Thursday May 23, 2024

The two-year scorecard

By Mohammad Zubair
July 19, 2020

The performance of the present government over the last two years has been dismal. The failure is spectacular – make no mistake about it. The numbers reflect a consistent slide in all macro economic indicators. In fact, forget the numbers – ask any Pakistani and everyone will confirm that their economic condition is much worse than what it was in mid-2018.

There’s no surprise on the downward trajectory of the economy in the last two years. What is surprising is the degree or the depth of the fall. There are two major yardsticks against which the government’s performance can be measured and termed satisfactory or otherwise. These include the PTI’s economic plan and commitments made before the elections, and the performance of the last two years in comparison with that of the previous government. The economic indicators are one aspect but equally important is to see the government's performance on the governance front.

Measured on all counts, the current government seems to have miserably failed. This conclusion is not based on simple hearsay but on facts and figures. Let’s have a more detailed review of these facts and figures.

In its election manifesto, the PTI had committed reforms in key areas. After two years, the process of reforms has not yet been initiated. When we look at the actual performance, nothing has been achieved. In terms of tax collection, we are almost where we were two years ago. As per pre-election promises, we were to achieve tax revenue of Rs8000 billion in two years. Instead we are barely halfway there. Despite low inflation in the entire PML-N period, tax revenues were doubled in five years. Since August 2018, we have seen four heads of FBR. Any government committed to reforms will not change an FBR head after every six months.

The energy sector has seen no reforms as well. The circular debt has gone up from Rs1100 billion in mid-2018 to more than Rs2100 billion at present. The present government had promised to completely eliminate circular debt by December 2020. As things stand, it can only get worse from here.

High on the agenda of the PTI was its commitment to restructure public-sector enterprises through ‘Sarmaya Pakistan’. Nothing has happened in this regard, with public-sector enterprises bleeding more heavily than at any other time in history. The outstanding debt of public-sector enterprises has gone up from Rs1.4 trillion in mid-2018 to around Rs2.8 trillion now – increasing at an alarming rate. Forget the reforms promised, in most cases even the boards have not been set up.

None of the other commitments made before the elections have been delivered – and in most cases not even initiated. The 50 lakh housing units promised are nowhere to be seen even after two years. Same is true for the one crore jobs that were promised before the elections.

The comparison with the previous government is inevitable. That is where the performance of the present government looks so poor. Any party taking over the reigns of the government faces many challenges and the PTI is no exception. But generally the economy was doing well in 2018 as most macro-indicators would confirm. GDP growth went up from less than 3 percent in 2013 to 5.8 percent by June 2018. By contrast, the current government’s first year ended up with GDP growth nosediving from 5.8 percent to 1.9 percent for no apparent reason. The second year is ending with a negative growth – for the first time in 68 years. Inflation remained in control during the five years of PML-N rule, ending with less than 4 percent in 2018. The fiscal year that just ended shows inflation in double digits – the highest in more than eight years.

Close to three million people have lost their jobs in the last two years, while approximately 10 million people have gone below the poverty line. There’s nothing unusual in these numbers since it’s a natural consequence of low growth with high inflation. Fiscal deficit shot up from 6.6 percent in June 2018 to 8.9 percent in 2019 and is now expected to be above 9 percent – the highest in the last four decades.

During the PML-N’s five-year period, total public debt went up from Rs14 trillion to Rs24 trillion – an increase of Rs10 trillion in five years. The current government has added the same amount of debt in just two years (this is a net increase in both cases after repayments).

The real damage to the economy was done by increasing the discount rate from 6.25 percent in August 2018 to 13.25 percent within the first year of PTI rule. There was no possibility of the private sector borrowing at such high rates. The private sector was already demoralised for several reasons with the new government policies, and the high discount rate only added to the misery.

On the governance front, the less said the better. The handling of the pilots licence issue is a classic example of how a normal situation can be turned into an international embarrassment for the country. The financial losses are one thing but more important is the country’s image that had been tarnished beyond repair. Similarly, the sugar crisis has been lingering on for almost six months now; yet, the people continue to suffer as a result of one poor decision after another.

The present electricity crisis in Karachi is another example of how the federal government has messed up due to its inability to take timely decisions. The petrol crisis is another example of poor governance. The announcement of price reduction without ensuring adequate supplies led to the non-availability of petrol in most cases and, where it was available, we saw long queues of vehicles waiting several hours for their turn. Barely had the government managed this crisis that we saw another petrol crisis – this time due to the significant price increase. Ogra, the regulatory authority, was bypassed during this entire process.

There is no ownership of responsibility and the ministers of course have defended their decisions – but most alarming is the PM’s public stance on all these issues.

There is a general consensus that the government has failed to deliver in the last two years. And there is no indication that the next three will be any different.

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

Twitter: @Real_MZubair