- Need for a reset
After restructuring and reforms (read more taxes and economic hardships) during the past year, 2020 was touted as the year of consolidation and economic recovery. But ironically the very first month of the year has proved to be a harbinger of bad news and further pain for the masses.
According to the government’s own statistics, inflation jumped to a whopping 14.6 percent, the highest in the past twelve years.
Although, some independent economists claim that, based on their research and empirical evidence, the actual figure is closer to 20 percent and even higher for food items.
Shortage of flour and sugar in the market resulting in prices touching record highs was further bad news for the common man. To make matters worse, there is a whopping shortfall in the FBR’s (Federal Board of Revenue) revenue targets.
Collection will remain well short of the revised target of Rs 5.270 trillion. Only in January the shortfall was Rs 104 billion.
The visiting IMF team currently in Islamabad has just concluded its performance review and is now engaged in policy review. FBR officials have conveyed their inability to achieve the stipulated target urging for a further reduction in targets.
More bad news is the unravelling of the economic dream team drawn from former IMF apparatchiks and the private sector. Chairman FBR Shabbar Zaidi started having ‘panic attacks’ after the January figures came in. He has since proceeded on an indefinite medical leave.
These so-called mafias are held responsible for a sudden hike in sugar prices and creating artificial shortages. It hardly matters that Khan is in power now for one and a half years. Hence any mafias operating in the country are on his watch.
Notwithstanding the steep target, he had not done badly by achieving around 15 percent growth in revenue collection. But in the backdrop of a failing economy it was virtually next to impossible to achieve the whopping target.
Large scale and medium scale manufacturing sectors slowing down and expected shortfall in agriculture products, especially cotton; achieving a quantum increase in revenue was virtually next to impossible. Only to cite one example, the auto sector’s demand has fallen by 40 percent. Its upstream and downstream effects are bound to hurt the economy.
Current account deficit has been substantially reduced mainly owing to a recessionary economy. But this has also adversely affected the revenue stream.
Further bad news in January was exports taking a dip of $61 billion on year on year basis; a decline of almost 4 per cent. The advisor on commerce to the Prime Minister Razak Dawood is being reportedly put on the mat to explain why it has happened. Conversely, Pakistani exports only slightly increased in 2019 on year on year basis despite a 40 per cent devaluation of the Rupee.
There is no rocket science involved in finding out the reasons for the economy not picking up despite best efforts of the policy makers. Undoubtedly it is shrinking thanks partly to IMF conditionalities.
Record high interest rates and double-digit inflation combined with just a bare two percent plus projected GDP (gross domestic product) is a recipe for disaster.
According to eminent economist Dr. Hafeez Pasha, owing to high interest rates, the government will be barely able to service it loans. He has ominously warned that the country’s security and defence needs will have to be financed from borrowed money.
Unsurprisingly the government has decided to borrow Rs 1.9 trillion by July for ostensibly financing its fiscal deficit from January to July this year. The debt acquisition limit stipulated under the Fiscal Responsibility and Debt Limitations Act has already been grossly violated.
A government that castigated the Sharif regime for miring the country in external debt has borrowed relentlessly just to remain afloat.
The IMF team has patted the MoF (Ministry of Finance) for achieving most of its stipulated targets. Nonetheless in order to get the third tranche of the lending agencies’ $6 billion Extended Fund Facility (EFF) the government will have to meet more of its conditionalities.
Gas and electricity rates, not to mention indirect taxes are expected to be hiked further.
In the process the hapless common man and even the middle classes will be further crushed. Incremental hikes in utility rates and taxation can prove to be the proverbial straw.
Reportedly a mini budget is in the offing. Although denied by government spokesmen, finance advisor Dr. Hafeez Sheikh indirectly confirmed the eventuality. When pressed during an interview he candidly remarked, “Economic management does not mean you give a budget once a year and then you sit.”
As the country faces an existential economic threat, it cannot be business as usual. A reset is badly needed. But instead PM Imran Khan and his under-19 team are still fixated upon his oft repeated mantra: “the previous looters left a bankrupt economy”.
His various spokespersons on the economy have now coined a new narrative claiming that various ‘mafias’ have ganged up against the PTI (Pakistan Tehreek e insaf) to bring it down.
These so-called mafias are held responsible for a sudden hike in sugar prices and creating artificial shortages. It hardly matters that Khan is in power now for one and a half years. Hence any mafias operating in the country are on his watch.
The malfeasance of the government is evident in virtually every field. The opposition’s backs to the wall; the ruling party is imploding from within.
The ousted finance minister (now minister for planning) Asad Umar wants to make a comeback. In the realm of palace intrigues the knives are out for Jahangir Tareen, the prime minister’s point man who Umer blames for his ouster.
Relations with coalition partners are also at an all-time low. The Chaudhrys of Gujrat are livid that the fresh agreement brokered mainly by Tareen was thrown out of the window as soon as he went abroad for a brief break.
They have expressed deep reservations about another committee headed by the Punjab governor to open fresh talks with them. Perhaps the only glue that is making coalition partners of the PTI stick is the ubiquitous establishment.
PM Imran Khan is presiding over a fractured state, a divided polity and an ailing economy, but wallowing in his favourite hobby horse ‘Riyasat e Madina’ he refuses to wake up and smell the coffee.
The prime minister of Azad Kashmir Raja Farooq Haider on Kashmir Day gave some sane advice to the premier that he quite expectedly refused to heed. During the AJK (Azad Jammu and Kashmir) Assembly special session he had implored with Khan to initiate a national reconciliation process with the opposition for the sake of Kashmir cause. Predictably the prime minister refused claiming arrogantly that ‘he will never talk to the corrupt opposition’.
Unfortunately, the proverbial, “my way or the highway” attitude cannot persist for long. Some thing or the other has to give in under the sheer weight of ego-driven flawed policies.
