EDITORIAL: Three-time former prime minister and the undisputed leader of his party Nawaz Sharif entered parliament for the first time after he was ousted from power in 2017.
His televised address to his parliamentary party showed a mindset still dwelling in 2017 not only by continuing his litany of grievances that he labelled injustices yet again, but also in presenting an economic picture which is contrary to ground realities.
While the 2017 verdict against him was not on his inability to provide a money trail for his and his progeny’s wealth but on what was clearly frivolous even to his most ardent critics - not taking salary from his son’s company in Dubai and declaring it as his income — yet his return on 21 October 2023 with all the protocol of a prime minister restored, a 180-degree change that the average Pakistani can never hope to experience, and the installation of his daughter as Chief Minister Punjab, the first leg in ensuring that she is his political heir, should have alleviated his grievances.
Be that as it may, the picture he presented of economic stability and prosperity in 2017 is clearly not accurate and one would hope that the new administration led by his brother Shehbaz Sharif does not re-engage in policies that not only accounted for the higher ever current account deficit of 20 billion dollars in 2018, an inheritance that compelled the Pakistan Tehreek-e-Insaf (PTI) government to seek yet another International Monetary Fund (IMF) programme, but also led to agreeing to harsh upfront conditions, on four counts: (i) the power projects established under the umbrella of the China Pakistan Economic Corridor (CPEC) favoured the producers (capacity payments irrespective of demand, repatriation of profits and foolishly locating coal units away from domestic coal mines and the port).
In addition, refusal to raise utility rates from 2013-17 and not implement structural reforms in the energy sector (power and petroleum) led to a persistent rise in circular debt, which haunts the country to this day and is a major reason for constant upgrading of tariffs; (ii) not implementing reforms in the tax structure that remains skewed in favour of indirect taxes whose incidence on the poor is greater than on the rich, up to nearly 75 percent of all taxes are collected in the indirect tax mode, and the party’s opposition to taxing the traders, considered a key PML-N support base to this day, and continuing to grant tax exemptions to favoured influencers and provide monetary incentives to them is being cited as the root-cause of a rise in poverty levels to 40 percent; (iii) the rupee-dollar parity artificially controlled through massive borrowing from abroad is the main factor held responsible for the historically high current account deficit in 2018 by economists that in turn led to plummeting exports as a stronger currency not only makes products uncompetitive abroad but favours imports and leads to de-industrialisation; (iv) the contention that Pakistan was in 24th place in 2016 as per GDP Purchasing Power Parity (India was in third place) was made by PricewaterhouseCoopers (PwC), an international and highly reputable accounting firm, which disclaimed responsibility for the accuracy or completeness of the information in the report.
This was not echoed by any multilateral or bilateral and it is telling that with the end of an IMF programme in 2016 with the final quarterly mandated review completed in October that year, in 2017 the country was seeking yet another Fund loan which was deferred by the PML(N)-led government till after the 2018 elections; (v) lower rate of inflation when he was ousted from power compared to today; however, one would hope that someone brings it to the attention of the PML-N Supremo that prices in all countries rise with time (so comparing 2017 prices with today is simply not logical) and that prices and exchange rate controls during his tenure led to the Fund imposing harsh conditions in 2019 as well as in the ongoing Stand-By Arrangement that was brokered last year; and (vi) the Public Sector Development Programme was focused on Nawaz Sharif’s pet projects – roads and power – however today there is simply not enough fiscal space to engage in these mega projects.
What is a source of deep concern to independent economists today is the fact that the 2013-17 inane policies were repeated when Ishaq Dar took over the reins of the Finance Ministry on 27 September 2022, which led to the suspension of the Fund programme as well as refusal of friendly countries to release pledged assistance without going back on the Fund programme with a threat of default looming large on the horizon. This led the then Prime Minister Shehbaz Sharif to bypass the Finance Minister and engage directly with the IMF to secure the SBA.
Copyright Business Recorder, 2024
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