Pakistan: 'PTI govt's bad policies plunged country into severe economic strife'

ISLAMABAD: Pakistan Muslim League-Nawaz (PML-N) central leader and former federal finance minister Miftah Ismail says that the Pakistan Tehreek-e-Insaf (PTI)'s "indecision" coupled with "bad policies" has landed the country in severe economic strife, and the presented budget shows that this government is incapacitated to recoup the drowning national economy.

In a video statement, Ismail said there was no doubt that the new coronavirus caused economic slowdown in Pakistan, like it did in the rest of the world. But Covid-19 economic hit to Pakistan was worse than any other country because the national economy was already in a nosedive because of the PTI's blunders, even before the pandemic. "Blame and cuss the PML-N all day, all night, all you want. But at least, do your basic job of going to the office and collecting taxes. Find ways to reduce expenditure. Dismissing the 18th Amendment as impractical black law is unreasonable. Even if the government wants some amendments to it, it can be discussed for consensus, but that is irrelevant unless the PTI starts doing its basic job of revenue collection," he said.

Ismail said the PML-N government increased annual National Tax Revenues by 14.5 percent compounded.

He said considering that the PML-N left the revenue collection at Rs3,840 billion, continuing on the same pace of 14.5 percent increase, the tax revenue should have been Rs4,400 billion.

But despite adding Rs700 billion in new taxes and withdrawing income tax concessions given by the PML-N, the PTI's Finance Minister, Asad Umar, could not otherwise even achieve the previous year's target collected by the PML-N, and fell short of Rs3,840 billion after setting themselves a target of Rs5,500 billion, he said. Ismail said had the PTI government managed to even continue the speed of revenue growth being practiced by the PML-N, they could have collected Rs5,000 billion.

Even after massive devaluation, the PTI fells horticultural of 500 million in exports than the PMLN, and in the second year, has only barely touched level with the PML-N's export number, the former finance minister said.

Ismail said a major share of the tax revenue comes from the ports through imports. He argued that it was a misconception that the tax revenue shrunk because of a decrease in imports. Ismail said although the PTI decreased imports by 10 percent, that decrease was in dollars.

Whereas due to the 30-40 percent devaluation of the rupee there was a net 20 to 30 percent increase in the import revenue in rupees, he explained. He said the government has now set itself a target of Rs3,908 billion, in which Rs100 billion have been added to grants from the FBR collections, which means the true target set for this year is Rs3,809. This, he said, is even less than what was collected by the PML-N government without the 35 percent currency devaluation.

The former finance minister said the economic slowdown under the PTI government is because of marked reduction in Large Scale Industrial and Agricultural Production and has nothing to do with the current account deficit. He pointed out that the PTI's inability to fulfill its promises made regarding dedicated provision of electricity and gas to industry and agriculture and its exponential increase in policy rate from PML-N's 6.5 to over 13 percent. This increase in rate not only hit industrialists but also the government's domestic borrowing, and the PTI paid Rs2,300 billion in interest on domestic loans, which the PML-N paid Rs1,500, he said, and added that the government would need to pay around Rs2,800 billion in interest on domestic loans this year.

This means the government will pay Rs1,500 billion more due to its interest rate increase "blunder".

This Rs1,500 billion is more than Pakistan's defence budget, more than the revenue budget and more than the development budget, he said.

But the government does not seem optimistic about lowering interest rate as it has earmarked Rs2,900 billion for the debt interest already, he said.

Ismail pointed out that this PTI government had increased Pakistan's total public debt by 50 percent in less than two years. According to the State Bank of Pakistan, when PPP left power, the debt was Rs14,292 billion; when the PML-N left government, it was Rs24,953 billion. The PTI has added Rs10,254 billion to public debt in less than half of its term by March 2020. By the end of this month, the public debt will be Rs37,000 billion.

Talking about the GDP growth, he said, had PTI not dented manufacturing and kept PML-N's 5.8 GDP growth going, the Covid-19 economic fallout would have decrease it by 1-2 percent max. But because the PTI's policies reduced the GDP growth to 1.9 in its first year, it has now plummeted to - 0.4, which experts say will be - 1.5, he pointed out.

Budget for a country in negative growth is entirely different from the budget under normal circumstances. But this budget by the PTI in no way reflects that. The government has further cut the already slashed PSDP from Rs700 billion to Rs650 billion, whereas with negative growth, it should have increased it, he said.

Increasing the PSDP and starting development projects to re-employ workforce rendered jobless due to factory closures was a crucial opportunity missed by the government, he opined. He said the growing deficit is one of the most worrisome issues.

The PML-N left the budget deficit at 6.5 of the GDP, while the PTI has jacked it up to 9.1, and there is high likelihood of it going into double figures, which is catastrophic for the country. The PML-N central leader said these measures by the PTI led to suppressed demand and reduction in consumption but the government did not even try correcting that with a reduction in income tax or the GST to boost demand and public expenditure.