The incumbent government has successfully managed to present the federal budget 2018-19. What is however different this time is the unprecedented tax relief given to the middle-income group especially the salaried class. The incumbent government also availed the budget-presentation opportunity to drum beat the economic achievements that it has achieved in its current five-year tenure.
It projected its five-year economic performance by stating that as compared to 2013, GDP jumped from 3.6 percent to 5.8 percent with a target of 6.2 percent for 2019, credit to farmers increased from Rs 196 billion to 570 billion with a target of Rs 1000 billion for 2019, inflation dropped from 7.98 percent to 3.68 percent, foreign exchange reserves rose from $11.8 billion to $16.9 billion, per capita income increased from $1333 to $1640, and debt swelled, albeit marginally, from 60.2 percent of GDP to 61.4 percent. Also a 100 percent revenue growth was registered in the last five years.
The opposition rejected the budget and government's claims of achieving economic excellence; it even demanded the government declare 'economic emergency' a demand rejected by the government. Unfortunately, however, the opposition stance does not go well with the doctrine of 'Pakistan First' as calls for 'economic emergency' will create uncertainty in the already fragile economic dynamics of the country, on account of which country's businesses and people will suffer.
The budget 2018-19 is a road map for the year in question and can be adjusted multiple times during the year as per the evolving ground realities.
The IMF has taken note of the growing economic and political uncertainty in the country. In its regional economic outlook update published this week, it has projected that Pakistan's growth will moderate to 4.7 percent in fiscal year 2019 from 5.6 percent in 2018.
The IMF notes that "an increase in macroeconomic vulnerabilities and domestic policy slippages have weakened Pakistan's economic outlook, with growth now projected to moderate to 4.7pc in FY19".
In January, the IMF and the World Bank expected growth in Pakistan to pick up in 2018-19.
The government too targeted a 6.2 percent growth for fiscal F19 in its latest budget. In the meantime, there has been slippages.
The IMF report credits improved energy supply, investment related to the China-Pakistan Economic Corridor, and strong credit growth for the raise in Pakistan's growth to an estimated 5.6 percent in the outgoing FY18, from 5.3 percent last year.
As always, the report places Pakistan among the countries where "delays in implementation or completion of structural reforms and political and policy uncertainty" continue to weigh on growth.
Pakistan is also placed among the countries where upcoming elections and a more challenging political environment could slow the reform process.
"A high perception of corruption and lack of transparency in some of the regional countries could not only affect macroeconomic outcomes directly, reducing investment and productivity, but could also heighten social tensions and hinder reform," the IMF warns.
The report notes that some countries in the region are slowly taking steps to improve governance and transparency while additional efforts are also being made to bolster the business environment, with Pakistan recently strengthening its bankruptcy framework.
The IMF lays emphasis on debt servicing. "This burden will increase since financing costs are likely to rise in line with the expected tightening of monetary policy in advanced economies," says the IMF, while urging borrowing nations to focus on efforts to reduce debt.
Over the years, Pakistan has depended on the IMF. It has always been a debate whether or not our perpetual dependence on the IMF is a curse or a cure.
Our economic wizards argue that if we now approach IMF we are likely to get a frosty reception. They argue that a return to IMP programme could possibly include the following difficult performance criteria
- A hefty adjustment in the rupee's value;
- Privatisation of power distribution companies, PIA and PSM privatisation is the unfinished agenda of the previous programme;
- Sincere implementation of prior actions and measures;
- The other targets and performance criteria could expected to be more stringent than under the previous programme.
The negotiations with the IMF, if any, are not likely to happen before the next elected government settles down by the end of this year as the IMF is not likely to negotiate with the caretaker setup nor is it the mandate of the caretakers to move the IMF. To summarize, the landscape of Pakistan's economy and the five-year scorecard of PML-N government, one can say that there has been significant improvement in performance indicators that it inherited in May 2013 from the previous regime. It, however, fell short in the privatisation or restructuring of loss-making business entities in the public sector and timely and affordable availability of power to the consumers. Moreover, it could not manage the declining exports and increasing imports. its profound failure in this regard caused a woefully widening current account deficit and foreign exchange shortfalls.
Rupee devaluation was an act of sheer folly. It did little to enhance exports or serve the whatsoever purpose it was meant for. The then Finance Minister, Ishaq Dar, had worked harder to manage the value of PKR in order to create the perception of a stronger economy. The economy of a country belongs to its citizens. To them it means jobs, education, healthcare and prosperity. This is not an area where the incumbent government and the opposition should play vote politics lest the public lose its confidence in the political system and its political leaderships.
(The writer is former President of Overseas Investors Chamber of Commerce and Industry)
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