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December 1, 2020

Claiming a victory where there’s none


December 1, 2020

LAHORE: This government announced a budget in June 2020 when Covid-19 was at its peak. It missed most targets in the first four months, although budgetary targets were fixed keeping in view the impact of the pandemic.

It is perhaps the first government that is claiming victory on the economic front despite missing all the targets it fixed. The increase in tax revenue during July-October 2020 is only 4.5 percent, while the government had aimed revenue growth at over 22 percent in the current fiscal.

It claims that exports are in top gear. Yet, in the first four months of this fiscal, the exports inched up by 0.6 percent from $7.529 billion in 2019 to $7.575 billion during the same period in 2020.

The imports are up that gives some indication of pick up in the economy, but much below the desired level.

Any inflation on the top of the huge increase in food prices in the past 8 months is a further burden on the pockets of households. The incomes are on hold for the past two years.

Past inflation has eaten up the savings of all households from poor to middle class. Still our inflation at 8.9 percent is the highest in the region.

New investors are afraid to enter Pakistan and the existing investors are desperately trying to survive. Some have gone for technological upgrades, but that would not create any jobs; rather some jobs would be lost as a result of new technology.

The upgradation of existing industries would only increase the competitiveness of the entrepreneurs. No jobs will come if greenfield projects are commissioned. The newcomer would hire staff for the production, marketing, and finance.

Increasing foreign exchange reserves are being touted as a great achievement of the government. The entire money coming in is borrowed from friendly countries, multilateral agencies, and expat Pakistanis.

We did achieve a current account surplus for a few months, but that was not the major contributor in our reserves. We are paying market based and in many cases higher interest on these foreign exchange loans.

We are just passing time and there is nothing to rejoice. We have to build foreign exchange from our own resources.

Remittances have increased appreciably that boosted foreign reserves. Let us hope that this momentum stays for long.

Exports, as already stated increased by a paltry $46 million. Every country depends on its exports to boost its foreign exchange.

Our exports are not contributing any amount in this regard. Our imports after massive decline are still double than our exports.

The government claims that textile, our main export industry, is operating at full capacity. However, nominal increase in exports reveals that we do not have exportable surplus.

This government must realise that the economy went on ventilator. The oxygen generated by this ventilator comes from foreign loans.

You stop the foreign loans and the economy would die. We are not launching development projects that are capable of generating enough revenues to pay back or at least service the foreign loans.

We need industrialisation and revival of agriculture. We cannot afford to spend $2 billion on import of cotton because our farmers are supplied with spurious seed.

Nor can we afford to spend billions of dollars on import of sugar and wheat because some vested interests took wrong decisions when we had ample stocks.

There is some silver lining in this chaos as the government has shown seriousness in tackling the loss-making public-sector enterprises. For a change this government has shown some courage by retrenching over 4,500 workers of long closed Pakistan Steel Mill.

Workers have been provided handsome separation packages. The remaining workers would also be given this deal.

This was a difficult decision, but there is a catch. The Nawaz government also retrenched many workers from public-sector companies in its second tenure (which it claimed to be political appointees).

The PPP government that came to power in 2008 reinstated all those workers. Not only that, it gave them the salaries for the entire period.

Need is to ensure that through a judicial order and legislation, no such reversal takes place in future. The present regime should also refrain from making any appointment out of merit when it goes for rehabilitation of the mills.

It would in fact be better to sell the mill to a private party by retaining its unutilised land that is worth more than the value of the mill.

The PIA management has also shown intention to reduce its staff by offering golden shake hands to half its employees (7,000). Let us hope it would stop bleeding in the national airlines.