• Six sub-sectors show negative growth
• Rs3tr required just for interest payments next year
• Rs5.2tr jump in debt and liabilities since July 2018
• Inflation to remain high all next year

ISLAMABAD: The data painted a bleak picture of economy and Adviser to the Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh blamed the past 10 years of “economic mismanagement and unresolved structural issues” for it while unveiling the Economic Survey of Pakistan for FY2019. The survey showed a sharply decelerating economy, where the growth rate for the current fiscal year has been put at 3.3 per cent against the target of 6.2pc, barely past the halfway mark.

It was perhaps the first time that the head of the government’s economic team launched the crucial survey document without talking about overview of the performance of economy during the fiscal year under review. Instead the government preferred to keep the focus on their inheritance.

“We have to explain why we are in a situation that our weaknesses stand out again despite long coastlines, minerals, natural resources, agriculture and the great potential of our people,” Dr Shaikh said while talking about loss-making public sector entities and expenditures higher than revenues and external loans without foreign earnings.

The survey showed that all the real sectors — agriculture, industry and services — had not only missed the targets for the current fiscal year but also declined over the last fiscal year. A total of 15 out of 20 sub-sectors missed the targets and six of them actually showed negative growth, meaning a net contraction in the size of the activity registered in that particular sector.

Dr Shaikh said the situation was such that about Rs3 trillion was required just for interest payments next year. Foreign debts, he added, had increased over the years to $97 billion, while exports showed zero growth. “This is a threat to the economy. We are exposed to external and internal imbalances,” he said, emphasising that the country had the opportunity to address the challenge or else “we are heading to a default and there will be no escape route”.

The survey document showed that total debt and liabilities have increased by Rs5.216tr, or 18pc, since end June 2018.

Warning of tough times ahead, the adviser reminded the nation that Prime Minister Imran Khan had decided to take tough decisions that “will provide a base for sustainable progress even if it is at the cost of difficulties over six-eight months”.

The tough times, according to the survey document, include higher inflation all through next year, as well as higher taxes, restrained spending and sharper “demand compression” measures, economic lingo for getting people to tighten their belts.

Dr Shaikh returned to the topic of the asset declaration scheme to promote tax culture to meet the gap between incomes and expenditures of the government. He did not respond to a question asking if all amnesty schemes offering limited window of 15-20 working days meant that their benefits were intended for the ruling class linked with incumbent governments.

The adviser said the export industries were given incentives, subsidies and facilitation out of the government pocket so as not to provide them an excuse for not enhancing exports. He said the public sector entities were looted in “a systematic manner” over the past 10 years, turning them into white elephants with total losses touching Rs1.3tr.

Dr Shaikh parried questions about losses of public sector enterprises and corrective measures when he was finance minister in the PPP government under president Asif Ali Zardari, who had been taken into NAB custody only a few hours earlier, or the non-payment of $1bn outstanding proceeds of PTCL privatisation he oversaw as privatisation minister in the Gen Musharraf regime about 15 years ago.

The economic survey showed that most of the macroeconomic indicators were significantly below their targets. The adviser conceded that most of the economic targets were missed and there were also reasons why these were not met before adding that “you also need to appreciate how these targets were set and by whom and also there should be an understanding that stabilisation was currently in progress before moving on to the recovery and growth phase”.

Adviser to the Prime Minister on Commerce and Industries Abdul Razak Dawood said the government had been able to secure import compression of almost $4.5bn during the current year through its policies.

The economic survey, however, noted that the “reduction in imports is due to decrease in imports of furnace oil, machinery & electric equipment, palm oil, colza seeds and textiles”.

Published in Dawn, June 11th, 2019