Where is the economy going?

Mohammad Ali Tabba’s interview regarding business conditions has sent shockwaves across the country. Tabba is one of Pakistan’s best known and dynamic businessmen. Over the last many years, his group has invested heavily in the country in many sectors and can rightly be regarded as a major contributor to Pakistan’s economic growth.

So, when negative comments come from a person of his stature, they will be heard loud and clear across society. Among the many things that he mentioned, two statements stand out: first, that business confidence is at a historic low; and second, that his group has no intention of investing in Pakistan in the next few years.

If top businessmen believe that business confidence is at a historic low, the government needs to take this very seriously. Business confidence is low because the government has been uncertain with regard to economic policies. From the outset it has remained confused in taking key economic decisions – IMF or no IMF, GIDC write off and then withdrawal, it’s a story of inconsistency throughout the last 13 months. Even more serious is the statement that his group will not be investing in Pakistan in the next few years. In the first year of the current government, investment – both domestic as well as foreign – has already plummeted.

The uncertainty in the economic direction, along with the incompetence of the PTI team has landed us in this most difficult situation. How and when the PM and his economic team start to articulate their economic priorities will help Pakistan’s top businessmen contemplate on investing in the country. The lead for investment has to come from domestic investors. Foreign investors will only follow them.

The business community is the most important stakeholder as far as the economy is concerned. But there are other important stakeholders, including the people, who are not happy with the present economic conditions. The public is crushed due to double-digit inflation, job losses, economic downturn and lack of investment.

As per media reports, some key members of parliament are also unhappy and have expressed their frustration in various committee meetings – most recently in the finance committee of the National Assembly. The outrage was most prominent among the PTI’s own members led by former finance minister Asad Umar who said that ‘someone has goofed up the system somewhere and should be held accountable’.

The budget was announced on June 10 and expenditure exceeded the revised estimates by Rs800 billion. The finance committee rightly demanded an investigation. This is serious and the government would do well to explain the rationale of missing out on such significant expenditure. If they can’t project accurately for 20 days, how do we believe their numbers for the next two to three years or even for this fiscal year? The committee also showed serious concern at the rising inflation that remains in double digits despite a change in methodology.

Clearly none of the major stakeholders is happy with the economic performance and the future outlook. The negative trend continues in the first two months of the new fiscal year. Realizing this perhaps, the PM has added Mr Shaukat Tareen to his team. Tareen is an experienced technocrat who earlier served as finance minister in the PPP government.

Interestingly, now the PTI government’s finances are being run by finance ministers who served in the last PPP government of Mr Zardari. Surely Imran Khan has come a long way in recognizing that the PPP’s economic performance, after all, was not so bad. Finding no credible person within the PTI to match the abilities and economic understanding of the finance ministers of the PPP era, it is nothing less than a miracle. But then the PM has repeatedly stated that a great leader is one who is ready to take a U-turn. This big a U-turn no one would have imagined – even those close to the PM. What is also surprising is the mute reaction of the senior PTI leadership and the hard-core party supporters to these appointments.

In fact, a closer look at the cabinet will reveal that no PTI leader is heading any economic-related ministry – and that includes commerce, finance, revenue, industries, production, textiles, petroleum, energy, planning and investment. Not even IT – a key ministry in terms of economic development which is headed by an MQM leader. Even the health adviser is not from the PTI.

It is strange that key economic ministries are headed by technocrats – quite a phenomenon in parliamentary democracy. More so considering the party had promised a ‘Naya Pakistan’.

Clearly there’s a mismatch. Those who prepared the plan for the party and made commitments for achievement of the party’s economic agenda are not running the ministries. The ministries are being managed by those who are outsiders and have no responsibility for the economic plan of the party (that’s one reason we never hear of promises made in the plan such as 1 crore jobs and 50 lakh housing units) And when the time comes to face the people before the elections, the ones who are running the show will not be there to answer for the performance or lack of it. I wonder if the party leadership, including Imran Khan, understands this dilemma.

For now, confusion prevails – very well reflected in the macroeconomic indicators. Ninety per cent of the indicators are down; they include GDP growth, fiscal deficit, debt as a percentage of GDP, inflation, private-sector credit, foreign exchange reserves, large-scale manufacturing and others. There has been some improvement in exports in the two months of this fiscal year but it has come at a very high cost of massive devaluation. It is too early to suggest a positive trend.

Some improvement in tax revenue has also been seen in the first two months of this fiscal year but again we have to reach an almost impossible target of Rs5.5 trillion. Most experts are of the opinion that the tax target will be missed by about Rs600-700 billion. All this shortage will be added to the growing fiscal deficit which has already reached unsustainable levels.

Time is running out fast for the present government in improving the economic situation. That will only be possible if serious efforts are made and economic management gets the right focus from the PM and his team, which unfortunately has not been the case in the last one year.

The writer is former governor Sindh and former minister for privatisation.

Originally published in The News