FeaturedInternationalVOLUME 15 ISSUE # 01

PML-N’s indictment

The World Bank has identified causes behind Pakistan’s poor economic performance in its latest report. Covering the last three years of the Pakistan Muslim League-Nawaz (PML-N) government, it reached a conclusion that Pakistan lacks a consolidated system for recording and reporting its debt and there is also no mechanism to regulate public assets that results in discrepancies and non-reconciliation of hundreds of billions of rupees worth of funds.

 

The final draft report of the Public Expenditure and Financial Accountability Assessment (PEFA) 2019 of the World Bank has pointed out glaring deficiencies in the management of government assets and liabilities. It also pointed out that Pakistan’s budget has lost its credibility and the public finance management system has also deteriorated. It has downgraded the country’s ranking on almost all 31 fiscal management-related indicators during the PML-N tenure. The findings reflect extremely poor performance of the Ministry of Finance that failed to carry out its responsibility and let the fiscal rules violated. The report indirectly blames the PML-N for the fiasco, as the ministry was being run by its favourite minister and bureaucrats.

 

When compared with a similar assessment of the World Bank in 2012, the country fared poorer on almost all indicators and seven key pillars. There were hardly two indicators where the score improved while on the other two the score remained unchanged. In 2012, the country had secured five A grades – the highest score – but in the 2019 assessment there was not even a single indicator where it got A. Pakistan lost the highest score on critical indicators like classification of budget, comprehensiveness of budget information, transparency in inter-governmental fiscal operations, participation in the budget process and predictability of direct budget support. In 2012, the country got only six Ds and D plus but the lowest score reached a staggering 13 in 2019, reflecting extremely poor performance of the Finance Ministry. In 2012, there were 10 Cs, average score – a figure that stood at eight in 2019.

 

Pakistan was assigned the lowest score D on the indicators of reliability of budget due to higher-than-budgeted expenditures and low revenue collection, extent of unreported government operations, public access to key fiscal operations, effectiveness of internal audit, lack of information about service delivery, poor quality and timeliness of annual financial statements, public assets and investment management, and revenue administration. The problems that have been identified in the report also remain largely unaddressed even today. The report acknowledged the importance of the 18th Constitutional Amendment that “re-asserted the federalist character of the Pakistani state”, which set the stage for provincial governments to improve local-level participation.

Meanwhile, the Asian Development Bank (ADB) has said Pakistan’s GDP growth had deteriorated to 3.3pc in fiscal year 2018-2019, which was the lowest in last 8 years. According to its report, the lowest rate was a result of weak performance across the board. Rising twin deficits in the fiscal and current accounts weigh on Pakistan’s outlook, it added that inflation in Pakistan almost doubled from 3.8pc in the same period of FY2018 to 7.2pc in FY2019. Pakistan’s GDP growth remained lower as compared to the other countries of South Asia. Whereas Indian GDP growth has projected at 7pc during FY2019 and growth in Bangladesh accelerated from 7.9pc in FY2018 to 8.1pc in FY2019 with faster growth in industry and services. Similarly, GDP growth in Nepal accelerated from an upwardly revised 6.7 percent in FY2018 to 7.1pc in FY2019. However, Pakistan’s GDP growth recorded at only 3.3pc in FY2019.

 

According to the report, developing Asia will maintain strong but moderating growth over 2019 and 2020, as supportive domestic demand counteracts an environment of global trade tensions. In a supplement to its Asian Development Outlook, the ADB maintains growth forecasts for developing Asia at 5.7pc in 2019 and 5.6pc in 2020 which is unchanged from its April forecast. These growth rates are slightly down from developing Asia’s 5.9pc growth in 2018. Excluding the newly industrialized economies of Hong Kong, China; the Republic of Korea; Singapore; and Taipei, the regional growth outlook has been revised down from 6.2pc to 6.1pc in 2019 and maintained at that rate in 2020.

 

Though the World Bank has blamed the Finance Ministry of poor performance, yet it has, in fact, indicted the last PML-N government for Pakistan’s financial ills. The report covers three fiscal years, from 2015-16 to 2017-18, but the bureaucrats responsible for executing the functions still occupy their positions in the Ministry of Finance. The issues identified in the report remained unaddressed even in the last fiscal year 2018-19, which was the first year of the Pakistan Tehreek-e-Insaf (PTI) government.

 

The PTI government should learn from the mistakes of the PML-N to improve Pakistan’s economy and lives of its people. The government claims the worst is over, yet the economy continues to face many challenges. Prices of essentials continue to rise on a daily basis. Inflation in July rose by 10.34pc. It was the highest in 68 months, which puts the public under greater financial pressure. Compared to the last year, inflation has almost doubled. And compared to June this year, inflation has gone up from 8.9pc to double digits. A steady hike in petroleum prices and electricity and gas tariffs is directly responsible for the jump while the new tax measures will also contribute to it throughout the year.

 

Food inflation has increased to 9.2pc per annum, which means there are serious reasons to worry about the impact of the economic slowdown and inflation on hunger and malnutrition in the country. The cost of education, clothing, utility supplies and health has increased by over 8pc, which means affordable living is not going to be available anytime soon.

 

The PTI government has completed one year of its five-year term. It cannot continue to blame the past governments for Pakistan’s problems for long. It should act fast to mitigate the suffering of the people. Shopkeepers have increased prices unilaterally and there is no mechanism to check them. The PTI should activate price control magistrates in provinces where it is in power to provide relief to people.

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