State of the Economy by Asad Umar
The federal Government’s recent decisions and statements indicate that it has started to panic as it becomes clear that despite the billions spent by it on propaganda, the reality of its complete failure in managing and reforming the economy is becoming more and more apparent. This has now been conceded by the Government also, with both the Finance Minister and Finance secretary conceding that there is a possibility that at the end of the current IMF program another one may be considered. This was stated by Asad Umar MNA and head of PTI media, policy and marketing.
The Prime Minister had claimed both before and after the budget that with the “experienced team” that PML N has , they wonteven take 6 months to turn things around as they knew exactly what needs to be done. Now his economic managers, half way into the parliamentary term, are conceding that even a year from now they will need to lean on the crutches of IMF. Nothing could be a more vivid summing up of the complete failure of the current Governments economic policies and implementation. It is also a confirmation that Pakistan is sinking further into a debt trap from where escape is difficult if current policies and practices continue.
Umar said that lives of common citizens and the vast majority of business and industry has seen marked increase in difficulties due to the blind acceptance of the current IMF program coupled with the lack of transparency , corruption and incompetence of the regime. One would shudder to think what another program would do to the country if its entered into as being disclosed by the Government.
The failure to reform the tax system has resulted in desperate measures like imposing the highest ever GST of 50% on diesel, an overall increase in GST on all products particularly petroleum products and the draconian increase in minimum tax on services . Despite massive new taxation in the budget the first quarter of this fiscal year has ended with FBR revenues 48 billion rupees less than forecast in the budget. The Government has neither shown any will nor the imagination to carry out real fiscal reforms. There is virtually no discussion of overhauling the tax machinery which has shown itself to be inept and corrupt over a long period of time. The list of more than 3 million potential tax evaders has disappeared and the Govt has denied that it exists! There is no serious attempt to bring back looted wealth from abroad.
The failure to make the economy competitive has resulted in continuing current account deficits despite the massive windfall gain received by the economy in the shape of dramatically lower oil prices and strong growth in workers remittances . Hence decision in desperation to carry out borrowing huge sums of money at exorbitantly expensive rates thru the Eurobond issue to artificially inflate the reserves. The increasing tax burden is crushing the life out of the economy with businesses reluctant to invest and not even a fraction of the required job creation taking place. It is no surprise that with the anti business policies adopted by the Government exports are continuing to decline.
It is strange to see that during the tenure of a supposedly pro business government domestic private sector investment and foreign direct investment are near historical lows. Business seems to have no confidence in the economic policies of the government and is reluctant to invest when it can see the inability of the government to carry out any reform and also the extremely non transparent and unprofessional manner in which decisions are being taken and implementation being carried out .
Nandipur, neelum jehlum, LNG scam, solar park, gadani power park, coal conversion projects , euro bond issuance , devastation of farm economy are all glaring examples of this incompetence and in most cases lack of transparency.