Painting a gloomy picture of the country's economy, some leading economists feared that Pakistan has landed in deflation while others blamed the government for sluggish growth rate.
In spite of growth-conducive environment, the government has failed in a quick exit from stabilisation to move towards growth-oriented policy, a number of economists, former finance ministers and advisors told Business Recorder.
Economist Dr Ashfaque Hassan Khan said that Pakistan's economy is in deflation. Misplaced fiscal and monetary policy contributed to taking the economy in a deflationary phase, he said, adding that pursuance of tight fiscal and tight monetary policy under the ill-conceived IMF programme has indeed contributed significantly to taking the economy into deflation.
Decreased government, businesses and consumer spending on the one hand and tight monetary policy on the other have caused deflation in Pakistan. Once deflation has shown its ugly head, it can be very difficult to break the cycle of deflation, Khan added. To take the economy out of deflation requires a change in fiscal and monetary policy, he added.
He warned that if no corrective measures were taken soon, it will be very difficult to come out from deflationary spiral. He urged the government to avoid presenting a rosy picture of the economy. The data presented by the government themselves speak volumes about the deteriorating conditions of the economy, Khan maintained.
Pakistan's economy has grown at an average rate of 3.2 percent per annum in the last seven years. With country's population growing by 2.2 percent per annum during the period, the real per capita income has grown at an average rate of 1.0 percent per annum.
He said the country's economic growth has slowed, domestic demand has weakened, private sector is shy and not borrowing enough to expand their businesses, manufacturing activities are stagnant, exports are falling, and foreign investors are exiting.
Consequently, unemployment and particularly youth unemployment is on the rise and the labour force participation rate has also declined, suggesting that less people are now looking for a job. These developments are breeding civil unrest, social chaos, breakdown of law and order and weakening the state authority.
Pakistan's economy has either landed in deflation or approaching fast towards deflation and government has to strike a balance between stabilisation and growth, he added.
Former Finance Minister Shaukat Tareen said that recession in country's economy is out of question; however government is yet to embark on a growth-oriented policy.
The government claimed that GDP growth rate was 4.7 percent for 2015-16 and International Monetary Fund (IMF) says it is 4.5 percent while independent economists are ranging it between 3.1 and 3.5 percent, said Tareen, adding that all are agreed that growth was registered. He said inflation and fiscal deficit reduced while revenue to GDP increased and rupee is stable which indicates stability. However the government seems to be directionless and needs to revisit its policy and come up with growth-oriented policy.
Tareen said that agriculture registered negative growth in the last financial year while exports are still declining. Until to overcome these challenges, government performance will be under question mark, said Tareen, adding that China Pakistan Economic Corridor (CPEC) will bring infrastructure development in the country. However, government plan on how to fully utilise its potential and get due benefits from the project is still missing, he added.
Former Economic Advisor to Finance Ministry Sakib Sherani said that despite a growth-conducive environment, especially in the wake of significant decline in oil prices government failed in achieving high growth rate.
He said that GDP growth rate figure given by the government is inflated. The country took more than two years in stabilising the economy but failed in a quick exit towards fast growth. Though the country is not in recession, but growth rate is sluggish/slow down.
The main reason according to Sherani is the government flawed policy to put more burdens on the existing taxpayers instead of brining new tax payers in the tax net.
He said that government claimed that tax to GDP ratio increased by 60 percent but the fact is that 99 percent of it was collected from GIDC, custom duty, sales tax on High Speed Diesel and refunds of exporters.
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