INSIGHT
Unanticipated fast paced developments on the internal and external fronts are likely to increase uncertainty and further hurt the already subdued economy, as both the government and the opposition are not taking cognizance of the issue due to their expanding political and other vested interests.
The new jolt came from the Saudi led decision to sever all kinds of political, diplomatic and economic ties with the tiny state of Qatar which many believe could sabotage its $18 billion LNG deal with Pakistan.
Moreover, if the issue drags on there will be a setback to $20 billion annual home remittances that are profound to support the declining foreign exchange reserves. One cannot imagine the return of Pakistani workers due to Arab’s quarrelling.
As if a yearlong confrontation over Panama scandal and Dawn leaks were not enough to negatively impact $300 billion Pakistani economy, the sad decision by Saudi Arabia and six other Middle Eastern allies against Qatar for allegedly supporting terrorism could cause new problems to the country.
What are the political and economic implications for Pakistan if it does not side with Saudi Arabia against Qatar and also Iran? The ruling elite have little time to set their own house in order, especially in terms of looking after the economy more zealously rather than protecting their own political interests.
In the absence of long cherished political stability, the economy continues to suffer, though the Pakistan Muslim League-Nawaz (PML-N) government has succeeded in giving its fourth annual budget.
The World Bank and Moody’s International, a New York based credit rating agency, have forecasted about 5 percent plus GDP growth rate in 2017-18 and 5.5 plus in 2018-19, but their officials do warn about increasing political instability in Pakistan that is leading to economic instability.
The government claims it has done a great job to fix the tattered economy despite facing hardships and political wrangling by its opponents both in and outside the parliament. The finance minister maintains that the economy is no more in red and that major economic challenges have successfully been met if not completely tackled.
The finance minister claims that PML-N government would also present its fifth budget next year despite all hurdles being created by the opposition parties. The new budget, however, amply suggests that it is an election budget for which a massive amount of Rs290 billion has been earmarked for legislators to undertake new development schemes aimed at winning 2018 general election.
The government’s opponents and critics allege that Rs1 billion has been allocated to every MNA, the objective of which is to help them win the next election. The allocation of Rs290 billion to legislators is unprecedented and speaks volumes about the political intentions of the government.
It is being said in this backdrop that the new budget’s projections are overestimated, and meant to favour legislators. There are apprehensions that opposition legislators would be denied this funding which means the PML-N legislators would get double of their share to win the election by spending this money before the next election.
Prominent political and defence analyst Dr Hasan Askari Rizvi is of the view that the country’s economy will continue to suffer due to deepening political squabbling which is causing growing instability across Pakistan.
“If judgment on Panama case comes against the prime minister and his family, the government will be pushed to hold early elections. In case the result goes in favour of the ruling family, it was likely to delay the elections with a view to manage Senate election to be held in March next year. Therefore, in both cases, political instability would increase that is detrimental to the country’s fragile economy,” he said.
But in that case, he pointed out, opposition parties would not sit back silently and would further create strong pressure on the government to hold early elections.
Another distinguished political and defence analyst retired Air Marshal Shahid Latif said the current government mismanaged all political and economic affairs.
He regretted that Nawaz Sharif administration has failed to stabilise the economy and was wasting time only to defend itself in courts and now before the Joint Investigating Team (JIT) set up by the Supreme Court. “Today Pakistan is in dire state both internally and externally,” he said, and added that on one had the economy was being handled by incompetent people and on the other hand there was no foreign minister to deal with issues like the new problems between Saudi Arabia and Qatar.
“This issue could harm our economic interests and who knows what would happen to the much talked about and very expensive deal with Qatar on the import of LNG,” he said.
Latif said the economy was already in the ICU notwithstanding tall claims of finance minister Ishaq Dar, as according to independent economists, fake and fabricated figures were given to the nation. “Those who know the economy are saying that trade deficit is increasing, budget deficit is getting unsustainable and foreign debt has reached $80 billion and feared to be soon reaching $90 billion. If that happens, all international financial institutions led by the IMF would seek denuclearisation of Pakistan at the behest of the United States,” he warned.
He regretted the government was not paying attention to the default situation which could occur due to falling imports and home remittances as well as foreign exchange reserves. “Honestly I do not see our economy improving due to the current government’s increasing political and monetary interests,” he said.
Meanwhile, the government is said to be focusing more on development activities rather than on any issue due to the fast approaching general elections. A record Rs1.8 trillion will be borrowed - 45 percent of the current expenditure - which will turn out to be 55 percent due to interest rate on this unprecedented borrowing for development aimed to lure voters.
National High Authority (NHA) will get Rs320 billion, an increase of 55 percent over last year’s allocation of Rs210 billion. This was done by increasing Public Sector Development Programme (PSDP) from last year’s Rs715 billion to Rs1.1 trillion, an incredible increase of 40 percent. But ironically, the power sector which got Rs134 billion last year, has been allocated Rs61 billion, which simply shows that the government does not intend to make investment in this vital sector of the economy.
Emerging details reveal that the government had originally decided to keep Rs377 billion for power sector in the new PSDP. But now Wapda has been asked to self-finance and generate Rs316 billion, which will put it in deficit. In fact, this is being done out of the budget, for which the government would extend guarantees for the money Wapda would borrow.
The government allocated juts Rs21 billion for the Rs894 billion Bhasha Dam, and experts say this means the close to 5,000MW dam would not be completed even in the next 50 years.
Special programmes of the prime minister would get Rs185 billion as part of the discretionary quota, which is called “pork barrelling” a metaphor about appropriating funds to please voters.
The worst is yet come as the government has decided to borrow Rs41 billion during the next financial year from the commercial banks to partially retire the circular debt which has again risen to over Rs400 billion. This is happening because the government did not adequately restructure the power sector. The new loan will be parked in the government owned Power Holding Private Limited where Rs375 billion was already parked.
The financial difficulties will continue to increase if the government does not go for complete restructuring of the power sector. And at the same time, does not revamp the Federal Bureau of Revenue (FBR) for collecting adequate resources without which the close to Rs1.5 trillion gap between income and the expenditure cannot be bridged.
Going forward the planners will have to introduce new and workable ways to collect the required revenue.
The writer is a senior journalist based in Islamabad
