Economic challenges for next govt

The economic challenges for the next elected government will be more formidable than those inherited by the incumbent government in May 2013. It was then long hours of power shutdown, loss-making public sector entities, mounting circular debt, poor economic and political governance. Much of all this stays; and many more economic woes have been added to the country's plight during the last five years and the process continues in the remaining few days of the incumbent government's five-year tenure.
Federal Finance Minister Miftah Ismail in his budget winding-up speech announced that a 24 billion rupee export package will be announced in the remaining two weeks of the tenure of the Abbasi-led administration. According to him, "we have decided on a new export package to further boost exports which had been on the downside during the last few years and are now showing some growth subsequent to measures taken by the incumbent government as well as depreciation of the exchange rate."
Earlier, the government announced a people-friendly budget with unprecedented tax benefits which is perceived as a means to woo voters and a challenge to the new government to reduce the revenue gaps by other means.
The budget and the export package are not likely to be implemented given the sheer massive scale of benefits extended to all major groups in the country while setting the expenditure priorities - benefits that cannot possibly be funded given the accompanying massive tax relief measures.
The biggest challenge to be encountered by the new government is Pakistan's external debt and liabilities which have soared to a record $91.8 billion, showing an increase of over 50% or nearly $31 billion in the past four years and nine months.
The external debt and liabilities of $91.8 billion as of March-end suggest that the figure may touch $100 billion very soon as the country faces grave challenges in meeting growing external financing requirements. Pakistan is scheduled to make some bullet debt and interest payments in the last quarter (April-June) of the current fiscal year.
The other big challenges are the loss-making public sector enterprises (PSEs) that continue to bleed. These have suffered a cumulative loss of Rs 3.746 trillion over the last five years.
Also, during the tenure of Pakistan People's Party administration, the scenario was not favourable either as these state-owned enterprises recorded an average loss of Rs 400 billion annually.
After the PML-N took over in May 2013, losses at state-run units continued to mount. They increased to Rs 495 billion in fiscal year 2013-14, Rs 570 billion in 2014-15, Rs 712 billion in 2015-16, Rs 862 billion in 2016-17 and crossed the trillion mark in 2017-18, recording a huge loss of Rs 1.109 trillion. The losses shall further mount in 2018-19 as no measures have been taken to arrest them.
The incumbent government did achieve success in putting on ground new power plants based on LNG and coal and some renewable energy. But its benefits could not be passed on to consumers on account of power evacuation limitations of the network and the cash flow on account of circular debt.
It is estimated that some 40 percent of the Independent Power Producers (IPPs) are non-operational due to non-payment of dues as circular debt has exceeded Rs 500 billion and is likely to further escalate due to low recovery and a higher incidence of power theft across the country.
The country's industry, already burdened with unsustainable high cost of electricity, is set to face load shedding of 10 to 12 hours a day during the holy month of Ramazan because of the above-stated reasons.
Does any of the political parties have the in-house competence to ably manage country's economy? The answer apparently is in the negative. Largely, our political parties are neither sensitive to nor knowledgeable about the dynamics of state economy. Their criticism is limited to point-scoring and vote politics.
With elections less than 10 weeks away, none of the political parties has truly outlined its economic agenda. Some have given outlines of the same but without providing any road map. The next government would have to take some bold decision whether or not it should move the International Monetary Fund (IMF). If it decides to move the IMF then its recipe would be tougher with compliance to leftover matters like privatisation of loss-making public sector entities, further depreciation of rupee, withdrawal of subsidies and on top of it more conditionalities related to the CPEC financials and more.
The incumbent government is also leaving behind some pluses and one of the great pluses is that in its five-year tenure the GDP of the nation has recorded a systematic economic growth with 5.5 percent recorded in 2017-18 - being one of the highest in the region and the highest in 10 years in Pakistan.
The challenge for the new government is to capitalize on the pluses of its predecessor and work on the shortfalls left behind by it.
The success lies in the state economic governance which is a combination of competence, knowledge, economic, political statesmanship and a strong will to deliver. A party that can deliver in these areas will be the ultimate winner.
(The writer is former President of Overseas Investors Chamber of Commerce and Industry)