Government's economic policies to land country in another IMF programme: PTI

The present government economic policies would land the country in another International Monetary Fund (IMF) programme because the repayment of loans taken during the last two and half year from next year would deplete foreign exchange reserves swiftly as a result of collapse in foreign direct investment and exports. This was stated by Pakistan Tahreek-e-Insaaf (PTI) leader Asad Umar addressing a press conference here on Thursday over the mid-term review of the government performance.
He stated that of the 30 months tenure of the present government, there was consistent decline in exports during the last 21 months as well as historically low FDI created serious problems as huge repayment obligations of around $9 billion are approaching in next couple of years. He said that the government has failed to deliver on its manifesto promises and government wrong polices have risen the country debt by Rs 4,700 billion, exports declined to lowest since 2010, investment is stagnant, foreign direct investment is at lowest level during the last 12 years.
Quoting data of international agencies as well as State Bank of Pakistan (SBP) data, he stated that according to them unemployment has risen sharply in the country during the last two and half year largely because of underperformance of manufacturing sector and worsening business environment.
He said that the finance minister-led economic team has failed to bring about any improvement in the country's economy and their entire focus remained on taking loans at expensive rate. He said that Egypt with B3 rating had borrowed at much less rate of 6.13 per cent while with similarly rating of B3 Pakistan has borrowed at 8.25 per cent. Asad Umar added that with the decline in exports, Pakistan foreign exchange reserves would remain unsustainable.
He said that the tenures of Sharif and Zardari during the last eight years would prove another lost decade for the country with people having no employment opportunities, no access to basic necessities of education, health and clean drinking water.
He further stated despite the government tall claims, the facts show a rapid decline in investment and exports which are key drivers for any economy. Sharp increase in cost of doing business, rampant corruption and predatory taxes on citizens are hurting the economy and leading to a sharp increase in the number of unemployed workers which has increased sharply to over five mission - a net increase of over 1,500,000 in just two years.
Asad Umar stated that new investment into the economy remains stagnant at only 15 per cent of GDP although the government completes half of its tenure - the lowest recorded for any government in our history. The foreign investment (FDI) has virtually collapsed, recording a 50 per cent decline in fiscal year 2015. Despite investments from China coming for the China Pakistan Economic Corridor (CPEC), the overall FDI fell to just US $851m in 2015 - the lowest recorded in the last 12 years. He said that the government instead of serious reforms continues to make the situation worse by predatory taxes, rampant corruption and mini-budgets.
The PTI leader stated that farmers of Pakistan have been caught between decline in prices of their end product, increasing input costs and stagnant yields and in the case of cotton sharply reduced output. As a result, the agriculture economy of Pakistan has suffered badly and the small farmer has borne the brunt of this deterioration.
According to the World Bank, the cost of doing business has increased sharply in the first two years of the PML-N government with Pakistan's ranking slipping to 128 (out of 189 countries) in 2015. Similarly, the World Economic Forum 2015 report shows that rampant corruption, worsening energy crisis and high cost of paying taxes is eroding the competitiveness of the industry in Pakistan.
Since coming into power, the government has made unprecedented increase in indirect taxes on citizens in the shape of higher GST, regulatory duties and withholding taxes on all essential goods & services. Contrary to its manifesto, the government increased GST rate to 17 per cent from 16 per cent. He said that tax rate on diesel has been raised to 51 per cent, which is basic input for agriculture sector, without approval from the parliament.
Instead of broadening tax base, the government has shifted the entire burden of taxes on the citizens through indirect taxes. The indirect taxes (inclusive of WHT) stood at 9.7 per cent of GDP (88 per cent of total tax collection) as compared to 8.4 per cent of GDP in fiscal year2013. On the other hand, direct taxes (excluding WHT) continue to decline and the government refuses to tax the powerful elite and reform Federal Board of Revenue (FBR).
The government has added over Rs 4.7 trillion in public debt in just 28 months in power and consequently, every Pakistani citizen is now under a debt burden of Rs 112,000 (as of September 2015) compared to Rs 85,000 in May 2013. The government added a record debt at record high cost. The $500m Eurobonds in September 2015 are priced at 8.25 per cent, making them the most expensive borrowing done by any country in the world in 2015 as compared to $1.5 billion raised by Egypt at 5.9 per cent and $650 million Sri Lanka at 6.1 per cent.
Finance Minister Dar has taken loan of $500m through issuance of Eurobonds at 8.25 per cent, which are most expensive debt ever raised by any Pakistani. On energy issue, he said that the present government came into power with slogan to resolve the energy crisis and make a 'Roshan' Pakistan. However, the power and gas shortfall have increased and moreover, the government imposed new taxes (including tariff rationalization surcharge of Rs 1.54/unit, debt servicing surcharge of Rs 0.44/unit). He said that according to the SBP Annual Report 2015 the 'new tariff structure will "address" the circular debt issue by transferring the entire cost of poor governance and inefficiencies in the power sector to end-users'.
He said that the government made no progress to improving governance, reducing transmission and distribution losses, bringing a greater transparency in buildup of receivables. Instead, the entire burden of power theft and inefficiencies has been transferred to the honest consumers through record increase in electricity bills.
The government has totally failed to reduce the power shortfall (loadshedding) in the country. According to NEPRA report, the power shortfall increased to 4,743MWs in 2015 from 4,227MWs in 2013.
Similarly, Asad Umar stated gas shortfall has reached alarming levels of over 2 BCFD in 2015, from 1.6 BCFD shortfall in 2013. Despite a record increase in gas prices and import of the highly controversial LNG, the government has been unable to address the rising gas shortfall, with negative fallout on industry and consumers. Big question marks remains over the non-transparent manner in which the LNG supply agreement has been reached without open bidding and in complete disregard of PPRA rules.