Courtesy: Malik M Ashraf
Managing an economy like Pakistan’s is probably the most excruciating and convoluted responsibility. When the PML-N government was installed in May 2013, the economy of the country was on the verge of collapse. The country faced a severe energy crisis. Economic growth was below 3%, inflation was at double digits, interest rates were high, budget deficit was at 8.8% of GDP, investments were abysmally low, foreign currency reserves stood at the lowest ever level and the country faced the prospect of an ignominious default on IMF loans. Now after two and half years the government can rightly boast of putting the economy back on track.
To save the country from default on IMF loans, the government accorded top priority to negotiating US$6.4 billion Extended Fund Facility (EFF) with the agency and was able to avert a catastrophic situation for the country. IMF has already released nine tranches of the EFF and negotiations for the tenth are currently in progress. It lost no time in putting in place measures to address other aberrations in the economy. Through prudent, rational and visionary management of the economy that focused on macro-economic structural reforms, expansion in tax net, investment in infrastructure and energy projects and initiatives aimed at reducing budget deficit, the government has been able to orchestrate a discernible turn around in the economy, notwithstanding the devastation wrought by floods and expenditure on military operation Zarb-e-Azb and volatile political conditions.
There are credible and verifiable signs of revival in the economy owing to the steps taken by the government. The budget deficit which stood at 8.8% in 2013 has been brought down to 4.8%, inflation has been reduced to 4.53%, credit to agriculture sector has increased to Rs515.87 billion, development spending has touched Rs427.67 billion, GDP growth which was in the vicinity of 3.1% has been enhanced to 4.24%, per capita income has increased to US$1513, foreign exchange reserves have reached the highest ever US$ 20 billion mark and stock exchange has touched new heights.
This success story has repeatedly been endorsed by the international rating agencies IMF, the World Bank and the international media, lending credence to the government claims.Bloomberg in a report observed “Nawaz government took charge in the highly unfavourble situation yet it has been able to put the country on the path of economic progress”. Forbesobserved “Macro-economic and structural reforms over the last couple of years have narrowed the budget deficit and raised GDP to a stable level of 4.5%. Standards and Poor’s upgraded Pakistan’s credit rating from stable to positive. Explaining the rationale for this up-gradation the report said, “The positive outlook reflects our expectation of Pakistan’s improved economic growth prospects, fiscal and external performance and the supportive relationship of external donors over the next 12 months.” Moody’s, another credible rating agency, also upgraded credit rating of Pakistan.
The Wall Street Journal maintained that Pakistan’s economy has improved, thanks to the prudent monetary and fiscal policies of the government. Similarly, The Economist in a recent report said, “There were some indications of upturn in spending as the state bank has cut its bench mark interest rate to 7%, the lowest in 42 years. Those in search of a thriving stock market, a stable currency market and low inflation would not normally pitch up in Pakistan. Yet Pakistan is enjoying a rare period of optimism about its economy. The economy is likely to grow by 4.7 %, the fastest rate in eight years. The government of Nawaz Sharif deserves credit for the new stability in the economy. It has stuck to an IMF programme and consequently foreign exchange reserves have more than doubled. The new stability is encouraging.” The IMF and World Bank are also on record to have endorsed claims of recovery by the government. The World Bank, reportedly, also has agreed to provide US$ 10.2 billion to Pakistan during the next five year for policy reforms in the energy sector, revenue mobilisation, governance, social sectors and investment in hydropower.
Another strong and irrefutable evidence of the revival of the economy and the opportunities thrown open for foreign investors was the overwhelming response that Pakistan received on the issuance of Eurobonds. For the five years bonds, the response came from all geographical regions. Nearly 59 percent were subscribed in US, 19 percent in UK, 10 percent in other European countries, 10 percent in Asia, 8 per cent by banks, 7 percent by hedge fund and 1 percent by insurance companies and pension funds. In respect of 10-year bonds also most of the money came from US. This response undoubtedly was a result of strenuous and consistent efforts of the economic managers of Pakistan to showcase the marked improvement in economic indicators and the success of the economic reforms introduced by the present government at all the international economic forums.
Apart from the foregoing achievements, the government, honestly speaking, has shown remarkable sense of urgency and commitment in tiding over the energy crisis. Under the China-Pak Economic Corridor, China has committed to make an investment of $34 billion in the power producing ventures with a cumulative power generating capacity of 10,600 MW to be completed between 2017-18. Another 6,645 MWs of early harvest projects in the energy sector are on the actively promoted list. The Prime Minister inaugurated 100 MW solar power unit at Bahawalpur recently which will come on stream by the end of December and would eventually produce 1,000 MW electricity. Two more units with power producing capacity of 300 MW and 400 MW which were jointly inaugurated by the visiting Chinese President and Prime Minister Nawaz Sharif will also be constructed on the same site which will become operational by the end of next year.
These are all very auspicious developments and would go a long way in boosting the already buoyant economy. The government has already added 3,000 MW electricity to the system due to which power outages have been drastically reduced. The government is also focusing on improving the distribution network and is encouraging the private sector to invest in the projects related to electricity transmission which needs a complete overhaul to be able to carry the existing power producing capacity as well as the electricity which is likely to be added to the system in the future. These achievements despite the formidable challenges and debilitating variables inherited by the government are commendable to say the least. They promise a great economic future for Pakistan.