Sitting governments all over the world are victims of a syndrome known as’ the “disadvantage of incumbency.’ No matter how good and successful their policies are, they fail to win the unqualified appreciation of the opposition, its detractors and a corps of cynics whose only obsession is to denigrate anything associated with the government. Pakistan is no exception to this phenomenon. The government has been continuously subjected to undeserved opprobrium over the economic policies pursued by it to trigger a turnaround and overcome inherited debilitating factors out of context and without making an allowance for the difficult situation that the country finds itself in. However, seen through the incisive scrutiny of the world’s lending institutions, evaluating agencies and the assessments made by some prestigious national bodies on the economic situation, it is not difficult to notice some irrefutable realities.
Fixing an economy like Pakistan is probably the most excruciating and convoluted responsibility. The focus of the policies pursued by the government undoubtedly has been on building a robust and vibrant economy. These policies have produced verifiable results. When the PML(N) government was installed, the GDP growth rate was 3% which stands at 5.1% currently. The budget deficit which was nearly 9 per cent at that time has been brought down to 4.9 percent and the inflation rate which hovered around 9 per cent in 2013 has been reduced to 5.77 percent. The foreign exchange reserves stand at US$16 billion at the moment as against US$11.3 billion in June 2013. This performance and economic management by the government has been duly endorsed a New York based independent media company ‘Bloomberg’ in an article published recently with these remarks: “Corporate earnings are soaring, stocks have surged and the currency is among the world’s top performers. Add to it the factors of lower oil prices, higher remittances and consumer spending. All these are pushing growth towards a seven-year high. The long term benefits are huge despite organizational and political challenges that have continued to stand in the way.”
The IMF and World Bank are also on record to have endorsed claims of recovery by the government. The former IMF Chief of Mission in Pakistan, Jeffery Franks, recently made these observations on the economic performance of the government: “The overall economic situation in Pakistan is gradually improving. The forecast of 2.8 per cent growth rate during 2013-14 has been revised to 3.1 per cent by IMF which may be a bit on the conservative side. Inflation has been better than expected at around 8% and balance of payments position has also shown an upward trend. Foreign exchange reserves have gone up and IMF foresees further strengthening of the reserves. Revenues are coming in as we expected. We believe that by the end of the year, Pakistan would likely meet the deficit target and bring down the deficit down to 5.5 per cent of GDP from 8% of GDP last year.” The current IMF chief in Pakistan expressed similar views during first week of March. It is pertinent to point out that the IMF has already issued six tranches of the agreed loan on the basis of its evaluations on the economy and the release of the seventh tranche is being discussed currently.
Managing Director of World Bank who visited Pakistan a few months ago dilating on the economic situation in Pakistan remarked: “The increase in the country’s reserves is a good sign. Successful review by IMF and rapid implementation of initial reform actions are positive signs.” The World Bank, reportedly, also has agreed to provide US$ 10.2 billion to Pakistan during the next five year for policy reforms in the energy sector, revenue mobilization, governance, social sectors and investment in hydropower. Mody’s has also upgraded Pakistan’s credit ranking in view of the economic performance.
The State Bank of Pakistan in its monetary policy statement issued on 21st March said, “The Government has succeeded in overcoming the fiscal deficit and the economy is now on a more stable footing.” The Bank predicted that inflation would fall to as low as four per cent by the end of the fiscal year and the growth rate would surpass the 4.4 per cent record during the previous financial year. The Bank also announced to reduce the policy rate from the current 8.5 per cent to 8.0 per cent. The endorsement of the success stories of government policies in the economic arena by these international lending agencies and State Bank, surely lend currency to the claims of the government with regards to the revival of the economy. Therefore, in view of the foregoing facts the critics of the economic policies of the government need to revisit their outlook.
These achievements are a result of the macro-economic reforms introduced by the government in line with the national consensus on expanding the tax base and reduction in the budget deficit. Politicians and economists have all along been emphasizing policy initiatives geared to realizing these objectives. But it is ironic that when it comes to the implementation of this consensus view, the opposition chooses to oppose it unjustifiably, by taking the somersault on the philosophy that it has been vociferously trying to sell, though with limited success.
During a debate in the National Assembly recently, with regards to the imposition of GST on petroleum products and regulatory duty on some luxury items, the opposition benches led by PPP accused the government of undermining the parliament and insisted that the government, instead of taking these fiscal measures on its own should have debated the issue in the parliament and further that it was unfair on the part of the government to put more burden on the masses. The Finance Minister defended the measures maintaining that they were taken as per the practice and the Acts of the parliament and as dictated by the economic compulsions. He was absolutely right as Sales Tax Act 1990, Customs Act 1969 and Income Tax Ordinance, the laws enacted by the parliament do bestow powers on the government to impose duties and levies. The government had to take this step to offset the impact of a short fall of Rs. 165 billion in the revenue collection. These measures will enable the government to raise only Rs. 46 billion, meaning thereby that the government has not passed on the entire impact of the masses keeping in view their welfare and economic situation. There is no escape from expanding the tax base to achieve sustainable economic growth.
The writer is a freelance columnist.