It has been more than nine months that the government of the Pakistan Tehreek-e-Insaf (PTI) is in the saddle but it is faced with numerous challenges with the foremost test is how to put the economy on the right track. At the moment, the government of Prime Minister Imran Khan is in the soup for its inability to put the economy on the right path and consequently, he has to show the door to his finance minister, Asad Umar.
Now the biggest question is how to move on from this bad economic situation. The most important lesson here for each of us and the policymakers to learn is that the economy is a very specialized field and it cannot be left to just politicians to fix the fundamentals of the country’s economy and its key aspects of fiscal, monetary, and trade policies. So, in order to improve the economic situation, we need experts who have command of all aspects of the economy. In this context, the appointment of Dr. Hafeez Sheikh as Prime Minister’s Advisor on Finance is a step in the right direction. However, there is a problem. Dr. Sheikh is not a politician and a member of the parliament although he has been given the status of a federal minister. The appointment of Dr. Sheikh has put a huge question mark on the viability of the entire political system of the country. Because, if a political system cannot produce an economic expert among its political wings to run the affairs of the country, how could it be called suitable, let alone an efficient system to run the affairs of the country? Here, the opposition political parties must argue and come up with criticism that it has been the inability of the PTI government and policies of PM Khan and his team members, which are responsible for the bad situation of the economy. Indubitably, PM Khan and his government have many shortcomings in their policies and approach to put the economy on the right track; however, if we look deeper into our economic and financial woes, the roots could be traced into the policies of successive elected governments since 1988. For instance, when in October 1999, General Musharraf top pled then Prime Minister Nawaz Sharif, who was serving for the second time, the country was on the verge of an economic default. Then, there was no Imran Khan or the PTI which could matter politically. When Nawaz Sharif became the prime minister for the third time in 2013, everyone of us expected that this time he would do wonders and the country would make progress by leaps and bounds. It never happened and he repeated all his previous mistakes and committed all kinds of financial corruption which hit every Pakistani badly.
The economic policies are indirectly the result of our political conditions, the former hit the people directly. The government of the Pakistan Muslim League-Nawaz (PML-N), led by Sharif and followed by Khaqan Abbasi after the disqualification of Sharif by the Supreme Court of Pakistan for financial corruption, was least concerned about the economic woes of people. It was not only due to the insensitivity of the PML-N government and its bigwigs, but the fundamental point is that most of the members of the government personally benefitted from the political instability and poor economic conditions in the country. In other words, the economic conditions were left to worsen by the PML-N government and before it, the Pakistan People’s Party (PPP) government, so that the main figures could personally benefit from it by indulging in extensive corruption.
Although Asad Umar may have made his efforts to resuscitate the economy of the country and worked hard, yet he could not succeed because he and his team could not understand the fundamental problems of the economy. A man from the corporate sector, Umar, could not look at the economy with a strategic outlook.
Just before the July 25 elections last year, we wrote in these lines that the next government should have to revisit the entire gamut of economic policies. We had written: There is a need to have a complete reassessment of our macroeconomic policies by the next government immediately after coming power, otherwise economic catastrophe has already engulfed us. Our forecast has proved absolutely correct because the PTI government could not understand the fundamentals of our economy.
When the PML-N government left in late May 2018, the state of economic health of Pakistan could be gauged from the fact that the current account deficit in the eleven months (July 2017-May 2018) of the preceding financial year had increased by 43 percent, relative to the same period of the previous financial year. This was a huge current account deficit by any economic standards as the total deficit amounted to $5.96 billion. Whereas, the total current account deficit for the outgoing fiscal year had swollen to about $17.5 billion. The colossal current account deficit of Pakistan, then and now, has mainly three reasons. These include a huge import bill, sluggish exports and significant reduction in workers’ remittances.
It is important to note that the import bill for the last eleven months of the PML-N government had surged to $50.71 billion. Most of the imports had been of consumer goods, which resulted in a huge import bill. Although the PTI government has tried to discourage imports, yet it has not been very successful in this regard. It might have reduced the imports of consumer goods but at the same time Asad Umar could not come up with a strategy to improve exports.
Insofar as economic policies are concerned, the PML-N government had completely failed on this front. In the last year of the PML-N government, the current account deficit had exacerbated due to decreasing exports which had come down to $22.78 billion. During the last year of the PML-N government, remittances of workers remained $18.03 billion, which was a significant decrease from the previous years. The PML-N government could not encourage economic exports because of erratic policies. Importantly, it could not address the energy crisis in the country due to which the country’s manufacturing sector’s full potential could not be utilized. So, without surplus products what Pakistani manufacturers could sell to the world? It may be remembered that the PML-N had got the mandate in 2013, mainly due to its promise of resolving the power crisis within two years of its government. The promise could never be fulfilled after five years. Unfortunately, the PTI government of PM Khan could not understand the fundamental problems with the economy and could not come up with vibrant policies. Already, a lot of time has been wasted by the PM Khan government. If it wants to put the economy on the right track, it would have to understand the fundamental problems of the economy, left by the previous governments and the general dynamics and potential of the economy. Otherwise, replacing ministers would not make any difference and the common man would be worse off in the months and years ahead.