There is little doubt that when the Pakistan Tehreek-i-Insaf (PTI) government came to power, it had inherited an economy in tatters. The debt burden had become unbearable while the current account deficit ballooned to the skies. The rupee was kept artificially high to project the false image of a strong economy. Exports were in the doldrums while imports rose uncontrollably. It was a totally hopeless situation, which called for a massive effort to restore the economy.
Much has been done in the last two years to revive the economy. Adviser to the Prime Minister on Finance Abdul Hafeez Shaikh recently said that neutral international observers had acknowledged economic progress made by Pakistan during the two years of the federal government despite the coronavirus crisis. He also listed many initiatives, including the Ehsaas cash assistance initiative, under which the government handed out Rs12,000 a month in cash to millions of lower-income families hit by the pandemic.
Soup kitchens for labourers and shelters for homeless people were also established across the country. Under the Ehsaas Kifalat programme, monthly financial aid and bank account facilities were provided to lower-income people. Interest-free loans were provided to people — 45 per cent of whom were women — who wished to start their own businesses. The government also introduced cheap loans to assist small traders so that they would not have to fire their staff due to lack of funds. The government also provided relief to traders by paying their bills for three months.
Due to the government’s policies, economic observers and organisations, like Moody’s, Fitch and Bloomberg, had improved Pakistan’s international ratings. Pakistan also made efforts to develop an “economic partnership” with African countries that have a population of 1.3 billion people, and the Engage Africa Initiative has been launched to increase trade and investment in the continent.
To cope with the financial setback faced by developing countries due to the Covid-19 health crisis, Prime Minister Imran Khan asked developed countries and financial bodies to provide debt relief. The initiative not only benefited Pakistan but all developing countries. At a time when the world’s leading economies were reeling from the impact of the coronavirus, Pakistan scored remarkable success against the pandemic.
Philanthropist Bill Gates, while comparing the coronavirus situation in India and Pakistan, remarked that the latter had dealt with the pandemic in a much better manner. A couple of months back, United Nations General Assembly (UNGA) President-elect Volkan Bozkir also said that the world could learn from Pakistan. The Wall Street Journal in a special report acknowledged that Pakistan was a “bright spot” in the world when it comes to the coronavirus.
To run the economy and provide for the needs of the masses, the government requires more revenue. To this end, the government has begun collecting taxes from the rich. Direct tax collections (a progressive tax whose incidence is on the rich and not on the poor) accounted for 363.6 billion rupees in July-September 2020-21, against 355.6 billion rupees in July-September 2020-21, in the comparable period of the last year. According to available figures, sales tax collected in the first quarter of 2020-21 was the highest single source of revenue at 435.7 billion rupees against 403.9 billion rupees collected in the comparable period of the last year.
The government’s current expenditure has been reduced, with civilian and military expenditure having been frozen in the current year. In July-September 2019-20, the running of the civilian government and defence accounted for 87.2 billion rupees and 242.6 billion rupees, respectively, while the comparable disbursement in July-September 2020-21 was 88.9 billion rupees and224.4 billion rupees, respectively.
Another remarkable achievement in the economic field is a primary surplus which shows a trend towards better stability. On the other hand, there has been a significant rise in the social safety net budget to 192 billion rupees and a historic package for former FATA. While subsequent to the launch of cash disbursements in 2008 to the poor and vulnerable under the Benazir Income Support Programme, there has been an annual increase in allocations in two years – from 120 to 192 billion rupees. Exports have also been rising due to incentives provided to exporters. In the last one year, exports in rupee terms have risen by nearly 5 percent.
Above all, the government has succeeded in reducing the current account deficit, which rose exponentially during the PML-N regime. The economy has, no doubt, stabilized. The turn-around is quite visible as indicated by a rise in foreign remittances, indicating enhanced faith of Pakistani expatriates in the health of the economy and productive results of the export-led growth strategy of the government.
But there is still a long way to go. The government should now focus on development and transmitting the benefits of the revival of the economy to the lower strata of society. Among other things, it must move quickly to control the rise in prices, which has upset the budget of the common household.