State Bank of Pakistan (SBP) has released its report of third quarter of previous fiscal year on the performance of major sectors of the economy. The report highlights prospects of GDP growth and suggests measures to address the challenges that economy is facing in the current fiscal year. It briefly touches upon the gains of stabalisation programme which included the monetary and fiscal variables such hiking of interest rate and imposition of regulatory duties for imports compression to fight inflation, reduce current account deficit and the one for achieving exchange rate stability. It also mentions the economy’s slowdown caused by Covid-19 pandemic.
The central bank quarterly report shows the way how to remove the impediments that will hinder the turnaround of the economy and advises measures to facilitate achieving the targeted output-income-employment led economic growth rate of 2.1 percent. It suggests effective and judicious utilisation of funds allocated in the current year budget for the implementation of projects included in PSDP for dams and necessary roads construction. The report emphasises the revival and growth of manufacturing sector to increase income, employment and effective demand. It appreciates the unexpected but spectacular performance of agriculture sector despite the extremely unfavourable weather pattern and leaving the Rabi and Kharif crops of this sector at the mercy of recurring locus attacks by the federal and provincial governments. It largely attributes the reduction in equity holdings of foreign portfolio investment to coronavirus pandemic, ignoring the effect of interest rate cut by 825 basis points which had mainly caused the flight of hot money out of the country.
Notwithstanding the optimistic projections about the resilience of economy, government has shown reluctance in bringing the required improvement in the economic environment to lower the production cost of all categories of industries. There is no visible change in fiscal policy inherited from the previous government, the “Darnomics” implemented by Dr. Waqar Masood, who is in the economic team of the Prime Minister. On the contrary, central bank advises the application of growth model propounded by the British economist of global fame, Lord Keyenes to steer the economy out deep depression and galloping inflation. The emphasis in the report is on boosting production, supply and effective consumer demand, which is the bottom-line of Keneyesian economics pursued in the great depression era of 1930s.
Inspite of setting September 30, 2019 as final deadline for industrial policy, there are no indication of its finalisation and putting in place. Agriculture contributes 20 percent to GDP, but implementation of comprehensive agriculture policy figures nowhere in the development planning of the government, except the gimmick of Rs.309 billion agriculture emergency programme of three years which is nonstarter.
The same lopsided energy policy of the previous governments is all pervading. Power sector circular debt has gone up Rs.2.18 trillion. Disbursement of next tranche of IMF loan is on hold and the multilateral donor is pressing hard for 30 percent increase in electricity tariff. Trade bodies are demanding lowering of tariff to revive and sustain industrial and business activities. The power purchase agreements made with IPPs have resulted highest in the region electricity tariff. Review of these agreements has become an impossible task. While chairing a meeting to review the power sector reforms on Thursday, Prime Minister Imran Khan said that it was intolerable and unacceptable to make people bear the brunt of mismanagement, theft and corruption in power sector. The crisis in power sector has long been diagnosed but strong corrective actions are nowhere in sight. If two mega IPPs tycoons are part of federal cabinet then who can dare take appropriate action against power sector mismanagement? Who will show the spine to bring to justice politically influential electricity bills willful defaulters and pilferers? Whose job is it to upgrade the ragtag transmission and distribution system to reduce technical losses, for which ADB had sanctioned$4.5 billion soft loan in 2016? If there is will, there is a way, which is not there for implementing long term fiscal, agriculture, industrial and energy policies.