The economy is in disarray. The Federal Board of Revenue (FBR) has failed to meet the revenue target. The rupee’s freefall continues. Heavy gas bills have robbed people of their incomes. Petrol and diesel prices have reached nine-month high. The government has announced a Rs2 per unit hike in power tariff in the next two months. The first seven months of the Pakistan Tehreek-i-Insaf (PTI) government have been the hardest for the people of the country and coming days forecast even more misery and suffering for them.
Inflation has already hit five-year high in the country. Measured through the consumer price index (CPI), inflation surged to 9.4pc in March 2019, the period when global oil prices started rising, undermining earlier gains, the Pakistan Bureau of Statistics reported. Over the past three months, prices of fresh vegetables, fruits and meat have posted persistent increase in major urban centres. The average inflation during the July-March period rose by 6.79pc on a yearly basis. While the government had projected 6pc annual inflation for the current financial year, the figure was crossed in February. The average inflation was 3.92pc in financial year 2017-18 and 4.16pc the year before.
The government has also increased prices of all petroleum products by up to 6.45 per cent for April as the international crude price inched up by less than 2pc over the last month. Petrol and diesel prices were increased by Rs6 per litre while kerosene and light diesel oil (LDO) were jacked up by Rs3 per litre, according to an official announcement. With a 5.36pc increase, the ex-depot price of high speed diesel (HSD) was set at Rs117.43 per litre — the highest since July 2018. The ex-depot price of petrol was fixed at Rs98.89 per litre — also a nine-month high, with an increase of 6.45pc. The Oil & Gas Regulatory Authority (OGRA) had worked out about Rs11.17 increase in the price of HSD per litre and Rs11.91.71 hike in the petrol price.
The government has already announced that electricity tariff would be gradually increased by Rs2.25-2.50 per unit in three phases and circular debt would be brought down to Rs250 billion by the end of December. Addressing a press conference, Minister for Power Omar Ayub Khan said the first increase of about Rs1 per unit or so would come into force over the next two to three months. The remaining increase would follow in about two quarters. The previous government had delayed a notification of tariff, determined by the National Electric Power Regulatory Authority (NEPRA) because of its electoral compulsions. The NEPRA had determined the power tariff increase of Rs3.66 per unit, but it was not passed on and, as a result, the circular debt ballooned to worrisome level. The government has already raised the tariff by Rs1.27 per unit.
The rupee’s depreciation against the dollar continues despite increasing inflows and rise in country’s foreign exchange reserves. The local currency lost Re1 against the dollar as the greenback traded at Rs142.30 in the open market. Experts fear the dollar could cross the Rs160 mark in few months, which would trigger another wave of inflation in the country. On the other hand, the State Bank of Pakistan (SBP) has projected growth between 3.5 and 4pc, indicating a sharp decline as compared to 5.2pc growth in FY18 or the target of 6.2pc for the current fiscal year. In its second quarterly report, it said the sharp deceleration is already visible across the board and is attributable to slower growth in agriculture as well as “stabilisation measures taken to preserve macroeconomic stability.” In the previous quarterly report, the SBP had downgraded the growth forecast to a range between 4 and 4.5pc, significantly lower from the starting year target of 6.4pc. With the further downgrade, the growth rate is nearly half of what it was expected when the fiscal year began. The report points out a slowing economy, rising inflation, persistently high fiscal and external deficits. “The fiscal deficit continues to stay high despite a sharp cut in development spending since the beginning of FY19,” the report said, adding that revenue collection had declined and current expenditures increased substantially. The overall fiscal deficit increased to 2.7pc of Gross Development Product (GDP), up from 2.2pc in the same period of last year. Similarly, a sharp growth in current expenditures led to a significant increase in the revenue deficit, which increased to 1.7pc of GDP in the first half of 2018-19, from 0.5pc last year.
According to National Accounts Committee member and noted economist Dr Ashfaque Hasan Khan, Pakistan’s GDP size may contract by 15pc from $330 billion from financial year 2017-18 to almost $280 billion in 2018-19 and the per capita income in the country could decline by 16.7pc from $1,640 to $1,366. “New jobs are created only when real GDP growth continues to stand at 7-8pc every year. As the State Bank of Pakistan has estimated the growth at 3.5-4pc in the current financial year and if Pakistan joins the IMF loan programme, GDP growth will remain the same for the next three year. It means the economy will not be able to absorb new entrants in the job market. Therefore, the pool of unemployed youths will keep growing,” he argues. He also feared the government could never be able to initiate and complete its flagship project of five million houses in the situation.
On the other hand, Finance Minister Asad Umar is optimistic Pakistan will go through a stabilisation period of two years after few more months of extreme turbulence. Defending the hike in petrol and diesel prices, he said the tax rate on the products was 52pc in the past, which had been reduced to 30pc. “If we had maintained the same taxes, we could have silently gathered Rs97b more from the Pakistani public. We have actually lowered tax ratios,” he insists. Admitting rising inflation, he still claims it is lower than the Pakistan Muslim League-Nawaz (PML-N) tenure. “In PML-N’s first year, there was double-digit inflation which has not been the case in our tenure,” he claims.
All measures taken by the government to revive the economy have overburdened the common people. Prices of all essentials have already skyrocketed. Rates of many drugs have tripled and even quadrupled after the government had allowed manufacturers to increase prices of medicines by 9-15pc in January. The unilateral and illegal increase and the government’s criminal negligence have made the lives of the common man miserable. A hike in electricity tariff and petroleum products may prove to be the last straw.