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Saturday, April 8, 2017

How bankrupt is Pakistan economy?

Just recently went past two news items; one was on a renowned international newspaper where the author discussed how Pakistan was beginning to turn around. He shared his experience how during his trip from Islamabad to Lahore he had seen huge infrastructure being built, witnessed heavy machinery alongside the roads, thousands of workers working on these projects worth billions of rupees. Second story was shared on a micro blogging website Twitter by an Indian journalist who visited Lahore for a few days to attend a conference. As soon as she touched the Indian soil, she tweeted she wished that one of our (Indian) rulers could build a city like Lahore. She just wished to have such wonderful infrastructure in one of the Indian cities.
I just got stunned by these stories, in fact whole international press, donor and rating agencies are sharing good stories regarding Pakistan economy. Read Wall Street Journal, Bloomberg, The Economist, New York Times, Khaleej Times, World Bank, Asian Development Bank, IMF, JETRO, Standard & Poor (improved Pakistan Rating), MISC’s thinking about bringing Pakistan stock market among emerging economies, Moody’s etc. But unfortunately when you tune in to Pakistani TV channels, it feels that all hell has already broken loose and we are about to vanish from the face of the earth.
Now let’s find out what exactly is happening. Are we really going to go bankrupt soon or there is a light at the end of the tunnel?
Three years back, when this government took over, Pakistan’s foreign reserves were hovering around 3 billion dollars, international institutions were predicting a default, Pakistan was suffering from worst ever power crisis (industry faced long hours outages in Punjab while domestic consumers faced 16-18 hours of power breakdowns), fiscal deficit was 8-8.5%, public entities were draining hundreds of billions yearly, gas shortages were holding back the industry across the country but Punjab industry faced worst, hardly any growth in revenue, Karachi was handed over to target-killers, bhatta mafia and criminal gangs, while terrorism wave across the country shook Pakistan to its core. Thousands lost their lives in terror incidents. Government machinery was marred by corruption charges, every second minister was a regular visitor of courts on corruption charges, and ministers got jailed in corruption scams, looted money found in their bank accounts while one PM was disqualified.
It was important to waste one paragraph on history as we in Pakistan have short memories and few of us live on very few brain cells. First thing first; three years into the government and not a single mega corruption scam surfaced despite repeated stories built in media by anchors of mega corruption. I will give 2 examples here:
1) LNG deal was made controversial, corruption worth hundreds of billions of rupees was found even before the deal was signed, when not even a single LNG cargo had anchored on our ports. Guess what happened. This government inked a historic deal, one of the cheapest deals even made in LNG sector In the entire world.
2) NandiPur was made controversial despite knowing well that this government had nothing to do with the deal signed with the Chinese company. Some even claimed to have exposed corruption worth Rs 100-150 billion in a project worth Rs 58 billion. Government went ahead with independent audit and then the whole media went quiet, no one bothered to rectify their blunder.
Load shedding came down from 16-18 hours to just 6-8 hours, industrial feeders declared load shedding free across Pakistan, after years of industry getting uninterrupted gas supplies after landmark LNG deal made by this government. As I told you, we, as a nation, suffer from short-term memory loss. Previous two governments failed to seal the deal as corruption charges surrounded it, but this LNG deal will prove our lifeline in the years to come. During the last 15 years, not a single energy project was initiated by Musharraf or Asif Ali Zardari. The country continued to suffer heavy losses, almost 1% of GDP every year due to this power crisis but nothing was done except expensive rental power plant deals. As we speak, Pakistan energy sector is going through a revolution. Through a range of energy projects launched under CPEC, Pakistan will finally get rid of these power outages by the end of 2018, a total of 10-12k MW energy projects shall be commissioned by the end of 2018 and work on many other projects will start that will finish during next decade.
When this government came into power, fiscal deficit, which is considered backbone of any economy, was hovering around 8-8.5%, now it has come down to 5% this fiscal year. Pakistan’s Tax-to-GDP ratio is lowest in the world yet during the last three years, major headway were made and this year Pakistan will successfully gather 3100+ billion rupees as tax. It is 20% increase in this fiscal year alone while in first two years, revenue increased by 30-31%. Tax-to-GDP will cross 10% this year. Pakistan’s reserves are touching 21 billion dollars and the stock market has been declared one of the best performing markets.
FDI is finally improving as well. This year, almost 15.7% jump was witnessed almost reaching 1 billion dollar in first eight months of this fiscal year, and may witness significant jump in coming months/years as projects under CPEC are going on at full speed. Agricultural credit is touching all time high, local investment after years is showing healthy growth due to all-time low interest rates, inflation hovering around at acceptable levels of 3 to 4 percent (hope you all remember it was around 10% in PPP era). Yes, worrying sign is the continuously falling exports but, then again, exports are continuously falling for the last 6 months in India too. But FDI is improving dramatically, even surpassing China, and their GDP is touching 7% that is fastest in the world while Pakistan’s GDP touched 4.8% that is eighth fastest in the world, and is all set to touch 5% at the end of this fiscal year because Large Scale Manufacturing is also putting up some strong numbers. Hope you all remember the negative growth rate in PPP’s 5-year tenure. Remittances are showing continuous growth despite global slowing down of oil prices and low inflation numbers, this year again shows 4.4% growth, crossing 20 billion dollars.
Apart from not declaring our sitting PM a RAW agent, there is a lot more that we can learn from our neighboring country. How Modi gets welcomed across the globe despite a poor reputation among middle classes due to Gujarat massacre? How Indians stand behind their PM when he visits abroad? How Indian media, immigrants, locals carry the shining India slogan? If my memory serves me right, in 1999 Indians faced the same economic challenges, were in miserable condition post nuclear blast sanctions. Pakistan faced a military coup and India faced the challenges with democracy. Now India is a 2.1 trillion dollar economy while Pakistan is 285 billion dollar economy, of which 50 billion dollar increase came during the last three years. Pakistan is turning around. Hope we all realize it and start accepting it and start contributing in its growth.
Pakistan’s reserves are 23 billion dollars as of Today 03–10–2016
Pakistan has been ranked 52nd, ahead of India (60th), among 79 developing economies in the Inclusive Development Index, according to a World Economic Forum (WEF) report.
WEF’s ‘Inclusive Growth and Development Report 2017’, released in Davos, Switzerland on Monday, said that most countries were missing important opportunities to raise economic growth and reduce inequality at the same time because the growth model and measurement tools that have guided policy-makers for decades required significant readjustment.
India has been ranked 60th, below neighbouring China and Pakistan, according to the WEF report, carried by The Asian Age, an Indian newspaper.
Various Indian journals including The Hindu, Indian Express, Deccan Herald, Punjab Times and others carried the report, highlighting that India ranked below China and Pakistan in the Inclusive Development Index.
The Inclusive Development Index (IDI) is based on 12 performance indicators. In order to provide the complete measure of economic development than GDP growth alone, the index has three pillars—Growth and Development, Inclusion and Intergenerational Equity, and Sustainability.
Lithuania tops the list of 79 developing economies that also features Azerbaijan and Hungary at second and third positions, respectively. While India is placed at the 60th spot, many of the neighbouring nations are ahead in the rankings.
China is ranked at the 15th position, Nepal (27th), Bangladesh (36th) and Pakistan (52nd). Two BRIC nations, Russia and Brazil, are at 13th and 30th places, respectively. Others in the top ten are Poland (4th), Romania (5th), Uruguay (6th), Latvia (7th), Panama (8th), Costa Rica (9th) and Chile (10th).

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