All the economic indicators are pointing to the fact that Pakistani economy is in serious trouble. All the prominent economists of the country are saying the same. But PTI government led by PM Imran khan is not ready to accept this fact. PTI government and its economic team is still claiming on daily basis that economic stabilisation has been achieved and economy is going on the right direction.
The economic team of PTI government is telling us that how it is going to solve the problem of ever increasing budget deficit. The budget deficit has reached at all time high at Rs 3.45 trillion. The debt has reached Rs 40, 214 billion. That is 104% of Pakistani GDP. It is the first time in the history of Pakistan that the total debt and liabilities stands more than the GDP.
Despite all the efforts of government’s revenue collection team, the revenue is continued to fall. The government is going to miss the revenue collection target in second straight month. It is most likely that government will not be able to achieve its annual target of Rs 5550 billion. A big shortfall in the revenues expected at the end of fiscal year.
All the measures taken by the FBR to increase the revenues and to expand the tax net is working. There is still wide distrust exists between the tax machinery and business class. The problem is that the government is not ready to accept the simple fact its measures and steps to stablise the economy is actually hurting the economic growth. The business confidence is running low. The foreign investment has dropped to half compare to last year. The domestic investment is also on the hold. There is wide spread fear in the investors and business community because of aggressive accountability drive in the country.
When Asif Zardari made his statement in the national assembly that NAB and economy cannot go hand in hand then many people made fun out it. Now the government is trying to amend the NAB law to exclude businessmen from NAB jurisdiction. Finally, PTI government realised the seriousness of the situation. That is what Asif Zardari was mean when he made that statement.
Many sectors including automobile, cotton, textile, construction and others are in crisis and hundreds of thousands of workers have lost their jobs as the result. The inflation and unemployment are on the rise and no serious effort has been made by the PTI government to control them.
The government will not able to achieve the revenue target without the recovery in the economy. The economic growth has slowed down to below 3% in the current financial year. It is a big fall in the economic growth. The economic slowdown has helped the government to decrease the imports. The rising dollar has also made the imports expensive and lowers the demand. As the result the trade gap has narrowed. But exports are not rising to the expectations. There is just slight increase in the exports.
The inflation is rising and making life of ordinary people more difficult. The government continue to rise the interest rates which making the borrowing much more expensive for the private sector. The stock market has fallen below the 30,000 points mark. Billions of dollars have been wiped out from the stock market. Two years ago, Pakistan stock market was one of the best and most attractive markets in the world. Its volume reached near to 54,000 points. Now it has come down to 30,000. The government is not seems keen to take measures to improve the stock market.
One might have to travel more than four decades back in time to find another year in which the fiscal deficit — the gap between revenues and expenditures of the federal government — was larger than 8.9pc of GDP, which is where it landed by end of FY2019. Despite the tall claims of austerity and expenditure cuts, the government expenditures continue to rise. The gap between expenditures and income is widening even bigger.
The government failed to control the expenditure despite making 25% cut on the development budget and 30% cut on higher education budget. The brunt of the curtailment in expenditures during this year was borne by development spending, which is one big reason why economic growth ground to a near halt as well.
The Dawn editorial published today summarise the economic situation in these words, “all through the year the government reminded us incessantly of the difficult economic situation it had inherited, often describing it in apocalyptic terms, such as the “worst economic crisis in history. But at the end of the fiscal year, the blame for the dismal outturn lies in one place only: with the government in power.
There was a lack of focus on economic priorities throughout, repeated entreaties for more time, repeated reminders that tough choices lie ahead followed by repeated U-turns on whether or not to approach the IMF, and even rhetoric of some sort of revival underway from February onwards.
The record setting fiscal deficit is the cost of losing focus on the economy. It results in higher borrowing, higher debt service costs, and further crowding out of the private sector from the country’s debt markets. In short, it has cascading consequences that can take years to pay off”.
The government should listen to the sane voices of leading economists of this country to address the sinking economy. Government should realise the seriousness of the situation and act upon accordingly.
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14 September, 2019