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The economic performance of the PTI-led regime By Kashif Mirza

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  • The economic performance of the PTI-led regime By Kashif Mirza

Economist, anchor,

analyst and the

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 Pakistan Private

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Prime Minister Imran Khan presented the Pakistan Tehreek-e-Insaf (PTI) government’s three years’ performance report after assuming power in 2018 and stated that exports and foreign exchange reserves have been increasing despite the Covid pandemic and numerous inherited challenges’ including financial instability, poverty, and inadequate education and health facilities. The report focuses on the government’s accomplishments despite the global economic recession in the wake of the coronavirus pandemic. The prime minister said that there has been an 18 per cent growth in the industry, and sales of cement went up 42 per cent, while farmers in the agriculture sector got Rs1.1 trillion and consequently, a record sale of motorcycles, tractors, vehicles etc was witnessed.
The 251-page report gives an outline of the achievements of 44 public bodies including ministries, divisions and departments. Besides defining the baseline of each sector, it focuses on key objectives, updates on initiatives, long-term strategies, legislative policy framework and the projects in the pipeline. When PTI came to power current account deficit was $20 billion but today it has declined to $1.8bn. In 2018 foreign reserves were $16.4bn which are now over $27bn. Total tax collection in the previous government was Rs3,800bn and now it is Rs4,700bn. Similarly, foreign remittances were $19.9bn in 2018 and now they are $29.4bn. To uplift the common man, the government launched projects such as Naya Pakistan Housing Programme for affordable accommodation to low-income groups, Ehsaas programme for social security and the Kamyab Jawan Programme for imparting skills to youth to help them get employment. Also to help poor and vulnerable segments of society, 54 laws were enacted including the Code of Civil Procedure (Amendment) Act, 2020, Enforcement of Women Property Rights Act, 2020, and Legal Aid and Justice Authority Act, 2020.
Prime Minister Khan compared his tenure with the previous regimes of Pakistan Muslim League-Nawaz supreme leader Nawaz Sharif and Pakistan Peoples Party co-chairman Asif Ali Zardari. The Pakistan Tehreek-e-Insaf (PTI) government has been able to accelerate the economic run-rate, and the incumbents envision a considerably higher provisional GDP growth of 3.94% in the ongoing fiscal year. This has prompted a response by the opposition political parties who downplay an amelioration in the economy. Hence, let us analyse the worthiness of the arguments advanced from both sides to better understand where we stand.
The economic performance of the PTI-led regime varies during the three-year tenure in comparison with the last five-year term of PMLN as official data shows that the N-League performed well on GDP growth, fiscal deficit including FBR’s tax collection and controlling inflation. Poverty had also come down during the PMLN led regime. However, the PTI led regime performed well on account of Gross National Product (GNP) in its third-year rule, converting Current Account Deficit (CAD) into surplus and attracting more remittances from abroad. But the PTI regime failed to tackle rising inflationary pressures. The PMLN achieved provisional 5.8 per cent GDP growth in the fiscal year 2017-18 but after PTI came into power, this growth figure was revised downward to 5.5 per cent in finalised estimates. Now the PMLN claimed that it had achieved a GDP growth rate on average 4 per cent in the five-year term from 2013 to 2018. The PTI led regime achieved 2.1 per cent growth in 2018-19, which got contracted to negative 0.47 per cent in 2019-20 after the eruption of the Covid-19 pandemic and now the provisional GDP growth is estimated at 3.94 per cent for 202-21. On average, the GDP growth remained 1.9 per cent in the last three years, which was much below than average population growth of 2.4 per cent on a per annum basis in Pakistan.

Exports remain at $29 billion from July to June. A continuously high remittance significantly helped the cause of the PTI government. Politically, the target for the incumbents is to surpass the 5% growth mark presumed to be the only reliable indicator to judge economic prosperity.

The size of GDP during the PMLN tenure had touched $313 billion in 2017-18 but it fell in the first two years of PTI led regime and got slashed down to $263 billion in 2019-20. In the third year of the PTI led regime, the size of GDP growth increased to $296 billion in 2020-21. The PMLN exports stood at $24.8 billion in its last year rule in 2017-18 but exports reduced in the first two years’ rule under the PTI led regime in 2018-19 and 2019-20. In the second year in 2019-20, the exports declined because of the eruption of the Covid-19 pandemic in the last quarter (April-June) period of 2019-20. Despite 35 per cent devaluation, the exports could not move forward in the first two-year rule of PTI. This year, even though global trade in home textiles has increased by double digits, Pakistan’s exports after three years and huge devaluation will only surpass the level attained by PMLN of $24.8 billion by 1pc. In spite of all the narrative building, all the PTI will achieve after three years is a 1pc increase. In PMLN’s last year, exports increased by 13pc.
The public debt rose by Rs10,000 billion in the five-year term of PMLN and stood at Rs24,952 billion. If the total public debt and liabilities are included, then it stood at Rs29,800 billion till the end of June 2018. However, the public debt increased by 52 per cent from Rs24,952 billion to Rs38,005 billion in the last three-year rule of PTI. If total public debt and liabilities are included, then it increased from Rs29,800 billion to Rs44,500 billion in the last three years of PTI. The PMLN claimed that the PTI increased debt by over Rs13,000b in less than three years. That’s more than half of all the debt added by all governments in 71 years. The PMLN added Rs 2,100 billion debt per year on an average and built power plants and motorways and CPEC, it further stated. The PTI is adding Rs4,300 billion per year and building nothing. The external debt has increased by $14.9b since June 2018 which the PMLN increased by $18 billion in five years.
On fiscal deficit, the average fiscal deficit was around 8 per cent of GDP under the PTI led regime but it was standing at 5.6 per cent of GDP. The total fiscal deficit stood over Rs10,000b in PTI’s three years versus Rs7,893 bn in PMLN’s five years. The PMLN doubled the FBR tax revenues from Rs1.9 trillion in 2013 to Rs3.8 trillion in 2018. For the PTI’s first two years, the FBR’s growth remained flat as it stood at around Rs3,850 billion. In the second year, the revenue collection was affected negatively because of Covid but in the first year, there was no Covid yet the performance remained dismal. Now the FBR was achieving double-digit growth. But Imran Khan, when standing at the container, had claimed that he would ensure the FBR collection doubled in the first year and it would be increased from Rs4,000 billion to Rs8,000 billion in one year. The tax to GDP ratio under the PTI, the true measure of tax collection efforts, has remained below PMLN’s number every year including this year.
The SPI Inflation has consistently remained above 13pc every week since 25 February 2021. Food inflation has remained above 10pc almost every month for the last two years. In PMLN’s last year, inflation was the only 3.9pc. Food inflation remained low throughout PMLN’s five years. The GNP growth remained over 6.5 per cent in 2020-21 under the PTI and it was the second-highest since 2004-5 whereas it was lower on average in the five-year term of PMLN. The remittances remained the highest ever absolute figure in the outgoing fiscal year that had fetched over $29 billion till June 2021. The current account deficit was brought down from a deficit of $20 billion into surplus so far in the current fiscal year. The circular debt was much lower under the PMLN but now it was moving towards Rs2,500 billion till the end of June 2021 despite raising power tariff several times. PTI’s nearly 4% rise in economic growth is due to the low-base effect, but the fact that it comes along with a positive current account balance, a relatively market-based rupee, and a rise in foreign exchange reserves is worth appreciating. Exports remain at $29 billion from July to June. A continuously high remittance significantly helped the cause of the PTI government. Politically, the target for the incumbents is to surpass the 5% growth mark presumed to be the only reliable indicator to judge economic prosperity. But, will they be able to do so without triggering a self-inflicted boom-bust cycle remains the most pertinent question. Hence, PTI now has a choice to either build on the hard work previously undertaken or to instead drive growth in the same manner previous governments did to post a compromised yet high growth rate.