THE PTI government has indeed taken measures to reverse the economic downslide started with previous governments during the last ten years. This was significant in 2017-18 in the last year of PML-N government when highest ever trade deficit, current account deficit and fiscal deficit were recorded. The PTI government measures include documentation of economy to increase tax revenue, reduce imports and increase exports to control trade deficit; however, the decision to give extension to COAS General Qamar Javed Bajwa has resulted in boosting confidence to business community. The interbank market rupee has stabilized at Rs. 157 per US dollar, and during the last week, the KSE-100 index for first four days recorded gains of 3,650 points and closing at 31,884. On Friday, the benchmark index receded by 534.34 points firstly due to slight correction, and secondly due to fake news in Indian media that Pakistan has been blacklisted by FATF affiliate APG.
Investors’ sentiments received a boost by the visit of the incumbent Chairman of Securities and Exchange Commission of Pakistan along with his team, which held discussions with the stakeholders on problems that plagued the market. Besides the companies that bought shares worth $1.44 million, ‘’brokers proprietary trading account’’ showed net purchases of $1.74m which encouraged investors to believe that talks with the apex regulator may have progressed towards a market turnaround. On the economic front, the news of current account deficit having narrowed by 73pc in July raised confidence of investors who believed that the economy may finally be on the path of recovery. During the session, heavily oversold stocks were trading at 11-year low price-to-earnings ratio of just five times, inviting value investors. The recent State Bank of Pakistan (SBP) report indicates steep fall of 73 per cent in the current account deficit in July 2019 on month to month basis.
In July 2019, the exports have shown an increase of 10 percent to $2.233 billion compared with exports of $2.012 billion in July last year. If the trend of falling imports and increase in exports continues during the current fiscal year, it will help the government to reduce short term borrowings from multilateral donor agencies, banks and friendly countries to avert balance of payment crisis. It will also help achieve exchange rate stability. However, the trade bodies have been critical of the restrictive import policy as in their view it would impede economic activity and impact growth in exports. The point of view of business community has some weight as export products producing industries consume imported raw material and intermediate goods. Over the past five decades successive governments had no interest to work out comprehensive industrial policies to promote establishment of industries that produce raw material for export industries and import substitute manufacturing industries.
As a matter of fact nationalization of industries of 1970s by Z.A Bhutto government had shattered confidence of entrepreneurs. Secondly, almost all governments in the past failed in introduction of new technologies, their indigenization by institutions of Research and Development, neglect of skill development, abnormal increase tariff of energy inputs created a discouraging environment that moved away Pakistan from becoming a manufacturing economy and turned it into an importing economy. This resulted in burgeoning current account deficit and an addition to the debt mountain. The PTI government has completed one year of its tenure but formulation of industrial policy is still awaited, as it was preoccupied with damage control exercise. Only four industries including textiles, leather goods, surgical items and sports goods export bulk of the value-added products. Unfortunately, the commercial councilors in the embassies abroad did not help exploring new markets for exportable goods and commodities from Pakistan. The PTI does not view defence and economic development in isolation from each other. An adequate defence is as necessary as a resurgent economy, which is must for maintaining and developing an effective capacity for the defence of Pakistan. Therefore, the PTI government formed the National Development Council (NDC) — with Prime Minister Imran Khan as its head and Chief of Army Staff General Qamar Javed Bajwa as one of its members — to accelerate economic growth and improve coordination among the provinces and the federation. Other members of National Development Council are Foreign Minister, Finance Minister, and top bureaucrats from relevant departments, and Chief Ministers of the provinces. According to a notification issued by the Cabinet Division, the newly formed body will set policies and chalk out strategy for development and provide guidelines for improving regional cooperation.
It has to be mentioned that the dismal economic situation was due to poor performance of PPP and PML-N governments in their tenures. PML-N government in its last tenure could not achieve its targets with regard to fiscal deficit, balance of payments vis-à-vis exports and imports; Pakistan’s external debt mounted to around $90 billion; economic reserves had declined to $12 bn that were not enough for even three months imports. How Pakistan could achieve the robust economic growth in the presence of such economic indicators. Yet outgoing PM said that they left the economy in good shape? On 27 March 2018, Bloomberg quoting IMF’s statistics said that Pakistan’s foreign reserves may drop to an alarming low. It was understood that to manage economy, Pakistan will have to fall back on the IMF and other international finance institutions, and per force accept the conditionalites attached with the loans that are more often than not against the national interest.
—The writer is a senior journalist based in Lahore.