WEB DESK: Prime Minister Nawaz Sharif while addressing an award distribution ceremony for companies that showed an outstanding performance on the Pakistan Stock Exchange boasted about the economic accomplishments of his administration during the lapsed three and a quarter years of its tenure.
He particularly highlighted the focus on infrastructure development projects targeted to improve road, air and rail links and meet the energy shortfall by 2018 as well as special measures to revive Pakistan International Airlines (PIA).
Projects focused on meeting the existing energy shortages and greater road connectivity, with national and regional implications, are mostly being undertaken under the China Pakistan Economic Corridor (CPEC) – a corridor that without doubt would be a game changer for us irrespective of the lending rate and the government guarantees being extended for Chinese private sector engagement.
Needless to add, the International Monetary Fund (IMF) under the ongoing programme had expressed serious concerns at the government’s decision to extend sovereign guarantees to Chinese private sector-funded projects in its tenth staff review prompting a hastily drafted technical assistance on public-private partnership legislation that required parliamentary approval.
There are also concerns being voiced by experts challenging the higher cost of CPEC projects relative to similar projects being undertaken in other countries. While there is ample evidence of China’s support for Pakistan on all fronts, including diplomatic and economic for decades past and of the unwillingness of private and public sector engagements by other bilateral partners in our economy yet one would have hoped that the government had released the details under the 46 billion dollar CPEC which would have allowed a more informed analysis of the benefits associated with the corridor.
And of particular serious concern for the Prime Minister should be the increase in Wapda’s indebtedness as noted in the State Bank of Pakistan (SBP) website – from Rs 18.9 billion in 2015 to Rs 55.8 billion in 2016 – a rise indicated by the start of the energy projects under the CPEC which would be passed onto consumers.
The Prime Minister must also be made aware that governance remains a serious issue in other public sector enterprises (PSEs) and according to data released by the SBP, the total PSE debt rose from Rs 458 billion to Rs 568.1 billion between 2015 and 2016 and PIA’s debt in particular rose from Rs 78.7 billion to Rs 99.8 billion rupees.
Fortunately, the Prime Minister did note with concern the decline in exports and reports indicate that he is consulting with the Minister for Commerce on ways and means to enhance exports. True that the government decided to allow load-shedding-free electricity supply to exporters as well as zero-rated our five highest earning export items yet the decline in exports continues.
A recent report by the Ministry of Commerce shows that Pakistan’s exports are declining because of: (i) higher input prices relative to regional countries particularly energy prices; (ii) an overvalued rupee (by 20 percent according to the IMF) which makes our products uncompetitive; (iii) heavier reliance on import taxes as well as sales tax (Pakistan’s 17 percent sales tax across the board relative to 12 percent in our competing countries), which should compel the Prime Minister to desist from boasting of higher tax collections and instead he must take his Minister of Finance to task for not reforming the tax system to render it fair, non-anomalous and equitable; and (iv) Rs 21 billion refund cheques (with Rs 200 billion outstanding under this head claimed by exporters) have still not been mailed though the Prime Minister attended the much publicised ceremony where the government committed to clearing all outstanding refunds.
A few other disturbing facts require the Prime Minister’s attention. Foreign Direct Investment (FDI) in 2012-13 was $1.456 billion – a period including the last nine months of the PPP-led coalition government plus three months of the caretakers, a time of political uncertainty which ought to have reduced FDI – while in 2016 FDI was $1281.1 billion or a total decline of 12 percent over the three-year period of the Sharif administration.
Net portfolio investment as per Economic Survey 2015-16 increased from a negative $2,762 million in 2013-14 to a negative $1,882 million in 2014-15 to a positive $430 million in 2015-16 (SBP data) and out of this amount portfolio investment from abroad was $101 million with debt securities accounting for $79 million. The government would do well to remember that portfolio investment from abroad can be withdrawn within minutes leaving the economy in turmoil which is what prompted the 1998 East Asian financial crisis.
He also needs to heed the statement of the IMF mission leader notably that most of our foreign exchange reserves are debt enhancing.
Finally, the Prime Minister must make an independent assessment of the quality of the data he is being fed and to ensure that the Ministry of Finance is enabled to take informed decisions based on credible data he must delink the Federal Bureau of Statistics from the Ministry of Finance and make it an autonomous and independent organisation.
Source: Business Recorder