The Pakistan Tehreek-e-Insaf (PTI) issued a white paper on the state of Pakistan’s economy which is, in fact, a paper of white lies. The conclusions presented in the white paper are factually incorrect and ignore several macroeconomic indicators. The truth is, the PTI left the country on the brink of default in April 2022.
Before the government went out, the IMF programme was terminated and unfunded subsidies on fuel and electricity prices were announced for short-term political gain. In March 2022 alone, foreign exchange reserves fell by $5 billion from $16.3 billion to $11.4 billion. The country was not even able to open letters of credit (LCs) for fuel import. As a result, heavy load shedding of six to eight hours daily was started due to the unavailability of fuel to produce electricity. The PTI government did not leave an easy way to come out of this economic mess.
The PTI, in its white paper, conveniently ignored its own performance and the state of the economy left by its government in April 2022 and blamed the last eight months’ performance on the incumbent government, especially PML-N. As the PTI sabotaged the IMF agreement intentionally to create landmines for the incoming government after the vote of no confidence, it was contingent on the new government to reformat the conditions of the IMF by increasing petrol prices, goods tariffs, and currency depreciation. During the PTI government, the circular debt of gas also increased to Rs1,600 billion, which was unprecedented in the history of Pakistan.
In such conditions, the inflow of dollars is very necessary. The government is now preparing for a joint 9th and 10th IMF programme to overcome the crisis of dollar inflow for which some hard measures have been taken by the government like the depreciation of currency for maintenance of single dollar rate, increase in electricity, oil, and gas prices etc.
Segment-wise brief detail is given below.
The import bill for FY2022 hit a historic high at $72 billion with a foreign exchange reserve of $9.8 billion (Jun-2022). A year ago the State Bank of Pakistan (SBP) reserves peaked at $20 billion in Aug-2021, however, due to insane economic policies, foreign reserves squeezed to a mere $10.4 billion in just eight months (April 2022) when the PDM government came to power. Uncontrolled imports and stalled IMF programme left the country at default risk.
The trade deficit stood at $17.3 billion in FY2022. The PDM government managed to curtail the trade deficit by 26.2 per cent during Jul-Nov 2022 as compared to the previous year.
Current account deficit
After coming into power, the PDM has not only revived the IMF programme but enhanced the fund to finance external liabilities. From Jul-Nov 2022, the government successfully contracted the current account deficit (CAD) by 57 per cent to $3.1 billion as compared to $7.2 billion in Jul-Nov 2021. The import bill was reduced by 16.2 per cent whereas exports were reduced by just 2 per cent which was also due to the global economic recession.
FBR tax collection
FBR tax collection remarkably grew by 17.5 per cent to Rs3,429 billion during Jul-Dec 2022 as compared to Rs2,920 billion during the same period last year. On top of that, the direct tax growth remained at 49 per cent during Jul-Dec 2022 with an exceptional growth of 66 per cent in Dec-2022.
During Jul-Nov 2022, agriculture credits increased significantly by 36 per cent to Rs664 billion from Rs488 billion during the same period last year.
During FY2018, the net foreign direct investment (FDI) reached $2.8 billion whereas in FY2022 FDI contracted to just $1.8 billion. Total foreign investments in FY2018 were $4.99 billion. However, in FY2022 total foreign investment remained at $1.78 billion. Work on China Pakistan Economic Corridor (CPEC) was halted; no global investor was interested to come to Pakistan due to failed economic and foreign policies of the PTI government.
Investment as a per cent of GDP was higher during the PML-N compared to the PTI tenure. The confidence of investors and their sentiments were much better in the PML-N tenure than in the PTI tenure
Rupee depreciation against the US dollar during PTI’s 3.5 years was 57 per cent from Rs115 to Rs180. During the current government, rupee depreciation remained at 31.3 per cent till Dec 2022. It will be reduced gradually in the coming months.
Global economies are witnessing stagflation (low growth with high inflation at the same time). The US monetary authority is responding by increasing interest rates which is creating pressure on other currencies.
The following table shows the double-digit depreciation of major currencies against the US dollar from April 2022 onwards.
The removal of Pakistan from the Financial Action Task Force (FATF) grey list was a big win for the country. FATF, an international watchdog on money laundering and financing of terrorism, had placed Pakistan’s name on the list of countries under “increased monitoring,” also known as the “grey list” in 2018.
The progress made by Pakistan in carrying out the tasks laid down by the FATF action plan has strengthened Pakistan’s legal and regulatory framework against money laundering and financing of terrorism at par with international standards. Pakistan’s removal from FATF debunks the propaganda of PTI that PDM and its allies are a cohort of corrupt politicians who have come to launder their own money. Had it been true, Pakistan would never have been able to come out of the FATF grey list.
Diplomatic efforts for climate change compensation
The historic announcement of the establishment of a loss and damage fund at the 27th United Nations Climate Change Conference (COP27) in Egypt is a major diplomatic victory for Pakistan and the rest of the developing world. Pakistan’s efforts to make the loss and damage fund an integral part of climate justice have been acknowledged worldwide. The loss and damage fund envisages financial compensation for the loss and damage caused to developing states due to anthropogenic carbon emissions. Pakistan’s contribution to climate change is a meagre 0.8 per cent whereas the impact of change is mammoth in terms of financial loss and humanitarian crises. As a result of pronouncements made at COP27, a transitional committee will start working early next year to make recommendations on how to operationalize both the new funding arrangements and the fund at COP28 this year.
2000 MW energy efficient plants
In a short period of eight months, the PDM government completed 2000 MW cost-effective power projects on Thar coal which were delayed by the PTI government, to manage the power circular debt which was increased by 115 per cent (1319 billion) during the PTI tenure.
AMI metering project
The federal government has started the Advanced Metering Infrastructure (AMI) in all power distribution companies in collaboration with the Asian Development Bank (ADB).
This state-of-the-art service will be provided to electricity consumers as per their requirements and it will help to eliminate theft, further improvement in electricity delivery, and not transfer the burden of electricity theft to consumers by obtaining accuracy.
Conversion to green energy
o cut reliance on imported fossil fuels, Pakistan plans to increase the share of clean energy to 60 per cent in its energy mix by 2030. Currently, the share of renewable energy is only about 4 per cent, according to government data. Pakistan’s energy imports during the last fiscal year were $23.3 billion, 29 per cent of the country’s total imports. The process for the generation of 10,000MW solar power in the country had already commenced and such a conversion by the federal government buildings would be the first phase.
The government has prepared a plan to ensure that all government buildings and departments are powered by solar energy. By end of April next year, all federal government departments, be it police, NACTA, health, interior, or the power ministry itself, would have access to cheap electricity. The government has prepared a National Conservation Plan to save energy.
Flood relief efforts
The government established a National Flood Response and Coordination Centre — with representatives from the National Disaster Management Authority (NDMA), federal stakeholders, provincial governments, and the Pakistan Army — to oversee the national response to the 2022 floods when one-third of the country went underwater. According to official estimates, the floods caused loss and damage of 30 billion USD to Pakistan’s economy.
The 2022 Pakistan Floods Response Plan focused on the immediate needs of 5.2 million people, with the lifesaving response and relief activities covering food security, assistance for agriculture and livestock, shelter and nonfood items, nutrition programmes, primary health services, protection, water supply and sanitation, women’s health, and education support.
The Government of Pakistan was able to garner international support to provide instant relief to the flood affectees. As of 7 November 2022, 19.7 per cent of the government’s appeal for $816.0 million has been funded by the Asian Development Bank and other donor agencies. The Asian Infrastructure Investment Bank has approved a $500 million loan to the government, as parallel co-financing of ADB’s $1,500 million under the Building Resilience with Active Countercyclical Expenditures Programme. Although that programme’s support extends across Pakistan, part of the funding is also expected to roll out relief and recovery efforts for the most vulnerable segments of the 33 million people affected by the 2022 floods.
The World Bank’s Board of Executive Directors approved $1.692 billion in financing for five projects to support people living in flood-affected areas of Sindh province in Pakistan.
While the Government of Pakistan was busy providing flood relief efforts, Imran Khan was busy creating a ruckus to destabilize the economy as well as flood relief efforts. A shady telethon was conducted by Imran Khan to deceive the people of Pakistan and to exaggerate his worth when in reality, a meagre amount of money was collected by this ostentatious exercise.
The PML-N believes that the country’s progress is directly proportional to the development of Pakistan’s agricultural sector. As evident from the record after the 2015 floods, then Prime Minister Nawaz Sharif announced the Kissan Package of Rs341 billion with the targeted uplift scheme of 1.2 million farmers. During the previous government of PTI, not a single agriculture package was announced except for a rebranding of the Kissan Card Scheme with PTI’s name.
In October 2022, Prime Minister Shehbaz Sharif announced a Kissan Package of Rs1,800 billion ($8.1 billion) for farmers to offset widespread destruction caused by unprecedented floods in the country. The package includes:
- Waiver of markup on loans to farmers in flood areas
- Fresh loans for small farmers
- Loan for youngsters
- Reduction in fertilizer prices & availability of urea in sufficient quantity
- Launch of solarization of agri tube wells
- Loan for SME sector for agriculture purposes
- Second-hand tractors to be imported
- 50 per cent rebate on duty on import of tractor parts
- Provision of 1.2 million wheat seed bags to flood-affected farmers
- Reduction of tariff on agri meters
- Loan portfolio for farmers enhanced
Financial assistance for cancer patients
PML-N, when it came to power in Punjab for a short period, decided to provide financial assistance to cancer patients being treated at government hospitals. In June 2022, then Chief Minister Punjab Hamza Shehbaz Sharif announced a special effort to provide free medicines for cancer patients by transferring cash into their accounts. Mayo Hospital and the Bank of Punjab (BoP) reached an agreement regarding this transfer of funds and signed it before Punjab’s chief minister. Under the Umeed-e-Zindagi programme, the Bank of Punjab would transfer money to registered cancer patients. Unfortunately, the PTI government and its Minister of Health Yasmeen Rashid discarded this scheme to promote Health Card Scheme which aimed to put public money into private hands. So far, no work has been done to provide free cancer medicines in government hospitals.
Corruption perception indexes
Pakistan dropped 16 places in the Corruption Perceptions Index (CPI) for 2021 compared to the previous year, ranking 140 out of 180 countries. Under the PTI government, the ranking of Pakistan has gradually slid. In 2019 it was 120 out of 180 countries, in 2020 it was 124, and in 2021 it worsened further to 140. In 2018, during the PML-N government, the ranking was 117 out of 180 countries.