PTI Govt’s performance and future expectations
NO doubt when the PTI came to power in Pakistan in August 2018, Pakistan’s economic position was not good.
It had 95 billion US dollars as foreign loans, a heavy amount of domestic loans and the circular debt.
While Pakistan’s imports were 61 billion US dollars, its exports were only 23 billion US dollars with a huge trade deficit of 38 billion US dollars. At that time the currency rate was Rs 123.00 equal to one USD.
During PML (N)’s time, in April 2018, Pakistan’s foreign exchange reserves were only 16 billion USD, the budget deficit was 6.6 percent of its GDP because the income tax payers were only 700,000 people, and the PML (N) and PPP governments had thrived on domestic/foreign loans.
Under this bad economic situation, the PTI government was required to pay back the external debt plus interest of about 12 billion US dollars every year.
Hence, to run the government affairs and to pay back the debt instalments, the PTI government made emergency efforts and got financial assistance from Saudi Arabia, the UAE and China and signed a three-year, six billion USD loan agreement with the IMF and have paid the loan instalments.
Thus, saving Pakistan from becoming a financial defaulting country was the first major achievement of the PTI government.
To meet the IMF’s very strict preconditions to get a loan, Pakistan had to devalue its currency, impose more taxes, increase prices of electricity and gas, did not increase pays/pensions, and removed tax concessions.
As a consequence, the prices of the daily use commodities in Pakistan went up. Then, due to Corona pandemic, the international prices of petrol, gas, edible oils and pulses, that Pakistan imports, increased, which further added to the inflation.
The prices of flour and sugar also went high due to the government’s mistake of exporting these items and also due to the government’s failure to curb the hoarders/profiteers malpractices.
The impact of the prices was further compounded as the relief provided by the PTI government to the poor through Ehsaas programme was insufficient and the subsidized ration scheme through utility stores did not work properly.
Thus, due to very high prices, the poor sections of Pakistani population are annoyed with the PTI government as the public pulse reported by some media channels indicates.
But, the poor Pakistanis would not have faced this high price situation, had the PML (N) and PPP governments widened the country’s tax base to have sufficient domestic income, and focused on increasing exports to gather sufficient foreign exchange reserves to return foreign loans without getting the IMF loans and also paid the import bills easily.
Going to the IMF, devaluation of currency and a large increase in the prices could have also been avoided if the PTI government had requested our CPEC/BRI centred top strategic partner, China, to give a bailout loan package of about 15 billion US dollars at nominal interest rate, or if China had offered the same at its own. It is hard to understand that why it did not happen.
However, due to the peoples’ focus on the inflation, some robust macroeconomic policies adopted by the PTI government, are not being appreciated.
For example, the government is making intensive efforts for increasing the foreign exchange reserves by focusing on the export of textile goods and IT, increasing expatriate remittances, and enhancing tourism. The government is also struggling to increase the agricultural yields through subsidies and inducting the Chinese technology, to reduce prices.
Its focus is also on the documentation of the economy to widen the country’s tax base to about twenty million, taxpayers, to earn sufficient domestic income. The provision of health card is also a great relief to the poor.
The government is working on constructing hydroelectric projects to produce cheaper electricity, to reduce electricity prices.
The construction of CPEC-related motorways and link roads is also being given due attention to facilitate trade and travelling. The cities’ transport system is also being improved, as has been done by operating Karachi green line bus system.
The PTI government’s passage of Local Bodies Acts in Punjab and KP provinces, involving the election of district/tehsil mayors/chairmen through adult franchise and devolving powers/annual budgets to them is a remarkable contribution.
The positive macroeconomic indicators show that PTI government’s socioeconomic policies have started producing results. For example, Pakistan’s economic growth rate worked out by the Economist is 5.17 percent of its GDP.
Pakistan’s exports are likely to be doubled soon and the foreign exchange reserves have already become 23 billion USD, from PML (N)’s 16 billion USD. The trade deficit has been reduced from 20 billion to 9 billion USD. The expatriate remittances have increased to above two billion USD per month.
Hence, after about five years, with the expected increased foreign exchange reserves, better agricultural and industrial production, more exports than imports, and sufficient annual income inflows through the reformed tax system, Pakistan will likely become an economically and defence-wise a self-reliant country to be able to pay the foreign loan instalments easily and finish its domestic loans/circular debt.
And, it will also be able to spend much more on its economic development projects, peoples welfare projects to end poverty and attain prosperity, and on strengthening its defence to play its due role in the region and the world.
The above discussed macroeconomic achievements of the PTI government, in its first three years, are suggesting that PTI government will perform much better in its second term, provided the party wins the next general elections.
But, to win the local bodies/next general elections, the PTI government has to focus on its internal unity and urgently needs to control the prices and dilute the inflation pressure by increasing minimum 20 per cent pays/pensions and providing subsidized rations directly to the poor.
The government should also improve its governance at the grass roots level by improving the dysfunctional civic facilities in the cities/towns, and controlling the corruption in the government departments, as the poor have to bribe to get their jobs done.
The provision of the above discussed relief to the poor is necessary because good macroeconomic indicators will not fetch votes to the PTI as poor voters are only worried about the unaffordable prices.
To make sufficient funds available to provide the aforementioned relief to the people, the government will have to delay or postpone some less important major development projects.
— The writer is also a former Research Fellow of IPRI and Senior Research Fellow of SVI Islamabad.
