Improvement in economic conditions

The PTI government is bent upon to tell all and sundry that the economy of the country has improved a lot since its assumption of power. According to its latest statement, the Finance Ministry has rejected the assertions that the unemployment rate is as high as 8 percent, one million jobs have been lost, prices of food items have increased by 24 percent and there was addition of 10 million people falling below the poverty line. These claims were made without any corroborating evidence and real picture would only emerge after the availability of latest facts and figures compiled by the Pakistan Bureau of Statistics (PBS). According to the ministry, economic conditions, in fact, are improving with every passing day. C/A deficit was reduced by 72.0 percent during July-January, 2020, workers' remittances had increased by 4.1 percent, FDI had grown by 65.7 percent, exports had expanded by 3.6 percent, fiscal deficit was contained at 2.3 percent and tax revenues had risen by 17.1 percent. The government had allocated Rs 125.18 billion for 10 billion trees that would create two million jobs. PSDP had been increased from Rs 561 billion to Rs 701 billion during FY20 and its authorisation so far had soared to Rs 464.7 billion as on 28th February, 2020 as against Rs 365.23 billion last year. The government had discontinued borrowings from the SBP and the central bank had raised the policy rate to 13.25 percent to compress aggregate demand. Subsidy to the USC had been given in order to ensure availability of affordable basic food items to the common man. Government had also made various targeted poverty reduction interventions through Ehsaas programme, BISP, Sehat Sahulat programme, Waseela-e-Taleem programme, Tree Tsunami programme, Clean and Green Pakistan etc.

The claims made by the Ministry of Finance appear to be aimed at blunting the constant criticism of the opposition parties and various analysts on the economic performance of the government. This is obvious from the fact that while the government has undertaken a tough stabilisation programme with the assistance of the IMF under the EFF, the opposition parties are not prepared to let the government do its job properly and provide enough time to complete the stabilization process. There is hardly any day when the government is not described as inefficient, incompetent and unable to manage the economy and provide good governance. While we can understand the compulsions of the government to indulge in such a tit for tat, the claim of the government conveyed through the Finance Ministry about the improvement in the economy is also only partly true. For instance, the government is fully justified to say that current account deficit of the country has been reduced to a great extent, workers' remittances are up, exports have increased and there is a significant rise in the collection of taxes by the FBR but it needs to be understood that items like workers' remittances, exports and FDI are basic components of the C/A balance and if the government is to take credit for improved C/A balance, other items should not have been included in the statement to take credit twice. Moreover, the assertion of the Ministry of Finance that tax collections have increased significantly during FY20 is not correct. These collectionsare only marginally above the expected increase in nominal GDP (at current prices) and sharply lower than the projections made in the beginning of the year and revised subsequently. To counter the criticism with regard to "growing" unemployment and "deepening" poverty, the government has taken the cover of non-availability of data but the evidence on the ground and rough indications suggest that such a criticism may be justifiable. Moreover, to say that inflationary pressures in the economy have eased seems to be little pre-mature. Such a claim cannot be made on the basis of data for one month CPI or few weeks' SPI which unfortunately seems to be the case.

The weakest area of the economy at the moment, however, is the poor growth rate. The economy of the country was earlier estimated to grow by about 2.0 percent but this estimate is likely to be revised downwards due to the spread of coronavirus. Ministry of Finance has not mentioned it in its statement due probably to paint a rosy picture of the economy but the Asian Development Bank in its latest assessment has said that coronavirus outbreak could cost the Pakistan economy in the range of dollar 4.95 billion and dollar 16.38 billion. This would be a great loss and push the growth rate downward significantly, leaving little hope of any rise in the per capita income during FY20. Anyhow, we would urge upon the government not to backtrack on the present reform process but to be firm on its agenda to stabilise and improve the prospects of the economy,with or without the guidance and assistance of the IMF.