EDITORIAL: The Pakistan Tehreek-e-Insaaf (PTI) government would complete its two years out of the five-year tenure on 18 August 2020, the day in 2018 Imran Khan took oath as the country's twenty second prime minister. In percentage terms, 40 percent of the administration's tenure would have elapsed, a period that cannot be dismissed as the short-term with all blame being laid at the doorstep of previous administrations.
The PTI has been most vocal in laying blame for the massive rise in debt on previous administrations. While this is true as each successive administration has increased foreign debt (from 46 billion dollars in 2008 to 60 billion dollars in 2013 to 95 billion dollars in 2018) and domestic debt (from 3.2 trillion rupees in 2008 to 9.5 trillion rupees in 2013 to 16.4 trillion rupees by 2018) yet the PTI government has not reversed this trend or slowed down reliance on debt: it raised external debt till March 2020 to 109 billion dollars and domestic debt to 23.5 trillion rupees. Moreover, the country's economic team leaders have given the country's external debt requirements for 39 months, the duration of the International Monetary Fund's Extended Fund Facility programme, at 38.6 billion dollars, excluding the 2 billion dollars borrowed to deal with Covid-19. The accrued interest and repayments would no doubt have to be made by the next government especially given that the Khan administration has transformed short-term debt into longer term to stave-off the amount of due repayments at a higher interest rate.
The Khan administration has been at pains to point the finger of blame on mafias operating in several key sectors including petroleum and oil, cement, sugar and wheat. There is no doubt that this assessment is accurate because disturbingly cartels proliferate in this country even in those sub-sectors where the number of sellers and buyers is large enough not to be able to influence prices in other countries; for example, cement, sugar and wheat. Collusion with regulators has strengthened the hands of these cartels and that too is a charge that is widely acknowledged. However, the Prime Minister did not rely on previous studies and almost as soon as he took oath he set up over 40 task forces staffed with sector experts to review sub-sectors, identify the issues, and make recommendations. Those task forces completed their reports latest by May 2019 and bafflingly no reforms have been initiated since.
The Prime Minister during his last address to the National Assembly lamented the mafias operating in the state-owned entities (SOEs), which are reliant on massive annual budgetary injections, money which could be better spent on social uplift. This too is true, however, the delay in implementing the reforms in SOEs rests with the government. Pakistan Steel Mills, for example, has been non-functional since 2015, three years before the PTI government assumed office and to this day a large monthly salary bill is being paid by the federal government - a decision that cannot be palmed off on previous administrations.
The Prime Minister should also adopt a hands-on policy with respect to the budget as many projections can be dismissed as wishful thinking at best. The provincial surplus of 242 billion rupees is not backed by three provincial budgets and Punjab's capacity to meet a surplus of 125 billion rupees is highly questionable while the heaviest reliance on external borrowing placed on commercial loans (to the tune of 647 billion rupees) which are short-term with a small amortization period compared to 503 billion rupees worth of programme loans (budget support); and 211 billion rupees IMF loan for budgetary support it projected for the current year and 218 billion rupees is earmarked as project support for 2020-21.
The Prime Minister's assessment that the budget was difficult reflecting the impact of Covid-19 that has impacted all countries of the world is very credible. However, he must query the budgeted rise in direct taxes from 1.6 trillion rupees in the revised estimates of last year (with three and a half months of Covid-19) and 2 trillion rupees in the current year (with at least the same number of months when economic activity would remain depressed), sales tax from 1.4 trillion rupees in the revised estimates of last year to 1.9 trillion rupees this year given the negative growth in the manufacturing sector and a 2 percent projected growth rate of the economy considered to be over-optimistic by one percent as per the IMF. The Prime Minister is also required to take serious cognizance of the performance of his large cabinet and begins the reform process in ministries/departments/SOEs as well as dealing with pressure groups/mafias operating at will.
Copyright Business Recorder, 2020
Comments
Comments are closed.