Thursday May 23, 2024

The economic scorecard

By Mohammad Zubair
August 07, 2021

The present government has completed three years in power. This is good enough time to pass judgement whether it has done well or if it has failed to meet the expectations of the large segment of the population.

The failure is spectacular when viewed against the pre-election commitments, and compared with the performance of the previous government.

The failure is more evident on the three most important economic issues which directly affect the people – inflation, poverty and unemployment. The five-year period between 2013 and 2018 saw possibly the lowest inflation in more than 20 years. When the PML-N left the government in May 2018, inflation was less than 4 percent. The last three years have seen unprecedented increase in inflation, especially food inflation.

It’s not just a case of rising prices. That is bad enough but more worrisome is the element of corruption which has contributed towards rising prices. Take the case of sugar. As sugar prices started to go up in late 2019, the government set up an inquiry commission and then a JIT. This was quite unnecessary and was only meant to deflect from the real issues. The prices were rising due to the poor decision-making process, lack of governance and corruption. These factors have not been addressed and as a result sugar prices, and indeed those of other essential items, continue to rise unabated. Most of the mafias and the cartels that the PM talks about remain part of the present government.

The poor people of this country have been looted mercilessly, ending up paying hundreds of billions over and above what should have been normal prices. After all, these hundreds of billions have gone into the pockets of a few multi-billionaires – most of whom are cronies of this government. Other items such as wheat, LNG, medicines, petrol etc have a similar story. Some of it, like LNG, is a never-ending story and provides a sorry tale of confusion, incompetence, poor decision-making and high levels of corruption.

Over the last three years, the government’s inept policies have pushed millions below the poverty line. The process started immediately after the PTI came to power and only worsened with time. Unemployment also picked up within months after August 2018 due to a complete shutdown of economic activities. There are more people below the poverty line and more unemployed than at any other time in the last 10 years.

The various reforms that the ruling party had committed before coming into power have not yet been initiated even after three years. The reform agenda is all but dead with the resignation of Dr Ishrat Hussain, whose main task was to initiate and implement various reforms. Entities such as PIA, Pakistan Railways, Pakistan Steel and others have deteriorated in terms of performance while losses and liabilities have piled up significantly. Even worse, the government has been unable to undertake a single privatisation transaction over the last three years, which have seen no reform, no restructuring and no privatisation.

The economic performance, or the lack of it, is best understood when we look at the macroeconomic indicators. All indicators have significantly worsened over the past three-year period. GDP growth nosedived in the present government’s first year to 1.9 percent – coming down from a very impressive 5.8 percent in the PML-N’s last year. After negative growth in its second year, the third year has seen some recovery but it’s more a case of low base than performance. Over three years, GDP growth averaged 1.8 percent, possibly the worst three years in recent memory.

Tax performance has been equally poor with an average annual increase of less than 7 percent over three years. Consider this against inflation rates in double digits and devaluation of up to 35 percent – reflecting negative tax collection over three years. Primarily because of poor tax collection, the fiscal deficit has been over 8 percent in each of the three years – again, the worst in any three years of our history. In terms of amount, the total fiscal deficit was Rs10,700 billion over the last three years. Compare this to only Rs4200 billion in the first three years of the PML-N government. The difference of approximately Rs6500 in the fiscal deficit is the main reason for the unprecedented increase in the amount of debt that has been added over the last three years. Total debt at the end of June 2018 stood at Rs24,900 billion which has now gone up to Rs37,000 billion.

The government has recently started to claim success in areas such as exports, curtailing trade deficit and rise in the stock market. In all cases, it's more a case of spin than any reality. Exports for example closed at $25.3 billion in June this year as against $24.8 billion at the end of June 2018. Over three years, it reflects a growth of just 3 percent – an average of one percent per annum. And the price we paid for this was a massive 35 percent devaluation that negatively affected significant areas of our economy. Due to the lacklustre export performance, there are genuine alarm bells as the trade deficit goes up over $3 billion per month. Trade deficit remained under control in the first few years, not due to any good economic management but rather as a result of insignificant economic activity. Now that economic activity has started to pick up, the trade deficit and current account deficit will continue to widen.

About the so-called stock market boom: the market index is around 47000 at present as compared to 43000 when the PML-N government left in mid-2018. This reflects an increase of just 9 percent over three years as against an unprecedented increase of 57 percent after three years of the PML-N rule. That’s called a stock market boom.

With the above numbers and the never-ending scams, the government still feels that they have delivered over the past three years. That could be public posturing which would be understandable but it is frightening to realise that the PM and his team actually believes this. Nothing can be worse than being this delusional.

The writer is the spokesperson for Nawaz Sharif and Maryam Nawaz, and former governor Sindh.

Twitter: @Real_MZubair