Dr. Tahseen Mahmood Aslam recapitulates the economic activity of the previous political dispensation of Reassessment of economic policies
The Reassessment of economic policies incumbent & PTI government had virtually raised hell by castigating its predecessor PML government and shifted the blame of the current economic decline and bad performance conveniently towards it. In the beginning this line of argument became the favourite mantra of PTI supporting cadres and many of them were convinced that the economic despondency prevailing in the country was essentially due to the less-than competent economic policies of the previous regime. This point was drawn home regularly by the hyperactive propaganda team of the PTI convincing people of the line they have given.
In this backdrop it is imperative to carry out a dispassionate analysis of the economic policies and performance of the PMLN administration. To begin with it must be borne in mind that the PMLN government is history now and analysts have started to evaluate its performance in office. It was quite a time it spent in power and created more controversies than it settled issues. It came to power riding expectation of economic recovery and it promised end of all economic woes. It was specifically oriented to mitigate sufferings created by energy shortage and proclaimed that it will end the power crisis in months. On the political side vulnerability of political institutions were clearly marked as the political governance in the last decade has failed to ensure completion of tenure to any prime minister who came to power after winning the electoral majority. Besieged by myriad problems the political groupings were not in a position to adequately deliver on economic front and their economic agenda remained under cloud.
However, to be fair to the outgoing administration it may be pointed out that Pakistan is much better in terms of macroeconomic fundamentals in May 2018 than when PMLN government took over from the discredited PPP government in 2013 but the inherent weaknesses in the national economic structure remain unaddressed. Due to PMLN dogged by political uncertainties it was not strongly placed to rectify the shortcomings of the complicated economic process.
The most important improvement in the country occurred in security situation but the outgoing PMLN administration cannot claim credit for it though the crippling effect of energy crisis has somewhat been mitigated. The energy shortfall is still haunting the national matrix but it may also be due to the extreme heat experienced by Pakistan in recent history. The industrial sector is getting fair share of energy that has provided it with impetus to add on to economic recovery.
Reassessment of economic policies & PMLN government made full use the high Chinese investment and converted this windfall into a high growth low inflation mode offsetting the disastrous impact of low growth high inflation economic cycle that was presided over by previous PPP government whose economic managers appeared lost throughout the tenure of their government. PMLN was also massively aided by low global oil prices that considerably lowered burden on their foreign exchange reserves and provided room for undertaking economic activity that produced 5.8% growth rate with 4% inflation that turned out to be the highest GDP growth in more than a decade. In this connection they considerably improved upon the PPP dismal growth rate averaging 2.9% with double digit inflation.
The infrastructure improvement exercise has given PMLN a strong slogan to raise in the forthcoming elections. They are well qualified to emphasise upon the benefits of their development work drive and ask for the voters to keep it into consideration while exercising their right to vote. But their development drive was countered by voluminous external account deficit, higher fiscal deficit and continuously bleeding public sector entities that marred all their efforts to improve the economic indicators.
PMLN planned bringing down fiscal deficit down to four percent during their tenure thereby increasing tax-GDP ratio from nine to 15%. But they failed in their endeavour as at the end of their tenure the budget deficit is stuck at 5.5% and is revealed to be at the same point where it was in 2013. The tax-GDP ratio has improved quite a bit and stands at 13% whereas the target was 15%.
Reassessment of economic policies & PMLN claimed that it improved Pakistan Railways and there were even signs of improvement visible but generally the transportation giant remained unwieldy and a lot is required to make it comfortable, reliable as well as profitable. Same is the case with PIA and despite peripheral improvements in its fleet its losses kept on accumulating compelling government to provide it with financial help of Rs.350 billion, a large amount for a financially strapped administration. In the same vein Pakistan Steel kept on bleeding piling up Rs.450bn liabilities and $2.5 billion annual foreign exchange loss to import of steel products. Like previous administrations PMLN government was in a fix to settle this terminal difficulty but could not and left it the way it found it in 2013.
PMLN government very cleverly shifted the burden of excessive losses in power sector from national exchequer to public resulting in exorbitant increase in bills to be paid by the consumers. It was forced to take this step for qualifying IMF conditions of reducing or eliminating subsidies and resorted to gradually levying a series of surcharges on consumers. In the process therefore the consumer had to pay almost Rs.12.50 per unit excluding taxes compared to about Rs.9.30 per unit five years ago despite historically lower international oil prices. The government was pretty insensitive to the cries of people for paying higher tariffs although its former PM Nawaz Sharif sometimes paid lip service to the difficulties they encountered by saying that his government will reduce price of consuming electricity.
PMLN repeatedly claimed that it has increased the generation capacity from 15,000MW to approximately 25,000MW and took credit for inducting fresh capacity of 10,000MW into the national grid but the power crisis refused to go away simply because commensurate transformational, transmission and distribution limitations were not addressed and losses accrued due to these shortcomings remained constant at 19 per cent.
To the chagrin of PMLN administration the increase in energy output temporarily brought relief but the increase in tariffs increased cost of doing business and reduced the competitiveness of Pakistani products abroad. The result was an unstoppable fall in Pakistani exports that reduced foreign exchange earnings. In its bid to meet with IMF conditions the government continuously followed a fiscal policy that proved very harmful to the export sector.
PMLN government failed miserably to produce a single oil and gas exploration block that would procure investment. Instead it focused on short-term measure of importing LNG whose volumes of 1,200 million cubic feet per day now equal the current supply of gas by Sui Northern Gas Pipelines Limited (SNGPL). This mislaid emphasis deprived the indigenous companies with the prospects of exploration and expanding their business. Another drawback of the imported gas option is that the price differential of Rs.1,100 per unit of imported LNG and Rs.600 per unit price of local gas will give rise to an estimated Rs.40 billion debt that had to written off increasing financial burden on the incoming government.
In all fairness therefore it can be deduced that the Reassessment of economic policies economic performance of the PMLN government was a mixed bag that tilted more towards keeping the status quo rather than going for real economic development. Its emphasis on infrastructural development showed the limitations of the vision of its economic managers led by Nawaz Sharif himself. The high levels of borrowing that the PMLN administration resorted to will be very difficult to pay in the coming years but the potential of development was on the way to create a viable economic balance. TW
Dr. Tahseen Mahmood Aslam is an educationist with wide experience