PTI government is continued to claim that it has put the economy on right track and direction in last one year of its rule. But the official economic statistics contradict these claims. These statics are available on State Bank of Pakistan website to ascertain the authenticity. These statistics are enough to expose the poor performance of PTI government as far as economy is concerned. Let’s examine the PTI government’s performance on seven indicators of economy in last one year.
Inflation as stated on SBP website was 5.8 percent in August 2018; it has almost doubled to 10.6 percent after changes made in the consumer price index. If the CPI index was not changed the inflation in August 2019 would have been 11.6 percent.
Every economist agrees that inflation is an implicit tax on poor as the businesses pass on the impact of inflation to the consumers. Majority of the population in Pakistan lives either below poverty level or on the edge of poverty.
The SBP data discloses that the foreign debt outstanding against Pakistan in September 2018 was $96.505 billion. The foreign debt by the end of June shot up to $106.320 billion.
This is a massive increase of $10 billion in less than one year. This does not include the $3 billion we received from the International Monetary Fund (IMF) and other loans received from multilateral donors and friends of Pakistan after June 2019.
Much hype has been created that the foreign loans were taken to retire the past debt. If that is so, why have our foreign debt liabilities increased?
The total foreign exchange reserves stands at $15.577 billion. This also includes the latest loan of $500 million from Asian Development Bank. The foreign reserves held by the State Bank of Pakistan stood at $8,264.4 million while the net foreign reserves held by commercial banks stood at $7,313.1 million, according to SBP.
The net reserves of SBP on August 24, 2018 were $10.226 billion. In the one year reign of this government, the net reserves with SBP have declined to $8.271 billion.
It is indeed worrisome that even after taking loans of over $10 billion plus $3 billion from IMF our reserves have declined instead of increasing. This is despite the fact that the remittances increased by $1 billion and imports shrunk by $7 billion during this period.
The direct foreign investment has declined 50% in last one year. The Foreign Direct Investment (FDI) in Pakistan stood at US$1.737 billion in July-June (2018-19) compared to the investment of $3.47 billion recorded during the same period, a year ago. The decline in foreign investment is due to the negative perception about the economy of Pakistan.
The PTI government has failed to improve the business confidence in the country to attract foreign investment.
Large scale manufacturing
The large scale manufacturing has seen the biggest fall in the last three decades.
For the first time in 10 years, the growth in large-scale manufacturing (LSM) industries contracted over 3.6% in the last fiscal year ended June 2019 after almost all major sectors recorded reduction in their output, deepening concern about a protracted economic slowdown and a high unemployment rate.
It was for the first time in the past 10 years that the LSM sector recorded a negative growth. Last time in fiscal year 2008-09, the LSM had contracted 6% in the aftermath of global economic meltdown and hyperinflation.
It also reflects that the consumers have been cutting expenses as they do not have the same consumable surplus that they were used to in the past. The consumption of oil decreased 15%. Car sales have declined too for the second month in a row by 41 percent. Cement uptake in the country declined by over eight percent in August 2019 compared with the corresponding month of last year.
Public sector losses
The bleeding of public sector enterprises has increased instead of declining. Public sector enterprises debt and liabilities were Rs1359.7 billion in September 2018. Public sector enterprises debt and liabilities were Rs1621.9 billion in June 2019.
The loss-making public sector enterprises (PSEs) borrowed 36 per cent more from the banks in the outgoing fiscal year over the preceding year.
The State Bank of Pakistan (SBP) latest report shows that the banks’ lending to the PSEs jumped to Rs329.7 billion in 2018-19, which was a record borrowing in a single year. In FY18 it was Rs245bn and Rs254bn in FY17.
Although imports declined by 9.86% in FY19 over the value reported in FY18, exports too dropped by 1%. The lack of export growth is disconcerting. The failure to increase exports at a time when the real effective exchange rate is close to 100 is a cause for concern.
The lack of export growth at a time when exporters receive greater incentives accompanied by weakening currency suggests severe structural issues. The stagnation of exports is a major headache for the government.
In August 2018, dollar was available at Rs123.78 according to the SBP data. In August 2019, the dollar was traded at Rs158.07.
Since our imports are almost double then our exports, weak rupee makes imports extremely costlier. The exports unfortunately did not benefit from devaluation at least in the last fiscal. In fact, overall exports nominally declined in 2018-19.
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17 November, 2019