The most carefully watched aspect of the Economic Survey 2021-22 is not the data that is usually limited to March (first nine months of a fiscal year) while more up to-date data has been made available by other entities including the Pakistan Bureau of Statistics (PBS) and State Bank of Pakistan (SBP), but the analytical bias, if any, to reflect the change in the political realities after the vote of no-confidence against the then Prime Minister, Imran Khan, was successful on 9 April 2022.
Contrary to past practice the Survey does not make any overt political statement other than to refer to an inappropriate response of the government that “created problems in import of LNG by the private sector which led to gas crisis in the country, especially in winter.”
Thus heavier reliance had to be placed on data to assess the validity of the markedly different narratives of the two political forces today — the Pakistan Tehreek-e-Insaf against the eleven plus parties’ coalition — baffling for the uninitiated in economic theory.
The PTI maintains success in achieving a robust growth of nearly 5.97 percent and an inflation rate though high when it was dismissed yet a good seven percent below the present rate (not challenged by the incumbent government). The latter claims that the unfunded subsidies of the relief package announced on 28 February 2022 by Imran Khan is the root cause of the current economic impasse.
Two areas of concern however can be gleaned from the data. Literacy rates (10 years and above) did not rise significantly during the Khan administration – from 62.4 percent in 2018-19 to 62.8 percent in 2020-21 with the largest rise in Khyber Pakhtunkhwa (from 52.4 percent to 55.1 percent) followed by Balochistan (from 53.9 percent to 54.5 percent), Sindh (from 61.6 percent to 61.8 percent) and Punjab at 66.1 percent to 66.3 percent. Total expenditure (provincial and federal) current and development for education declined to 1.77 percent of Gross Domestic product (GDP) in 2020-21 against 1.9 percent the year before. Data for the current year has not been compiled or projected.
The financial viability of the much touted Sehat Sahulat Card is not dealt with in the Survey though it does note that each participating province (nil coverage in Balochistan and excepting Tharparkar nil coverage in Sindh) is paying health insurance premiums with the federal government financing the programme in Islamabad, Azad Jammu and Kashmir, Gilgit-Baltistan and Tharparkar.
The public sector health expenditure — provincial and federal (current and development) however is 1.2 percent of GDP – an amount that seems grossly inadequate to meet the one would assume rising premium requirements as the numbers using the card has been rising exponentially.
Stated in bald figures with little political slant the Survey notes that borrowing rose to 1,586.8 billion rupees for budgetary support (July-April 2022) compared to only 642.6 billion rupees in the comparable period of the year before.
Government borrowed 133.5 billion rupees from SBP compared to retirement of 1164.3 billion in the same period of last year and borrowed 1453.3 billion from scheduled banks this year compared to the higher 1807 billion rupees last year thus net borrowing rose to 1795.6 billion this year compared to last year.
And for the first nine months the government financed 62 percent of the budget from domestic sources with bank and non-bank accounting for 66 and 34 percent, respectively. Figures July-March reveal that reliance on external sources rose by 74.6 percent and domestic borrowing by 45.4 percent and Public Sector Development Programme (federal and provincial) rose by 57.9 percent
Comparing the state of the economy in August 2018 and April 2022 impartially the obvious conclusion is that the economy inherited by the Khan administration was perhaps only a tad less concerning than what faces the government today: reserves on 24 August 2018 were 10.234 billion dollars, on 27 May 2022 they were 9.72 billion dollars (though as the international price of oil and products, Pakistan’s major import item, was half the rate prevalent today the purchasing power of the reserves is considerably less at present).
However, during the Survey release finance minister Miftah Ismail stated that 2.4 billion dollars will be credited by China early next week and current account deficit is expected to be around 16 billion dollars by the end of the year against 20 billion dollars inherited by the Khan administration.
Ironically, while criticising the severely contractionary monetary and fiscal policies agreed with the International Monetary Fund (IMF) for fiscal year 2019-20 that accounted for the projection of 1.5 percent growth, redundancies expected to be significant but not quantified, and 13 percent inflation for 2019-20 (an agreement repeatedly publicly slammed by Shaukat Tarin when he took over as finance minister last year – policies that remained largely in abeyance during the pandemic months from end March 2020 till almost end 2021) the incumbent Finance Minister Miftah Ismail has acknowledged that they remain the IMF’s seventh review prior conditions. Inflation was 13.4 percent in April 2022 — the highest since January 2021.
While Ismail stated during the press briefing on the Survey that the country has embarked on a stabilization programme, no doubt a reference to the politically painful increase in petroleum rates, electricity rates and gas prices, however these policies are not sufficient in themselves to assure the success of the seventh review or convince the independent economists of the veracity of his claim. That would depend entirely on the budget that will be presented in parliament today.
Copyright Business Recorder, 2022
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