Pakistan’s tottering economy

Tilak Devasher

Member, National Security Advisory Board

Earlier this month, while responding to people’s telephone calls, Imran Khan claimed, inter alia, that Pakistan’s major economic indicators were moving in a positive direction and painted a rosy picture of the country. What overshadowed his comments were, of course, the highly misogynist comments blaming women for getting raped. The reality of Pakistan and Imran Khan’s report card so far are, however, quite different as a series of recently released reports indicate.

The International Monetary Fund (IMF) recently forecast a growth rate of just 1.5% for Pakistan, coupled with a higher rate of inflation and rising unemployment, during the current fiscal year. These estimates are in line with those of the World Bank that has projected growth at 1.3%. Other IMF documents show the country’s development expenditure that stood at 4.2% of GDP in FY2017-18 plunged to 2.7% of GDP in 2019-20 and to 2.6% of GDP in 2020-21. Unless there is a substantial increase in the 2021-22 budget, the high-sounding vision of geo-economics propounded at the recent Islamabad Security Dialogue would remain only on paper.

According to a Pakistani economist, 80% of Pakistani families spend roughly 80% of their incomes on food. Two years ago, an average family spent around Rs 27,000 a year on wheat flour. Today, the same family would have to spend Rs 58,000 — a 100% increase in two years. Similarly, an average consumer is paying an additional Rs 66,000 a year for electricity than what he paid two years ago. More increases are on the way as per the agreement with the IMF to restart the $6 billion bailout package. How can an average family cope with such increases?

A major issue in Pakistan has been debt and consequent debt servicing. Here, too, Imran Khan has beaten previous records with debt-to-GDP ratio going up to 107% from 73% in 2017. According to an economist, under the Asif Zardari government (2008-13), Pakistan took additional debt of Rs 5 billion a day, every day for five years; under Nawaz Sharif (2013-17), the additional daily debt was Rs 8 billion; and under Imran Khan (2018 onwards) additional daily debt has gone up to an astounding Rs 18 billion a day.

In 2018, when Imran Khan became PM, debt servicing constituted 39% of the total Federal Board of Revenue (FBR) taxes; today, it is 74%. It is estimated that by 2025, 100% of FBR taxes would go towards debt servicing. This is unsustainable and reinforces that the lack of fiscal space has resulted in drastic reductions in developmental expenditure.

The poor state of agriculture can be gleaned from the fact that cotton output has dropped to its lowest in several decades — seven million bales — while the average consumption is between 13-15 million bales, making Pakistan a huge importer of cotton.

The latest National Human Development Report of the UNDP released on April 6 showed that the middle class had come down from 42% a decade ago to 36%. The pressure of inflation, unemployment among educated workers, and decreasing purchasing power parity was ‘squeezing’ the middle class to the bottom of pyramid. Moreover, 5.8 million additional people fell into poverty in 2020 as a consequence of the Covid pandemic.

A survey by IPSOS, a global market research and consulting firm, in March revealed that rapidly escalating inflation was the single most worrisome issue for Pakistanis (32%), followed by unemployment (20%) and Covid-19 (16%). As many as 64% said the economy was in bad shape and 41% thought the economy would weaken further. Only 3% said corruption and bribery were an issue. This showed how out of sync Imran Khan was with the pulse of the people since he has prioritised eradicating corruption rather than reviving the economy.

The recent report of the US State Department on Human Rights is a scathing indictment of Pakistan. It documents unlawful/arbitrary killings, including extrajudicial killings; forced disappearance; torture; arbitrary detention; serious restrictions on free expression, the Press, and the Internet, including violence against journalists; severe restrictions of religious freedom etc. It held that most of the abuses were carried out by the government or its agents who enjoyed a culture of impunity and were seldom punished.

There is also the issue of governance with Imran Khan yet to settle down with a team. He has appointed three finance ministers, five chairmen of Federal Board of Revenue, four chairmen of the Board of Investment, four commerce secretaries, three finance secretaries, five interior secretaries, six Inspectors General Police, Punjab, and four Chief Secretaries, Punjab. With such musical chairs of top appointments, any kind of stability in governance is impossible.

While his comments on women have received much criticism across the world, they are in line with the ‘Global Gender Gap Report 2021’ that lists Pakistan at 153 out of 156 countries on the gender parity index. Of a potential full term of 60 months, Imran Khan has completed 32. Though his mandate runs till August 2023, by next year this time, if he is still in office, he will be fast approaching the election sequence when governments tend to become lame ducks. Even without the complication of a surge in Covid cases, he would have found it difficult to turn the economy around, given his focus on decimating the opposition, limited understanding of serious economic issues and limited talent pool in the government. The impact of the pandemic has made the task infinitely more problematic.

Imran Khan has been fond of reassuring people ‘aapne ghabrana nahin hai’. The reality, however, is that the time has come for Pakistanis to be very scared.

Views are personal

Join Whatsapp Channel of The Tribune for latest updates.