Former Advisor to Prime Minister on Finance Dr Hafeez Pasha expressed reservations over the claim made by Finance Minister Ishaq Dar that the Pakistan’s economy was moving towards improvement.
“As long as investment and growth in exports do not increase, the claim of improvement in the economy does not make any sense,” Pasha said speaking at Aaj News programme ‘Paisa Bolta Hai’ with Anjum Ibrahim.
He further said that Pakistan’s exports had declined during the last three years and stood at $21 billion compared to Bangladesh’s $34 billion and India’s $300 billion. He urged the government to pay attention to the rising unemployment as 30 percent graduates were without jobs; while textile and other small export industries were badly affected in Punjab.
“Pakistan Stock market index achieving over 50000 points is a silver lining which creates hope that in the coming years local and foreign investors will invest in the stock market but this boom is without an expansion,” said Dr Pasha, adding that absence of expansion in capital market is unfortunate as the number of registered companies marginally declined instead of increasing.
He said that when the stock market is booming there must be an increase in the number of companies, which is a sign of investment in new equities and establishment of new factories. He said that improvement in rating in the international market is more related to foreign exchange reserves and stock market.
“The problem is that stock market may prove to be a bubble like it was in 2008 and foreign exchange reserves, fuelled by borrowing, have already started declining,” he said referring to $500 million decline in foreign exchange reserves during the last two months.
Dr Pasha stated that the government’s short term borrowing especially from external commercial banking sector has increased significantly by $2 billion and as a result of short term borrowing net outflows have increased which must be a major source of concern for the Ministry of Finance.
He said that the government revenue collection remained dismally poor in the current fiscal year as compared to the last financial year when there was about 20 per cent increase in tax with major increase in revenue through indirect taxes especially from petroleum products. However, this year, he said the situation is totally different as increase is hardly about 6 to 7 percent and the reason was the government did not increase oil prices in domestic market despite increase in international market for political expediency and fear of stoking inflation.
Additionally, he said, there was dramatic decline in non tax revenue primarily because of lower income from dividends of OGDC and other entities, decline in the State Bank profit and CSF inflows not materializing. As a result, he said overall growth in revenue of federal government was negative during the first three months of the current fiscal year and insufficient to cover the expenditure of interest payment on government debt. He said the government met the expenditure of defence, security as well as the development spending and salary of employees by borrowing.
Dr Hafeez Pasha said that there is one prominent item in the public development program -SDG community development – wherein 100 percent allocation was released during the first six months and this program is run through parliamentarians and gives an indication of government priorities for the rest of the year.
“We all agree that China Pakistan Economic Corridor (CPEC) is a game changer but its implementation speed is very slow. As per State Bank figures only $500 million imports under CPEC took place during the first six months of the current year,” he said, adding that the government has hardly released 33% to 35% from the $800 million Public Sector Development Program (PSDP) and total expenditure has not been more than 25 percent.
He emphasized that the government has to give priority to CPEC by higher allocation in the PSDP for projects. Dr Pasha also urged the opposition to raise these issues in the parliament.