It was a grand show of whistling in the dark. Fear of being caught empty handed on performance scale had understandably caused the whistling to be very high pitched. So much so that even the few that the PTI government could genuinely claim to be its successes were seemingly lost in the cacophony. It was more of a raucous ruckus at the Jinnah Convention Centre rather than a review of the performance of the government as it completed on Thursday the first three of its five-year tenure.
Prime Minister Imran Khan is not just a ‘pretty’ face. He is an achiever of first order. Name any major endeavour ---sports, health, education or politics---he has mastered them all by dint of sheer perseverance. And he is perhaps one of the world’s leading charity fund raisers as well.
But then if you keep repeating at every major outing how you had managed to achieve these successes against the toughest of odds, you run the risk of turning off the audience at some stage. Not that he has already started sounding boring. Among the current lot of country’s leading politicians, he continues to be undoubtedly the ‘listeners’ choice’ — perhaps rivalled only by Maryam Nawaz Sharif.
But self-praise by even the best of the achievers, if it is repeated every time one gets a captive audience, the story starts sounding uninspiring becoming in the process counterproductive. It is said, self-praise is the first sign of insecurity. Some things sound better if they don't come from you. Self-praise puts you up as arrogant, boastful person having a big head.
PM Imran detailed the struggles his government faced on the economic front over the first three years of its mandated five-year tenure, saying he had inherited a country heading towards bankruptcy.
"We had no capital to settle loans. We had no foreign exchange. The current account deficit we faced was of $20 billion. If Saudi Arabia, China and UAE had not helped us at the time, rupee would have declined further and caused us some real damage," he said.
"We had to go to the IMF and whoever you acquire loan from they set [certain] conditions," he added.
Highlighting his government's economic performance, the PM said: "When we assumed power, the [current account] deficit was $20billion and now it is $1.8bn. Our foreign currency reserves were $16.4bn when we assumed power and today they are at $27bn. Our tax collection was Rs3800bn three years ago and now it has reached Rs4700bn.
"We witnessed record sales in motorcycles and tractors, while car sales saw an 85 per cent increase. It means that the people's lifestyle is improving."
But then, during the past three years the PTI government has been pursuing economic policies more or less similar to those which had been the hallmark of the PML-N government during the preceding five years. In fact, the PTI government is being guided seemingly by the same economic ideology as the one driven by the PMLN government---an ideology based on what is called Washington Consensus.
Tell you the truth, it is same ideology that had dictated the economic policies of successive Pakistani governments since the Ayub regime of 1960s with a pleasant breather of five years of semi-socialism of Prime Minister ZA Bhutto in the first half of 1970s.
Indeed, because of the economic policies that the PTI government has been following the country is likely to face by the end of its fourth year in office a bigger current account deficit than what it had inherited.
Increased imports of petroleum products, edible oil, wheat, sugar and cotton, among other things – at prices which have been highest in recent years – are causing import bill to expand sharply. Pakistan’s current economic growth is fuelled by import-based domestic consumption which is heavily dependent upon a constant build-up of foreign exchange earnings. In the absence of a corresponding increase in export earnings, however, the ever-rising import bills would certainly lead to a balance of payments (BOP) crisis as you need more money to pay for your imports as also to return loans than you have in your FE reserve. Exports are not rising because, we are still largely exporters of primary goods. And the list of these export items has not changed for over 50 years. Value addition, too, has remained in its infancy.
In such a scenario, any visible decline in remittances or other inflows of money can lead to a situation in which you are left with no option but to ‘steal’ from foreign exchange reserves.
To shore up these reserves, Pakistan can go to multilaterals (ADB, IMF, and the World Bank). However, the IMF has already put its ongoing loan programme for Pakistan on hold – mainly because of the country’s failure to act on two fronts: managing the circular debt and carrying out structural reforms in the economy. The only way to reduce circular debt in the short run is to increase electricity prices. The World Bank’s move to link its $1 billion loan with increase in tariffs also points the same way.
With election only 24 months away the PM can hardly take the risk of increasing the power tariffs as costlier energy will infuriate the voters. And it will also impact adversely on the cost of production of export surpluses causing their competitiveness to decline and in turn reduce their demand. Subsidies can be resorted to as an alternative option but that would only add to the fiscal deficit. On the other hand, the development would send the circular debt which is already touching Rs2.5 trillion through the roof.
The State Bank of Pakistan could have improved the dollar supply by using its reserves to meet the surge in the import bill, but the IMF has restricted use of FE reserves to repayment of external debt and other such liabilities. Of course, the State Bank can interfere if the foreign currency market goes totally crazy. And mind you, the rupee’s value has already slipped from 152 to a dollar to 165 to a dollar in the last two months.
The rupee’s ongoing depreciation has already rendered imports costlier in local markets which in turn is highly likely to send domestic inflation galloping. In such a situation one cannot rule out the possibility of rich people in order to safeguard their loot starting a run for the available dollars in the market adding further to the decline in the value of the rupee.
If this depreciation of rupee is unable to slow down the demand for imports and current account deficit crosses a certain threshold, then the SBP will have no other option but to increase interest rates to curb consumption and incentivise savings.
As the demand for certain imports such as fuel, edible oil, and certain other food items is inelastic, curbing its demand will curb economic growth and cause food inflation. This means that the depreciation of the rupee will not have its desired impact on imports and exports and will, instead, fuel the local rate of inflation.
This would lead Pakistan back to the multi-laterals and their condition about electricity tariff for future assistance. But then, in that case we would be going back to from where we had started. Square one!
All that the party could show for the ‘Change’ it had promised was no more than the famous Tabdeeli song sung by Sindh Governor Imran Ismail with Attaullah Khan Esakhelvi leading the duet.
What is happening currently in the neighbouring Afghanistan is bound to have serious socio-economic repercussions in Pakistan. One hopes our government is strategically well-prepared to meet the consequences which may not be too pleasant at times.
Be that as it may, for a number of reasons Pakistan could be facing in the immediate run a very hostile US which would mean inflows from multilateral aid agencies as well as investment from the developed world would largely remain subdued.
During the last three years, corruption in the government has only increased because despite the screeching rhetoric one heard about how the PTI government would catch the looters and force them to return the loot to the exchequer, not much success has been seen on this front. Endless talk about combating corruption without achieving any measurable success so far has turned it into seemingly an acceptable part of every-day life. It has kept its single minded focus on persecuting its political opponents using the NAB while neglecting completely the task of creating socio-economic conditions that would routinely discourage the age-old practice of plundering of public money for private use.