KARACHI: Pakistan Tehreek-e-Insaf (PTI), which is going to form its first government 22 years after the party’s creation, has set tough tasks for itself in its five-year economic plan by promising creation of 10 million jobs, construction of 5 million low-cost houses, hike in subsidy for farmers and increase in revenue collection.
In its election manifesto that promises Naya Pakistan, the PTI has set an ambitious economic agenda which envisages increase in supply of cheaper resources, inputs and financing to various sectors to bring about a marked improvement in the country’s economy.
However, the agenda clashes with recent policy measures that are potentially aimed at restricting demand following reduction in supply of resources. For instance, the State Bank of Pakistan (SBP) has made borrowing expensive by increasing the benchmark interest rate to 7.5%, up 175 basis points over the last six months, and let the rupee weaken by around 22% against the US dollar in the past seven months.
These measures, along with others, are likely to slow down economic growth to 4.8% in FY19 from a 13-year high of 5.8% in FY18.
The first challenge facing the PTI’s economic team will be the formulation of a policy that could accelerate economic growth.
“PTI will play the role of an enabler and facilitator, but not developer, to build 5 million low-cost housing units,” the manifesto said. If the PTI fulfills this promise, it will still not be able to completely meet housing needs which have grown rapidly for the past many decades.
According to the SBP, Pakistan is currently facing a backlog of over 10 million houses. Middle- and low-income groups are on top of the list of those who needs a house.
Cheaper and long-term mortgage financing for 10 to 20 years may help in overcoming the issue gradually. This requires the government to allocate huge funds.
Construction of houses, malls and roads create thousands of job opportunities as it props up over 70 allied industries like cement, steel, paint and woodworks.
“PTI will strengthen the labour market and create 10 million jobs in over five years in key sectors namely SME (small and medium-sized enterprises), housing, ICT (information and communication technology), health, education, green economy and tourism,” the manifesto stated.
Owing to slow job creation, estimated at 1.3 million per annum, over 3.5 million people have never got a job and more people will join them if the situation remains unchanged. Pakistan needs to accelerate its economic growth to 6.6% to accommodate all the new job-seekers, the central bank has said.
“PTI will increase farmer’s profitability and boost growth rate,” the manifesto said. “We will optimise existing subsidy programmes (worth Rs180 billion a year), reduce input costs, transform agriculture produce markets, improve access to finance, champion mechanisation and incentivise value addition for exports.”
The achievement of this goal again needs hefty resources. In addition to this, the bigger challenge to the agricultural sector at present is uninterrupted water supply to standing crops.
Dearth of storage dams, no or untimely rains and climate change are all big challenges for the agricultural economy of Pakistan. The new government will also need to rein in the growing circular debt in the energy sector.
“PTI will complete electrification of rural areas, solve the circular debt issue through reducing transmission and distribution losses and implement our plan to harness the country’s natural resources towards a green energy mix,” the manifesto added.
Besides, the manifesto also deliberates on creating an enabling environment for the industries through ease of doing business and provision of cheaper credit. Pakistan’s ease of doing business ranking has plummeted from 107th to 147th place since 2013.
The manifesto has also touched on the issue of creating resources to feed different sectors.
It has chalked out reforms for revamping the revenue collecting authority which will plug revenue leakages and boost collection, especially of direct taxes.
Although Pakistan’s tax-to-gross domestic product (GDP) ratio improved to 11.2% in FY18, it still stood low when compared with regional peers. “The tax-to-GDP ratio should double as soon as possible,” Caretaker Finance Minister Dr Shamshad Akhtar said recently.
The manifesto said the PTI would crack down on corrupt practices that promoted tax evasion and increase tax collection through direct collection which stood at around 40% at present.
Published in The Express Tribune, July 27th, 2018.