Thursday May 23, 2024

Economy: better or worse?

By Mohammad Zubair
January 09, 2020

Are people better off today compared to August 2018 when the PTI took over the government at the federal level and in three provinces?

This was the topic of debate recently at a television network to review the performance of the present government.

This is a relevant question considering the party has been in power for a reasonable period (16-17 months) and must now start to take responsibility for the state of affairs of the common people.

However, the PTI leadership still insists that the present economic mess is the sole responsibility of the previous government, and if at all there are signs of stability, that is entirely due to the PTI’s efforts. They still believe that it’s unfair to blame the present government for the economic difficulties facing the country.

Every political party coming into power faces serious economic, political and foreign policy challenges. This is true not just for Pakistan but all countries in the world. The PTI is no exception to this rule.

When the PML-N came to power in 2013, the situation was far worse than what the PTI inherited in 2018. Just a comparison of macroeconomic indicators will confirm this point. GDP growth was less than 3 percent in 2013 compared to 5.8 percent when the PML-N left the government in 2018. Likewise fiscal deficit, inflation, foreign exchange reserves, stock market position, tax collection and other indicators were far worse in 2013 compared to where the PML-N left them in 2018.

On top of it all, Pakistan in 2013 faced perhaps the worst energy shortages, with loadshedding on a daily basis for 8-18 hours in different parts of Pakistan. The country also faced an existential threat due to terrorist activities across its length and breadth. Karachi, the financial hub and Pakistan’s largest city, was ranked among the most dangerous cities in the world.

This situation was far more challenging in every respect and certainly not conducive for sustainable economic growth. Yet, the PML-N accepted the challenge and set about improving not just the economy but also initiating an operation in Karachi and in the rest of the country. There were no lame excuses given by the PML-N leadership – unlike what we have now become accustomed to from the current ruling party’s leadership.

Within one year of the PML-N’s regime, most economic indicators were reflecting a positive trend – growth rate was up, inflation was getting in control, reserves were going up, investment was picking up (especially in the power sector), tax collection was up, fiscal deficit was down, interest rates were going down, exchange rate was within control and most importantly investor confidence was positive.

Bottom line: the PML-N contested the elections in 2013 knowing full well the challenges the country faced. There were specific plans to meet those challenges and there was never a point where excuses were made for poor performance or the inability to deliver. Shortcomings were accepted without placing the blame on previous governments.

Take another example. December, 1971 – when the PPP came in power. The country’s eastern wing had separated after a bloody civil war followed by a full-fledged war with India. One can imagine the economic devastation caused due to nine months of civil war, followed by a war with India. The economy would have almost collapsed and getting back the country on some level of stability would have been a nightmare. Add to that the 1973 oil crisis which devastated most economies including Pakistan.

And yet it was the PPP which was blamed for the economic mess and poor macroeconomic indicators. Never did anyone refrain from targeting the PPP for failing to provide economic relief. No doubt the PPP had also contributed through various policies, including nationalisation, which crippled whatever was left. But it would have been easy for the PPP government to blame the mess left by the military government and years of political instability. Would that explanation have been enough to satisfy the masses? Unfortunately, no.

Another example is that of 1990, when Nawaz Sharif came into power for the first time as prime minister (heading the IJI). The government took responsibility and started initiating major reforms in all sectors. The reforms were significant for the overall impact on the economy and several third world countries including India initiated similar reforms. The reforms were carried at breathtaking pace, changing the entire economic paradigm within the first year. Failures, wherever, were accepted and improvements planned.

A more relevant example would be March 2008. For almost five years, the rupee-dollar parity was literally kept at Rs60 to a dollar. In addition, current account deficit as a percentage of GDP was worse than what the PTI inherited in 2018. But the PPP government that took power in 2008 almost never made that a reason for economic non-delivery. The then opposition and media entirely blamed the PPP government for poor macroeconomic indicators during the five years of its rule. It could have been easy for the PPP to blame the previous government of Shaukat Aziz for keeping the rupee-dollar parity unchanged during the previous five years.

The point is simple; every new government faces enormous challenges and is responsible for economic delivery from the moment it comes into power. It has to make short, medium and long-term plans to improve the lives of the people. It has to initiate policies to encourage investment. After a few months in power, people must start to notice positive trends. And certainly after 16 months or so, those positive trends must be seen through improved macroeconomic indicators. If this is not happening, as is the case at the moment, then it’s a failure on the part of the sitting government.

Inflation is at a record level while growth rate has plummeted in the last 16 months. The worsening of these two indicators is a clear reflection that people are worse off today compared to August 2018. Per capita income has also gone down as a result of overall GDP decline of about $40 billion.

The lower middle class and middle class has suffered the most. Those with fixed income naturally are worse off – their income has remained almost the same while prices have significantly gone up during these past 16 months. Worse still, due to the economic conditions in the last 16 months, more than 1500,000 people have lost their jobs – and this continues unabated. Millions have been pushed below the poverty line. According to Dr Hafeez Pasha, about 18 million Pakistanis will have gone below the poverty line within two years of the current government’s rule.

These numbers are enough to demonstrate that Pakistanis in general are much worse off since the PTI came to power.

If the government, especially the PM, is not able to realise the gravity of this situation, it will be extremely sad and depressing. Not only must there be the realisation that the economy is in a bad state, more importantly the leadership must take responsibility and seriously consider the composition of its team and the poor decisions that it took resulting in where we are today. Knowing the PM and his team, it’s hard to imagine much positive change in thinking.

The writer is former governor Sindh and former minister for privatisation.