Pakistani premier’s first year: Economic hit and miss

Published: August 18, 2019
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Prime Minister Imran Khan. 
PHOTO:  REUTERS

Prime Minister Imran Khan. PHOTO: REUTERS

KARACHI  : Mohammad Tariq was one of the millions of Pakistanis who voted in the July 2018 elections for first-time Prime Minister Imran Khan and his campaign to build a corruption-free Islamic welfare state, better employment and civic amenities. But for Tariq, things have even gone from bad to worse during the first year of Khan’s government.

Unlike his predecessor, the thrice-elected premier Nawaz Sharif, Khan inherited a relatively stable economy with a nearly 5.4% annual growth rate, a receding power crisis and much-improved law enforcement in the country.

Further, he enjoys a cordial relationship with the country’s powerful army, whose ties with the two previous government remained sour.

Despite all this, the Pakistani rupee has since routed against the United States dollar by 30% with inflation hitting double digits and likely to rise another few percentage points in months to come, according to the country’s state bank.

Contrary to his election promises, electricity, gas, and petroleum prices now soar, with several hikes attempting to reduce the country’s chronic balance of payments.

In addition to that, the government has borrowed a record $16.2 billion in loans from the International Monetary Fund (IMF), Saudi Arabia, United Arab Emirates (UAE), China and Qatar to prop up its fast depreciating foreign reserves and ballooning balance of payments crisis.

Naya Pakistan at one

“I wasn’t expecting a miracle from him. But there should have been a little relief in our lives,” Tariq, who works in online taxi service in the country’s commercial capital of Karachi, told Anadolu Agency.

“But instead of any relief, things have gone worse in the last one year,” Tariq said adding: “Prices of everything, you name it – from vegetables to medicines, and from petroleum to electricity – have gone up, making it hard for us to afford.”

Imran Ali, a resident of capital Islamabad, had a similar story to share.

“I am really disappointed by Khan who has not fulfilled even a single promise during last one year,” said Ali, a 35-year-old employee of a private mobile phone company. He had voted for Khan for his pro-change attitude, which he said Khan failed to deliver on, “at least during his first year in power”.

Ali, a father of two, lives in a rented apartment in a relatively low-end neighbourhood in Islamabad, the capital, where he said sky-rocketing inflation badly dented his monthly budget.

“There has been no increase in my salary, but the prices of essential commodities have soared 50-100% during the last year, “Things have gone miserably for the salaried class,” he lamented.

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Unlike, Tariq and Ali, some of Khan’s die-hard supporters still believe that the former cricket hero could do wonders in the coming years.

“I acknowledge that things are not as satisfactory as they should be but are not as bad as being portrayed,” said Iqtidar Shamim, who runs a construction business in Karachi, accusing the previous government of wreaking havoc on the economy.

“Khan has inherited a crumbling economy. He had no other option but to increase the prices of gas, power, petrol and other commodities to save the economy from a total disaster,” he argued, adding: “But I am sure things will be much better by the end of his [Khan’s] second year.”

Crumbling Economy

Following their failure in putting the country’s teetering economy back on track – admittedly an elusive target – Khan had to replace his entire economic team, most notably his former Finance Minister Asad Umar.

His new team comprises former IMF employees, including acting Finance Minister Abdul Hafeez Shaikh who has served in this capacity in the past governments of former military ruler Pervez Musharraf as well as the centre-left Pakistan Peoples Party (PPP). The recently-appointed Governor State Bank Baqir Raza had been serving as the IMF’s country director for Egypt the day before his appointment.

No Naya Pakistan for revenue dept

According to Pakistan’s Bureau of Statistics, the country’s large-scale manufacturing sector shrunk to 3.5% over the last 11 months amid poor performance in the fertilizer, leather, pharmaceutical, and chemical sectors, raising fears of large-scale industry layoffs.

A shortfall of 500 billion rupees in revenue collection compared to the last fiscal year further added to the novice government’s economic woes, while little progress has been made with regard to Khan’s election promise for 5 million new housing units for the poor and 10 million new jobs.

The opposition claims that around half a million Pakistanis have already lost their jobs in the past year amid ongoing economic contraction.

Below Average

“On the economic front, the last one-year performance of the Imran Khan government is below average,” said Shahid Hasan Siddiqui, a Karachi-based economist.

As compared to the previous 5.4% growth this government inherited from the previous one, he noted that the current rate of growth in the country was 3.3%, whereas inflation had jumped from 3.9% to more than 10%. He added that the average growth rate of this year and the next two was likely to be less than the 5.4% growth rate of 2018.

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“Foreign Direct Investment (FDI) has dropped by 45% [this year] compared to the last year. The rate of rise in taxation is lower, and the rise in domestic and foreign debt and liabilities is much higher than the average growth in the last ten years,” Siddiqui observed, adding “Despite the tremendous fall in rupee value, there has been no increase in the country’s exports, which is another alarming sign.”

Siddiqui, however, hailed the government for bringing a significant decrease in the trade and current account deficits, mainly due to falling imports. He added that there had been some increase in the foreign remittances during the last year

Iftikhar Durrani, the Prime Minister’s Assistant for Information, said the government had ingrained a tottering economy with heavy foreign loans and a balance of payment crisis, which compelled it to increase gas, petroleum and power tariffs.

“We had to take tough decisions to rescue the economy. But these tough decisions have not hit the poor to a big extent. The prices of essential commodities have no doubt soared but only for those who could afford in the past and can afford today as well,” Durrani told Anadolu Agency.

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Still, we are fully aware of the hardships faced by the common people, and have launched different projects, including a 100-billion rupee Ahsas [welfare] Program,” he maintained.

Durrani underlined that the government had averted the imminent threat of default through its comprehensive economic policies, which had seen a 30% and 14% reduction in the current account deficit and trade deficit, respectively.

Furthermore, he added, the government had paid off nearly $10 billion in debt servicing, apart from revamping several state-run corporations.

However, Siddiqui argued against Durrani’s claim of inheriting a poor economy from the previous government.

“Of course there were some problems, but the economy was in much better shape compared to the one passed down by the Musharraf administration to the Pakistan Peoples Party [PPP] in 2008,” he asserted.

“In 2008, the PPP government had inherited an 8.2% current account deficit, which forced it to approach the IMF. But the Imran Khan government, which inherited 5.4% current account deficit from Sharif government, has borrowed loans not only from the IMF but also from Saudi Arabia, the UAE, China, the World Bank, and the Asian Development bank,” he said.

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