Press Talk on the State of the Economy:  PPP’s Charge Sheet on PMLN Economic Mismanagement

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The Pakistan Peoples Party is concerned at the total economic mismanagement of the PMLN Government, characterized by fake and fudged numbers, an exchange rate artificially showing a stronger rupee, artificially build reserves, all of which are now unraveling as former Minister Ishaq Dar is in hiding and hiding also his crimes of omission and commission.

In our view the charges by NAB are much smaller as compared with this charge sheet which holds him and PMLN government responsible for bringing this country to the verge of a financial disaster and worse off economically than 2013.

The Government’s profligate spending on boondoggle projects has led to huge debt burden on the nation, a current account deficit that is unsustainable and depletion of our reserves.

This was further compounded by wasteful expenditures which could have better spent in growth making projects. Nawaz Sharif promised that he would break the begging bowl for this country.

Instead it reported that this is the second time this government is going with a begging bowl to a friendly country. The first time was when Saudi Arabia gifted 1.5bn dollars to Pakistan and now apparently Shahid Khaqan Abbasi is going with one to China for a 2bn dollar injection.

PMLN must answer many things for the present state of affairs.

  • First, after four years of artificially keeping the rupee strong against the dollar by injecting dollars into the economy, the government has in the last 100 days allowed the rupee to fall against the dollar. This 10 per cent depreciation has added to our debt by 9.5billion dollars or nearly 1 trillion rupees. Every Pakistani today owes 130,000 rupees in debt.
  • Total Debt and liabilities in June 2013 were 16.338 trillion rupees which increased by 10.476 trillion rupees during the last 4.5 years and reached to record 26.814 trillion rupees in December 2017.

 

  • As per SBP, gross public debt to GDP is 63.5 percent however the independent economists question the credibility of GDP figures quoted by Pakistan Bureau of Statistics and economists claimed that debt to GDP is around 70 percent.

 

  • Total External Debt in June 2013 was $60.899 billion, which increased by more than $25 billion during last 4.5 years and reached to $88.891 billion in December 2017. With the devaluation of the Rupee by 10 per cent in 100 days, we have increased our debt by 9.5billion dollars overnight, and we are now at 95bn dollars.

 

  • Second, the reserves were grown not through increase in exports, or investments or savings, but mostly through borrowing. Even those reserves are depleting fast.

 

  • SBP gross reserves were $19.65 billion after second quarter of FY2016-17 which declined by USD 3.89 billion and reached to $15.76 billion after second quarter of FY2017-18. The IMF in its report stated that on February 14, Pakistan’s net international reserves were actuallyminus $724 million, as Forex liabilities stood at $13.5 billion against gross official reserves of $12.8 billion, with foreign debt expected to swell to $103.4 billion by June 2019.

 

  • Third, by strangulating the economy with high taxation, very high power tariff and by artificially manipulated rupee against dollar rate, the country isfacing one of the most gaping current account deficit. First time in the history, the imports went up to $52 billion leading to a trade deficit of 32 billion during the fiscal year of 2016-17

 

  • Fourth, the government has not made full use of CPEC. Instead of using this to boost production and industry, this has just been used for very expensive power projects, which have only added debt burden to the country.

 

  • Finally, privatization has been a disaster. Instead of restructuring public sector entities they have just allowed them to accumulate debt. In the last meeting the secretary privatization commission flatly refused to endorse the governments hurriedly designed buy one get one free plan.

 

The PMLN lions roared that they would make Pakistan an Asian Tiger. Instead they have made Pakistan a client state dependent on largesse from friendly countries.

After the completion of Extended Fund Facility Programme, the IMF has painted a bleak picture of the overall economy of Pakistan with special emphasis on foreign exchange reserves, current account deficit and the country’s capacity to meet its foreign debt obligations. They have endorsed the fact that no reforms were carried out to take Pakistan on a sustainable economic recovery. It is feared that the nation is headed for another IMF bail out program.

 

2013 and 2018 Compared

  • Dollar rate averages 120 Rs a barrel where as dollar rate averaged 50 rupees a barrel
  • Public Sector Entities’ (PSEs) debt in June 2013 was Rs. 425.27 billion, which reached to Rs. 1.21 trillion at the end of December 2017.
  • Circular debt has doubled from 500 bn in 2013 to nearly 1 trillion in 2018
  • Current Account deficit in 2013 was $4.6bn as against where it was nearly $12.4bn last year and with the current trend expected to reach $15bn in 2017/18.
  • Total debt was approx 16 trillion rupees. It has increased to 26 trillion rupees.