Dar has failed to provide any roadmap: Tarin

ISLAMABAD: Finance Minister Ishaq Dar’s press conference on 4th January 2023 is an attempt to divert attention away from the miseries inflicted by the PDM imported regime on 220 million Pakistanis, said former finance minister Shaukat Tarin.

In the press conference, FM Dar spent much of his time criticizing the PTI white paper. However, all he ended up exposing was his lack of understanding of economics 101, and exactly why we think he is unfit for this job.

All numbers mentioned by the PTI white paper are based on actual data released in the Economic Survey, SBP data and IMF staff reports.

Real focus on the mess that we inherited and how we turned around the economy with stellar 6 percent growth over two consecutive years despite the Covid pandemic.

Our real focus was on the current economic situation and how the policies of the PDM regime have inflicted pain on the masses through record inflation and record unemployment.

Failed to present a Roadmap

In his press talk yesterday, Finance Minister Ishaq Dar once again failed to provide any roadmap/credible plan of action to rescue the economy. The nation is tired of hearing excuses and we demand answers of the destruction caused over the last 9 months with a record increase in the cost of living.

The Finance Minister failed to present solutions to address record high inflation being faced by the masses, with headline inflation averaging 25% during July-Dec 2022 - the highest ever recorded. Inflation under PTI government averaged 10.8% during July-Mar FY2022.

He failed to address the concerns over rising unemployment; with Brokerage companies projecting the economy will post negative GDP growth in the current year, from 6% growth under the PTI government.

As a result, potentially 4 to 5 million workers at risk of becoming unemployed due to failed policies of the PDM government. In comparison, under the PTI government, we were creating on average 1.8 million new jobs every year. FM Dar failed to present a roadmap for increasing the SBP reserves and avoiding a default on external debt payments. SBP reserves under the PDM government have declined sharply to only $5.8bn in December 2022, only enough to cover one month of imports. This is the lowest level of reserves recorded since the last decade.

No clarity on the IMF programme resumption and financial assistance from friendly countries. We demand to know what are results of the world tours enjoyed by the PDM government in the last nine months.

Despite the passage of 3 months, not a single rupee has been released to the KPK and Punjab provinces for flood rehabilitation and reconstruction of the affected communities.

How is it possible that the government has funds to run a jumbo-sized federal cabinet of 76 ministers but has no money to give relief to the citizens?

Testimonials of 2013-2018 performance

FM Dar spent much of his time singing his own government’s praises and criticizing the PTI white paper. If he does not believe the facts stated in the PTI white paper, then he can read what international institutions had to say about his economic management.

Even his predecessor Miftah Ismail and other PMLN party members are critical of Dar’s policies and have publically called them ‘reckless’. Miftah’s tweeted that while Dar is busy playing ‘peg the dollar below Rs 200; Bangladesh exports reached $5.4bn in Dec’ while exports of Pakistan have collapsed 16.6% in Dec to just $2.3bn under Dar’s watch.

IMF Staff Report

‘Pakistan’s macroeconomic stability gains achieved during the EFF have been eroding amid widening external and fiscal imbalances. Against the background of limited exchange rate flexibility, international reserves have significantly declined, eroding confidence’. (IMF Staff report March 2018)

Moody’s

Moody’s Investors Service has downgraded the outlook on Pakistan’s rating to negative in June 2018. ‘This reflects Pakistan’s fragile external payments position and very weak government debt affordability owing to low revenue generation capacity. The coverage by foreign exchange reserves of imports will likely fall further from already low levels, while coverage of external debt payments due will weaken from currently adequate levels.’ (Moody’s Investor services June 2018).

FATF

Pakistan was added to the “grey list” in June 2018 and stated that ‘strategic deficiencies’ in Pakistan’s terrorist financing and money laundering legal frameworks pose a risk to the international financial system. Risk of Pakistan being “blacklisted” i.e. de facto facing international sanctions left by PMLN.

World Bank

‘Immediate macroeconomic adjustments are required to correct the large twin deficits. Pakistan’s high gross external financing requirements, together with diminished reserves and elevated debt ratios, weaken Pakistan’s ability to withstand external shocks. Fiscal discipline and increased exchange-rate flexibility—using the SBP’s foreign exchange interventions to reduce volatility, rather than to defend a particular PKR/US$ parity level—to ensure that an effective buffer to external shocks is in place, are urgently required to restore stability. Any delay in implementing such measures will only serve to increase downside risks and could entail substantial economic costs.’ (World Bank Development Update Oct 2018).

Point-by-point rebuttal

Fiscal Deficit: Fiscal deficits were rising in the last years of the PMLN (2013-2018) government and now in FY2023 the latest data released by the Ministry of Finance show that the fiscal deficits have increased sharply to Rs 1,266 bn from Jul to Oct FY23, an increase of 116% from Rs 587bn in the same period last year. This comes despite a record increase in electricity prices and record taxes imposed in the FY23 Budget by the PDM government. These deficits are likely to increase further in the days ahead, with FBR collection falling short by a record Rs 220 bn till December.

GDP growth: Under the Imran Khan government, the economy was expanding at 6% for the second consecutive year with record exports, record large-scale manufacturing output and record output of agriculture crops. The agricultural sector posted growth of 4.4% in FY22, which is the highest posted since FY05. This was driven by 6.6% growth in major crops, the highest since FY05. The large-scale industries posted a record growth of 11.7% in FY22, the second consecutive year of 11% + growth. The economy was booming with record exports of $ 32bn in FY22, while credit to the private sector grew by 22%.

However, under the PDM government, the economy has nose-dived and SBP now estimates that GDP growth will slow down to just 2% in the current year, compared to 6% under the PTI government. Even these estimates look optimistic. Due to the draconian tax measures and the restrictions on imports, the manufacturing sector has also nose-dived and in the first four months posted a 2.9% output. Independent analysts published reports indicate GDP will post negative growth under the PDM leadership.

Inflation: The PDM government policies have unleashed unprecedented inflation on the masses, with CPI inflation averaging 25.1% in the first five months of the current fiscal year. This is the highest inflation recorded in our 77-year history. The prices of essential household commodities including food, energy and daily use items are rising at more than 30% for the last 6 months, as measured by the SPI index. The average electricity prices for end users under PTI government were around Rs 16 per unit, have now been increased to around Rs 34 per unit, an increase of over 100%.

The PDM parties criticized Imran Khan when petrol prices were Rs 150/liter but when in government they have raised prices for consumers to Rs 214/liter. The increase in prices for consumers includes a record Rs 50/liter tax (PL), whereas under Imran Khan’s government the PL was reduced to zero to shield masses from the increase in international oil prices. The same has happened to diesel prices which have been raised to Rs 227, compared to Rs 150 under the PTI government. The increase in prices of petroleum products has unleashed an unprecedented wave of inflation, as transportation costs skyrocketed.

Food prices have also increased at a record pace under the PDM regime, making it almost impossible for people to meet their kitchen expenses. According to the latest report by PBS, prices of the wheat flour has increased to Rs 81 per kg in December 2022, an increase of 38% from Rs 58 per kg in March 2022.

Tax Collection: FBR collection is falling short by a record Rs 220bn till December. The problem is not with the FBR; in fact it is a Herculean task for FBR to collect taxes in the current economic environment where the PDM regime has effectively shut down the entire economy. From textile mills to automobile manufacturers, all are reporting shut down in factories and massive lay off of labor.

With inflation averaging 25%, the FBR tax collection during July-Dec FY23 grew only 16%, which is real terms is a decline of 9%. During the same period last year, inflation averaged 9.3% and FBR collection went up by 36.5%, showing a real growth of around 27%.

Under PTI government FBR collected a record Rs 6.1 trn taxes, growth of 30% in FY22 with average inflation of 12.1%. We targeted to increase tax collection to Rs 8 trillion in the current year, whereas under PDM regime it is likely that tax collection will remain below Rs 7 trn despite record new taxes imposed in the FY2023 Budget.—PR