A Realistic View Of The Economy

There is no dearth of people around who are bent upon denigrating the economic performance of the country, orchestrated by the PML-N government over the last four years, for reasons of their own which invariably are divorced from contextual relevance and rationale. The view being propagated is that the foreign trade deficit, rising fiscal deficit and huge debt, owing to excessive borrowing by the government, are surely going to send the economy into a nosedive. They are relentlessly trying to rub in the view that the country was on the brink of economic disaster.

While the proponents of the doomsday scenario mention the existence of these problems they fail to elicit the reasons that have led to the obtaining situation which they assume can scuttle whatever progress has been made. They also hesitate to acknowledge the likely off-setting and multiplier effect of the projects on which this borrowed money has been invested, on the future health and strength of the economy.

The reality is that the government has embarked on a massive programme of infrastructure development which is considered to be the major propellant of economic growth, especially under CPEC that necessitated obtaining of loans contributing to the quantum of debts as well other development projects, which were absolutely essential to put the economy on the upward curve. The National Highway Authority reportedly initiated projects worth Rs1400 billion during the last four years, including some under the CPEC and others for the improvement and building of connecting network of roads throughout the country. Some of these projects were initiated on BOT bases, some through private-public cooperation and some through CPEC necessitating loans from the Chinese Banks on the lowest possible interest rate of 1.6pc, which compared to the interest rates charged by other international lending agencies is much favourable.

Pakistan despite the financial constraints also had to divert huge funds to the war on terror. The economy reportedly also suffered a loss of Rs120 billion due its involvement in the fight against terrorism. The narrow base of tax revenue is also one of the major factors necessitating borrowing for development needs. In fact, Pakistan is one of the countries with the lowest rates of tax collection in the world. It has long been troubled by the tax problem, which is one of the main reasons behind its fiscal deficit.

But despite the foregoing constraints and debilitating factors, there is no denying the fact that the PML-N government has been able to winch the economy out of the quagmire it was stuck into when it was saddled with the responsibility to run the affairs of the country in 2013. It is a recorded fact that the country was facing the prospect of defaulting on IMF loans and had to seek another loan from it to rectify the situation. It is an irrefutable reality that among other success stories regarding the inherited challenge the revival of the economy though prudent economic management has been the most appreciated and endorsed achievements of the government which saw the GDP growth rate rising to 5.3pc (highest in the last ten years) in 2017 from a dismally low rate of 3pc in 2013. The budgetary deficit which stood at 8.8pc in 2013 was brought down to 4.4pc though it has gone slightly beyond 5pc recently. The international lending and rating agencies have repeatedly acknowledged and endorsed this economic revival. IMF attributed this success to consumer confidence and fiscal reforms. Not only that, it has also predicted GDP growth rate of 5.5pc and 5.8pc during 2018 and 2019 respectively. The Asian Development Bank (ADB) though recently pointed out Pakistan’s economic vulnerability to fiscal and external problems but maintained optimistic growth forecast for Pakistan’s economy. As late as 30th October 2017 the Standard and Poor’s global rating agency maintained the short-term and long-term sovereign credit rating of ‘B’ for Pakistan which is likely to help it to materialise its plan to generate much needed dollar inflow of 2-3$ billion which it plans to raise through Sukuk and Eurobond within the next two to three weeks in order to overcome the fiscal difficulties.

Admittedly there are difficulties in managing the economy due to the factors pointed out by the critics but remedies are also at hand to fix them and keep the economy on track. These problems can be addressed gradually through development to ensure financial sustainability. It is however a temporary phenomenon. The things will surely start falling in place when all the infrastructure development projects including motorways, road networks and the CPEC corridor as a whole become operational. It is likely to generate economic activity of colossal proportions which helped by its multiplier effect would unfurl an era of unimaginable economic prosperity.

Economists believe that the prospects of progress and prosperity are much brighter in the future and the implementation of CPEC would add another 2-3pc to the GDP growth rate. The resources generated by this mega-economic initiative would not only be more than enough to address the confronting challenges but also for the future development needs of the country which eventually might lead to the culmination of the dependence of the country on foreign loans for its development projects and fixing fiscal difficulties. CPEC has also led to increase in the direct foreign investment in the country. According to the state bank of Pakistan the foreign direct investment in Pakistan increased by 56pc year-on-year in the July-September period of which the major chunk of 65pc came from China.

Another major factor that is going to play a pivotal role in lifting Pakistan’s economy is the availability of energy for the industrial development of the country which has been severely hampered due to the energy crisis that the government inherited. These shortages cost Rs14 billion to Pakistan’s economy in 2015 equivalent to seven percent of the GDP. It is however encouraging to note that the production of electricity in the country at present 16477 MW against current demand of 14017 MW which enabled the government to announce the end of load-shedding.

Under CPEC power producing projects with an accumulated power generation capacity of 10,640 MW were initiated and all of them would become operational during 2017-18. Another 6645 MWs of early harvest projects in the energy sector are also on the actively promoted list. This would surely impart impetus to industrial development leading to improvement in the employment situation as well as expanding the tax base.

As is evident from the foregoing facts, the economic situation of the country is not as dismal as the detractors of the government and other vested interests would like to portray it. The country is certainly poised to attain a higher economic plank in the future and the problems currently at hand would gradually become extinct.

(Published in Monthly Tribute International on 01-01-2018)