Economic picture for 2020

Prime Minister Imran Khan, in his address after the ground-breaking ceremony of Jalalpur canal, an activity he denigrated as 'cutting of a ribbon' when he was in opposition, once again highlighted his two pet themes: the corrupt would be held accountable and the year 2020 would herald prosperity and job opportunities.

There is no doubt that the corrupt need to be held accountable for the sheer scale and extent of corruption, coupled with capital flight and subsequent income thereon that remains untaxed, is estimated at over 200 billion dollars in one country alone; however, to date, only one real estate Pakistani tycoon has reached a 190 million pound settlement, including UK property 1 Hyde Park W2 2LH valued at 50 million pounds, and that too with the National Crime Agency UK with the Prime Minister's team focusing on the Sharif family ownership of the property earlier. Other prominent politicians (and/or business people) have yet to plea bargain or remit money or indeed clear taxes due on the capital held abroad and/or income accrued. There is therefore a need for more proactive action and the Pakistani side committed in the first review of the International Monetary Fund (IMF) programme that "we are undertaking the second review cycle under the UNCAC implementation mechanism and will identify areas for improving anti-corruption framework." The reference here is to meeting the targets set by the Financial Action Task Force which, if remaining unmet, would further compromise the state of the economy. Needless to add, the ongoing confrontation between the government and the opposition has brought relevant legislation required by the FATF to a standstill and one would hope that the government would be able to at least forge a working relationship with the opposition in greater national interest. The IMF first quarterly review report does note the "lack of majority by the ruling party in the upper house" as a major risk to the entire programme as "it could freeze capital flows to Pakistan."

The Prime Minister's insistence that 2020 would be a year of prosperity and job opportunities is obviously based on briefings from his economic team leaders, notably Dr Hafeez Sheikh, Advisor to the Prime Minister on Finance and Dr Reza Baqir, Governor of State Bank of Pakistan. It is critical that the Prime Minister at least glances at the first IMF review Table 1 in which the GDP growth projection for 2019-20 remains unchanged at 2.4 percent (unchanged since the 12 May staff level agreement was reached), gross savings are projected at negative 4.2 percent (from the earlier negative 3.8 percent with savings investment imbalance now projected at negative 1.8 percent of GDP), inflation lower at 11.8 percent instead of the earlier 13 percent. The first quarter budgetary operations released by the Ministry of Finance included in the IMF review note that the government has disbursed less than one percent of what was budgeted for social sector, 8.8 percent for Public Sector Development Programme and nothing for subsidies during the first quarter of the year yet the Fund unconvincingly argues that inflation is stabilizing mitigating the impact on the most vulnerable. The government has committed to the Fund that disbursements would be according to the budgetary allocations agreed with Fund by end December; however, in that case the government would require either a forced sale of state-owned enterprises (SOEs) or else a mini-budget.

The Prime Minister's pre-election pledge to improve health and education has also not received due funding with the IMF stating that actual outturns turned out to be significantly lower. And for those already over-burdened with rising utility costs it would be disturbing to realize that the Fund states that accumulation of power sector arrears target was also missed.

The economic team has claimed considerable success in bringing the current account deficit down, a claim that has been echoed by the Prime Minister. However the current account as a percentage of GDP has not significantly improved - an area of serious concern as stated by the IMF mission leader for Pakistan. It is pertinent to mention that there is a perception amongst the rank and file of Pakistan Tehrik-i-Insaaf supporters that the general discontent is due to the high expectations from the Khan administration for which the Prime Minister himself is mainly responsible. Former New York Governor Mario Cuomo stated that 'you campaign in poetry and govern in prose' so Prime Minister Khan would be well advised to abandon poetry and begin to govern in prose; however, the prose must be his own writing after carefully determining the facts on the ground by taking multiple views into account. Surely he must be aware of the basic fact of Pakistani politics: the cost of the prose, if any, will be paid by him alone as a change in government would see a significant number of his own cabinet members, the evergreen rolling stones labeled as electables, abandoning his ship.