The Pakistan Tehreek-i-Insaf government has issued a progress report of sorts with regard to its performance over the past two years. The report covers various sectors out of which the economic front seems to be the trickiest one. The prime minister and his men have cited certain statistics and indicators to claim that they have been able give a boost to the country’s economy despite inheriting it in a bad shape.

Where they have failed miserably and beyond a question is that they have blamed the Covid-19 and the resultant slowdown in local and global economies.

The government claims that it inherited a current account deficit of $20 billion which has been reduced to $3 billion. It says the borrowing from the State Bank of Pakistan, which stood at Rs 6 trillion when it came to power, has come down to zero. It says the tax collection has gone up by 17 per cent and non-tax revenue by 33 per cent on a year-on-year basis despite the difficulties it has had to face.

Other accomplishments the government is celebrating are: a record increase in foreign remittances and exports, including the highest increase on a monthly basis over the last 10 years. The country received a record $2.8 billion remittances during the month of July 2020 and exports witnessed a growth of 6 per cent during the same time. Apart from textiles, the cement sector got export orders. Exports of cement went up by 66 per cent whereas the domestic sales of cement increased by 33 per cent. Having paid back Rs 5,000 billion loans is yet another feat the PTI government is celebrating.

Pakistan governments have been criticised over the years for failing to bring about real growth and getting investments directed mainly to non-performing sectors like the real estate and financial markets, etc, that do not create jobs in large numbers. People have been investing in these sectors for quick profits. The profits have come at the cost of industry which is the main consumer of local human resource.

Senior economist, Dr Kaiser Bengali, once pointed out that industrialists were shutting down factories in SITE area in Karachi and using the land to develop housing societies as this helped them make easy profits. Running industries with high input costs and poor infrastructure was never an easy task, especially when cheaper imported or smuggled substitutes were available in the local markets.

The PTI government says in its performance report that they are focusing on the expansion and growth of the industrial sector. To this end, it says, it has abolished import duties on thousands of raw materials coming to the country.

The government’s critics and the opposition challenge these claims on the grounds that it is not showing a clear picture and has been citing some outliers as a measure of success which might not be sustained. The examples of increased remittances and exports are pertinent here as the increases came about due to Covid-19-related factors.

Ishaq Dar, the PML-N government’s finance minister, has issued a statement challenging several claims of the incumbents. He says the GDP growth rate declined from 5.8 per cent to 1.9 per cent in the first year of the government and has further slumped at the end of the second year to -0.4 percent, slipping into negative territory after 68 years. He points out that the global financial institutions have stated that the negative growth for FY20 has been understated by the government.

Dar also points out that over the last two years, the consumer price index (CPI) has risen from 4 per cent to 10.5 per cent, the wholesale price index (WPI) from 4.7 per cent to 11 per cent and the sensitive price index (SPI) from 2.4 per cent to 14 per cent. These are reflected in almost doubling of the prices of sugar, wheat flour, vegetables, pulses, medicines, natural gas and electricity. “Food inflation which was less than 2 per cent two years ago has risen to 15 per cent and has caused massive unrest among masses as millions of people are unable now to even afford two square meals a day.”

The PML-N points out that the current account deficit (CAD) increased towards the end of their tenure mostly because they had to make payments in foreign currency to power producers who had helped the curb 18-hour load shedding in the country. Otherwise, the deficit was in a manageable range. However, it says, the PTI government has ruthlessly curtailed imports over the last two years by imposing high customs duty to improve the figures. Due to this, they say, the industrial activity has halted, resulting in negative growth (-10 per cent) in large-scale manufacturing (LSM) with millions of jobs losses. The worst part, it says, was that imports were curbed without import substitution.

The government has announced an incentive package that includes a Rs30 billion subsidy for the Naya Pakistan Housing Project. Besides, the real estate sector has received incentives, including an exemption for investors to disclose their source of invested money till December 31, 2020. If the prospective investors can be confident that they will not be questioned later on they will invest in the sector.

The IMF package, financial support from countries like China and Qatar, cash deposits by other states and deferred-payment oil import facility are also on the list of PTI’s economic policy.

Naveed Iftikhar Cheema, a former finance ministry official and public policy expert, believes that the practice of running the government using debt money must be discouraged. He says it should be seen as failure, not success. “The habit of government borrowing from local sources has hurt the interests of the private sector as financial institutions prefer to give loans to the government because their return is guaranteed. Returning old loans by securing new loans is the practice here,” he adds.

Cheema says the exports increases have been for the reason that lockdowns were not yet lifted completely in competing countries and Pakistan got the orders. The export orders were mostly for house apparel, protective equipment, etc, and we have to see whether this growth is sustained or not.

The PTI government is also under criticism for failing to cut down circular debt which has gone up to around Rs2,200 billion from Rs1,100 billion in mid-2018. The government claims to have revised agreements with the IPPs which it says will bring down the electricity cost.

Critics say the economy was badly hit by the increase in the discount rate from 6.25 percent in August 2018 to 13.25 percent within the first year of PTI rule. There private sector did not find it feasible then to secure loans. Now that the rate has been brought down, the hot money invested for high returns has been withdrawn.

Gohar Majeed, the Trust Links Realty CEO, says the relief given to builders in the context of affordable housing plan of the government is a good step but there is still a lack of clarity. The government, he says, has instructed banks to give loans at 5 percent interest to those building 5-marla houses and 7 percent to those building 10-marla houses but the process has not been defined. Majeed says a good thing is that the government realises that the construction sector is crucial and may lead to the revival of around 40 allied industries. However, it will take time and the government will have to be alert and remove the difficulties involved without wasting time.

Majeed says starting of work on dams and bringing interest rates are good steps but one must realise that local economy is also linked with the international economy. “The Covid-19 situation in the country and abroad, devaluation of the rupee and IMF dictates, etc, will all affect what we plan and achieve.”

The writer is a staff member. He can be reached at shahzada.irfan@gmail.com