacturing posted a decline of 3.6 percent. Cement production is shrinking and the turmoil in the industry has reached a stage where its representative association has stopped disclosing the monthly production figures on its website.

The car industry produced 47 percent fewer cars in July than the corresponding month last year. The turmoil in tractor industry has deepened. Retail sales are constantly going down. The government announced two weeks back that the exports have registered an increase of 14 percent in July 2019. The figure was later trimmed to 11 percent.

However, the Pakistan Bureau of Statistics has not posted the details of import and export of July on its website nor has it placed the details of exports and imports. Normally these details are available by the 18th of every month or latest by 22nd of every month. What is the reason for this delay?

The government functionaries have already confessed before the prime minister that that the businesses are scared of the harassment from National Accountability Bureau and the bureaucracy is similarly afraid of taking any decision fearing accountability on any human error.

The dysfunctional bureaucracy is playing havoc with the economy. On the policy front, the government is dilly dallying on many issues.

No policy has been confirmed to tax the shopkeepers. The CNIC condition on transaction of over Rs50,000 is in limbo two months after the start of the fiscal year.

The FBR has assured that no action would be taken on CNIC till September 30 –the third extension in three months. Businesses are at a standstill both in the manufacturing and retail sectors because of absence of a clear decision in this regard.

The CNIC condition is essential to bring all business activities under the tax net, which is the reason that the government is reluctant to withdraw this condition, but it continues to hold dialogue with businesses and giving them concession on month to month basis. This has slowed down business activities.

The consumers are the hardest hit. One can understand increase in the prices of imported goods as the dollar has appreciated against the rupee. There is some justification on increase in rates of edible oil and imported food items.

However, the increase in the rates of bread, roti, wheat flour and sugar cannot be justified. Wheat is produced in the country and we have adequate stocks.

Sugar too is produced from the local crop. The sugar mills ask the government to grant them subsidy for exporting surplus sugar every year.

Livestock is reared in Pakistan and its growth rate is double the national GDP growth. Cattle are increasing in number every year.

The feed they consume is also local, yet we have seen increase in rates of mutton, beef and poultry in the past one year. The small bread rates have jumped in two goes from Rs40 to Rs50.

The flour rates have increased by Rs300/40kg. Sugar prices jumped from Rs50/kg to Rs65/kg. The rates of vegetables and fruits are higher than last year. We do not witness the season low prices of these items when the supplies are higher. Banana perhaps are the only exception.

The rates of all pulses have registered an increase of 20-30 percent irrespective of the fact whether they were imported or locally produced. The transport rates have increased for the commuters because of increase in petroleum product rates.

Higher prices in the past year have been accompanied with stagnant incomes and a very tight job market. Consumers in every segment are feeling the pressures.

Most of the corporate sector has not increased the salaries this year. Many low cadre employees have lost jobs. Daily wage workers are not finding work for at least 15 days a month. The economy is not moving up.