Analysing Pakistan’s economic management
A good economic management and deliverance of good governance is said to be the beginning and end of everything in a nation state. Indeed, the strong economy is the source of national strength and form the basis for a knowledgeable and resilient work-force of a nation. Unfortunately, despite heavy taxes and exceptionally high levies on all goods and utilities in Pakistan, there have been downward trends in the economy of Pakistan since last few years. Despite being an agrarian economy, the essential food items are rapidly getting out of the reach for over 50% Pakistanis. Inflation is record high and developmental sector is found wanting in all areas of socio-economic development of the state. Indeed, not the resources but the poor economic management and bad governance is considered to be the real cause of deteriorating economy of Pakistan. Primary responsibility of the governments was to identify and prioritise the problems facing the state and society of Pakistan. Identifying the problem areas at an early time-frame and focusing to resolve them by all possible means and through better economic management could have saved the state from on-going economic crises. But, neither the problems identified nor any serious efforts were made to overcome the economic crisis. Once confronted by financial challenges, the government resorted to rush to IMF for a possible rescue which provided money with heavy interest rates and pre-conditions like impositions of heavy taxes and levies on to the masses.
While analysing the economic mismanagement of last few years; in 2019, IMF provided 39-months loan to Pakistan under the Extended Fund Facility (EFF). It was a total of $6 billion loan provided to support economic reform programme of Pakistan. Despite this loan facility of IMF and other loans from many friendly countries, PTI Government could neither reform the national economy nor could provide any relief to masses. Rather, the foreign loan rose to $129 billion and people were confronted with extreme economic crises under high taxes and increased levies. In 2018, Pakistan’s external debt was $93.531 billion raised from d $86.031 billion in 2017. These figures are sufficient to demonstrate the real picture of the performance of previous Government of Mr Imran Khan.
Though the GDP of the country was shown over 3 per cent for the fiscal year 2021/22 yet the economic state of the country remained extremely uncertain until April 2022. It is worth mentioning that, for the first time in the history of Pakistan, its GDP growth was negative (0.38% for the fiscal year 2019-2020). The federal budget 2020-2021 was based on assumptions and presumptions and so was the engineering made with budget estimates for 2021/22. The GDP growth rate for fiscal year 2017-2018 was over 4.5% which means there was better economic management until 2018. As per IMF, Pakistan’s external debt is $126 billion in March 2023. It has debt repayment pressure of $4.5 billion in June 2023. The domestic debt has reached to Rs54.94 trillion in March 2023 and if liabilities are added, it reaches to Rs. 60 trillion in June 2023.
Prime Minister Shahbaz Sharif and his coalition government could not overcome the economic crises of Pakistan and budget 2022-23 didn’t provide any relief for the people of Pakistan. Now once the preparations for budget 2023-24 are in its final stages, the economic health of Pakistan seems to be even worse. During last one year, the annual inflation of Pakistan was recorded as 37.97% (38%) highest in the history of Pakistan. Indeed, inflation in Pakistan is highest in Asia which surpassed even Sri Lanka, a country defaulted in 2022.
It is worth mentioning that in 2017 inflation rate was 4.15% which was further reduced to 3.93% in 2018. The inflation had risen to 6.74% in 2019 and reached to 12.50 %in March 2022. Thereafter, it constantly increased to reach 38% in May 2023. It is evident that, if PTI Government left the inflation at 12.50% before regime change, the incumbent Government is responsible for the increase in inflation after April 2022 to current stage of 38% in May 2023. The grim economic situation facing the state of Pakistan has reached to a level where provinces and institutions are unable to manage their annual expenditures. Similarly exchange rate of PKR versus US Dollar (1 USD= 300PKR) is highest in the history of Pakistan. It remained almost constant from 2013 to 2018. Owing to unknown reasons, the incumbent government has not been able to negotiate and finalize the deal with IMF to unlock $1.1 billion since last over a year which should not have been a big issue. Nevertheless, federal budget for financial year 2023-24 is likely to be of Rs16,600 billion (Rs16.6 trillion). It will be a deficient budget in which Pakistan will have to pay $7.56 billion in debt servicing in the next fiscal year. Besides, in order to pay the interest on its debt and to repay some of the principal amounts, Pakistan will be borrowing more money from local and international sources which will be problematic. FBR is unlikely to meet the target of collecting Rs. 8,200 billion as revenue collection. Moreover, government is planning to raise Rs2,396 billion from the non-tax revenues. The government has the plans to secure at least Rs1,804 billion from other countries or financial institutions whose attainment is questionable.
Unfortunately, owing to economic mismanagement in last five years, Pakistan is facing numerous economic challenges. Any further economic down-fall will means a lot for nuclear Pakistan. In order to overcome economic problems of Pakistan, government must undertake a massive restructuring of economic management of country. Besides, government must bring innovation and dependence on domestic sources and appoint home-grown economic managers who are well versed with national economic potentials of Pakistan.
— The writer is Professor of Politics and IR at International Islamic University, Islamabad.
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