WEB DESK: The recently concluded 12th review of the IMF program has inadvertently confirmed the listless achievements of the Nawaz Sharif’s governments during the last three years.
The interesting part of the official statement issued after the meeting said that, “-the economic reform agenda needs to continue after the program ends. In this context, it will be important to further strengthen public finances and external buffers, broaden the tax net, improve public financial management, strengthen the monetary policy framework, address losses in PSEs, complete the energy sector reforms, and accelerate competitiveness-enhancing improvements of the business climate, including the trade regime. …….
In simple English it is a severe indictment of the Sharif government, clearly demonstrating that it was as inept in reforms and governance as the previous Asif Zardari government. It simply squeezed more from the poverty stricken people of Pakistan through an inequitable and corrupt tax system to meet the IMF fiscal targets and did massive international borrowings to shore up the external buffers (reserves).
It failed to create the employment generating and export oriented growth in spite of the massive decline in global oil prices. It is now the eighth year of an economy that is averaging GDP growth of around 3 percent notwithstanding the dubious government claim of higher growth in 2016.
Early this year, Sri Mulyani Indrawati, VP for South Asia at the World Bank, in a speech at the HEC in Islamabad said that, “for the past two decades, Pakistan’s growth rate has been half of India’s and China’s. If current trends continue by 2050, India’s economy will be 40 times larger than Pakistan’s”. This is clearly a recipe for disaster.
The problem is that without reforms there would be no economic growth and economic reforms capability is the weakest part of this government. The areas highlighted by the review statement highlights the shortcomings of the Sharif’s government’s governance style and performance. The hallmarks of the present governance model are corruption, incompetence and misgovernance.
Consistently high rankings as one of the most corrupt countries by Transparency International and other monitoring agencies is a reminder that corruption is eating away at Pakistan’s economic sinews. The World Economic Forum institutional rankings of Pakistan governing and policy institutions are amongst the worst in the world. The public financial management system leaks like a sieve and money pops up in most unlikely places like ministers’ and bureaucrats’ homes.
Apart from the leakages from the government’s financial system both on the revenue and expenditure side the sanctity of the system has been completely compromised by removal of checks and balances on the executive for spending and prioritising the public money as a public trust. The distorted decision making process in both current expenditures and public sector development programme would amount to a criminal breach of trust whenever stock keeping is ordered by the highest courts of this country.
Let’s take a look at our recent performance. The Economic Survey has clearly indicated that Pakistan’s agriculture and the export sectors are in a serious crisis. The global prices of agriculture produce have collapsed in the face of declining cost of agricultural production and competitive pressures have intensified manifold. In this scenario our neglect of the agriculture sector has come home to roost.
The budgetary concessions announced in the recent budget are a bit too little too late. We have not built any water reservoirs in the last forty years; the rural economy is caught in a devastating alternating cycle of drought and massive floods.
Couples with this the failure of not inducting BT cotton, provision of poor extension services, continuation of poor farm management and slow induction of modern technology the malaise is apparent and impact is devastating. Our yields are amongst the lowest in the world and costs are among the highest. Clearly a recipe for disaster. A comprehensive plan for revitalizing a competitive and productive agricultural sector is unfortunately conspicuous by its absence in the government’s outlook.
The issues of productivity and competitiveness of the Pakistan economy have not been addressed. Private sector is in doldrums while private investment is lacklustre. The Public sector continues to bleed profusely. Expansion of the economy under such business climate is not possible. In 2007 Pakistan’s rank in the Global Competitiveness Index was 91. After the five years of PPP and three years of PML-N government the rank has deteriorated by approximately 40 positions. Similarly in the ease of doing Business index, the rank of Pakistan in 2007 was at 60, while now it has deteriorated by 70 positions.
These two global rankings reflect the state of our economic governance. The sharp decline set into motion by the PPP government in 2008 has not been put into reverse by the PML government. Sound economic governance continues to elude the government.
It is a well known fact that the energy sector (particularly power sector) is Pakistan’s Achilles heel. The root problem of the productive sectors of the country is the lack of cheap reliable power and energy input. The PML-N’s best and influential brains including the Sharif family were put on the task. After three years of bombastic claims we find out that the PML-N power team has failed to address the power crisis comprising high price and poor supply. In 2007 Pakistanis consumed 98 billion of units of power. In 2016 after 9 years the consumption stands at around 102 billion units showing the stagnancy in supply over the last nine years.
The issue facing the nation for the last decade remains unresolved. The question is whether Pakistan will get adequate and cheap power to drive its growth?
Only last month, the UAE awarded a contract at 2.99 cents per unit for supply to the national grid in contrast we are in hot pursuit of installing power at exorbitant prices. To put it in proper perspective, take the example of the power plant being installed at Port Qasim by a Qatari company for supply at a price of 8.5c per kwh. The 4.5c tariff differential above global benchmarks will cost the Pakistani consumer $300 million every year in higher tariff payments for the next 30 years.
When we consider that Nandipur power will cost us 11c per kwh, Thar power at 12c per kwh, and Bahawalpur solar power at 15c per kwh the picture becomes very alarming. Add to these projects the 15,000MW coal capacity which the government wants to pursue under the CPEC at 8.5 cents per unit, the extra bill to the people of Pakistan could amount to as much as $5 billion a year.
The continued large transmission and distribution losses over and above generation costs will mean absolutely no relief from the most expensive power in the world for the hapless consumers of Pakistan. This kind of power regime in Pakistan is designed to permanently damage Pakistan’s global competitiveness.
The high cost and sovereign guarantees issued for the power sector will lead to future build-up of circular debt and contingent liabilities for Pakistan that would necessitate the return of the IMF a few years down the road. The people of Pakistan are justified to ask from the Government and the IMF regarding the just concluded program…”Where’s the Beef?”
(The writer is former Finance Minister)