Adviser to the Prime Minister on Finance Dr Hafeez Sheikh while speaking at Pakistan Innovative Finance Forum organised by Asian Development Bank and Karandaaz stated that the government inherited a threatening economic situation and had to take tough decisions to restore macroeconomic stability.
He stated that there are visible signs of macroeconomic stability though he acknowledged that everything is not rosy and challenges to meet peoples' expectations, particularly with reference to creating more jobs, remain. The visible signs of macroeconomic stability are in: (i) stability in the rupee value vis-a-vis dollar though PKR remains undervalued which is regarded as a major impediment to the manufacturing sector reliant on raw material and semi-finished imports as well as raising the transport costs of goods and people; and (ii) a current account surplus for October though sceptics seek an explanation from the government as to how much of the 3.2 billion dollar deferred oil facility granted by Saudi Arabia was used in October as total imports from the kingdom plummeted from 308 million dollars in the month of October last year to 112 million dollars in 2020 - a 36 percent fall.
It's worth remembering that job creation was a central pillar of the Pakistan Tehrik-i-Insaaf manifesto and the commitment was to create as many as 10 million jobs in five years, with a special focus on providing job opportunities to the youth with an estimated 10 million entering the job market. The bold policies supported by the Adviser and agreed with the International Monetary Fund (IMF) envisage a decline in the growth rate to about 2.4 percent, projected not only in the IMF documents but also in the budget for the current year - a projection that indicates lower Gross National Product growth with a consequent negative impact on economic activity and jobs. While the Adviser feels this rate will be surpassed he has yet to cite any concrete evidence post the budget announcement for this optimism.
And yet, the PTI government insists that employment opportunities would be created as pledged. This is envisaged through the housing project launched by the government in July this year with the Prime Minister committing construction of 110,000 units for the fishermen of Gwadar, 25,000 units in Islamabad and 6,000 units for the residents of AJ&K. It is not yet clear if construction has actually begun though there are reports that Chinese and Canadian companies have expressed interest in building low-cost houses. The construction sector can jumpstart a number of other downstream industries, according to the prime minister, with a 5 billion rupee revolving fund approved by the government targeted to extend up to 20 billion rupees in loans to aspiring home owners. All Pakistan Cement Manufacturers Association Pakistan notes a 6.26 percent growth in local sales in July-October 2019 compared to the comparable period of the year before and 27.95 percent growth in exports during October 2019 compared to the same period a year before.
Dr Sheikh has reiterated the need for the government to come up with a better way of coordinating between the centre and the provinces on the one hand and between international agencies and the government on the other hand as well as among various government departments and ministries. Subsequent to the agreement on the National Finance Commission award in 2010, due for a revision for over four years, all those who held the federal finance portfolio have complained about the shrinking resources of the federal government coupled with the inability to reduce the share of the provinces from the divisible pool as per the constitution. It is unfortunate that the current dispensation too harbours similar reservations, like its predecessors. Fortunately, it does not have the numbers to amend the constitution, however, it can proceed with devolving all subjects identified in the 18th Amendment to provinces and thereby reduce the financial responsibility of the centre. The PTI government continues to spearhead the devolved subjects from the centre accounting for the largest cabinet ever in the country's history, and additionally, the budget for the current year envisages a massive rise in current expenditure, to the tune of around 30 percent, if defence increase is not considered, as well as a rise in development expenditure. This belies the government's claim that it is committed to ensuring fiscal discipline.
The Adviser has further claimed that the government is committed to the role of private sector (large-scale manufacturing sector continues to register negative growth due to a high discount rate and an undervalued rupee), transparency and good governance (with no evidence of any improvement) and cracking down on corruption which remains an objective of the government though there has been no marked increase in the corrupt returning wealth through plea bargaining option from the year before.
And finally, Dr Sheikh has stated that he is not interested in keeping authority to himself and has delegated powers to sector ministries so that they can take decisions swiftly. This must be supported and we urge him that in the same spirit he relinquish his ministry's hold on the Pakistan Bureau of Statistics and make it truly autonomous for the sake of greater credibility of data in the larger national interest.
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