Daily Times

Despite of facing political turmoil, since Pakistan Tehreek e Insaf (PTI) came into power, it managed to stabilize country’s macro-economic indicators. In such environment,resistance from decades old opposition parties having their strong presence in country’s administration,it remained very difficult for the government to handle state affairs. On the other hand International financial watchdogs i.e. International Monetary Fund (IMF) and Financial Action Task Force (FATF) are also giving real tough times to newly established government. However, Prime Minister (PM) Imran Khan and his Economic Czars tactfully managed internal and external pressures which is also evident from IMF’s first quarter review of its $6 Billion Dollar program where major targets were not only met with flying colors but there is a positive outlook for next quarter review. This means that next trench of loan will also be available with some buffer to ease out business activities in current quarter. Due to tight monetary and fiscal policies country’s Current Account turned positive with $ 99 Million Dollar surplus in October 2019 after 4 Years with First quarter of fiscal year deficit declined to 0.7% from 1.4%. Advisor to PM for Ministry of Finance (MoF) Mr. Hafeez Shaikh assured to give a further relief to exporters by sanctioning easy loans to the tune of Rs.100 Billion over and above of already approved limit. IMF also allowed Pakistan to issue sovereign guarantee up to an amount of Rs.250Billion which will help country to check circular debt by issuing Energy Sukuk. Government managed to issue T Bills and Pakistan Investment bonds (PIBs) as low as 11.35% against Discount rate of 13.25% which is developing a sentiment of rate cut in later monetary policies. Overall positive outlook made Pakistan Stock Exchange to perform very well.

If trends of macro-economic indicators are towards positive future outlook, micro-economic indicators are not showing positive development for the betterment of society. Inflation is not under control whereas it is expected to increase to 13% due to food price and utility bills based on devaluation of Pak Rupee and hike in discount rate. Unemployment is on the rise whereas PTI narrative of providing 10 Million jobs seems impossible in near future. Employment opportunities are directly related to growth in economy whereas Gross Domestic Product (GDP) decreased from 5.75% to around 2.9% as reported by IMF and other international financial institutions. No doubt Current Account surplus achieved by curbing imports but it also have disturbed input imports for Large Scale Manufacturing Units (LSM) which therefore is showing negative growth now whileaffectingbusinesses of Small and Medium Enterprises (SMEs) who are related for providing locally make inputs to these unit.Eventually employment and business opportunities further shrunk resultantly.It is estimated that so far 50,000 people have lost their jobs due to this very effect. Due to hanging sword of FATF black list and to meet IMF tax targets the government of Pakistan have no choice left to increase documentation drive and broadening of tax net. Both the fundamentals are interrelated. If economy becomes documented it will definitely increase tax net however decades old undocumented behavior of economy is not in a hurry to support this national cause. Therefore a further halt in economy from retail industry is being observed since the promulgation of budget 2019-2020. Several rounds of negotiations are made between retail industry and Federal Board of Revenue (FBR) but ended with no solid commitments on either side. Real Estate sector is also on a hit due to Taxation policies introduced in present budget and therefore activities in this sector and related industries slowed down enormously. At large, if one may look to Economy of Pakistan it seems that export based industry will prevail together with those who are providing import substitutions. Industries or Retailers/Traders who are heavily dependent on imports will be in deep trouble.

For national interest it is imperative to make the economy documented to fight with Indian threat at FATF forum to black list Pakistan. For this reason, Banks are doing their job well but now it is on retail industry that needs to accept documentation drive together with condition of CNIC

Going forward there will not be only one side to show relaxation for the other side but a joint effort from government and business community is a need of the day specially when Pakistan is in a state of economic emergency. Our country is not only facing sever opposition from India in FATF and harsh conditions of IMF but political unrest within the country together with corruption and tax evasion oiling fuel to the fire of such situation. Nationalism from either side is required for the betterment of our homeland to move on right track. Administration side of present government is very weak which requires a proper attention specially towards controlling supply of food items and its prices. For example recently, prices of Tomatoes became sky rocketed which needs an explanation from the government. Now when IMF also asking government to release development funds it is very important for the government to start those public sector development programs (PSDP) which may not only create employment opportunities but may generate revenue in return unlike programs of previous governments. PSDP will also increase activities of related industries; Housing and Dams are such examples of PSDP which can attain stated objectives. On the other, for national interest it is imperative to make the economy documented to fight with Indian threat at FATF forum to black list Pakistan. For this reasonBanks are doing their job well but now it is on retail industry that needs to accept documentation drive together with condition of CNIC. It will not only increase tax net but it will document population at large which will enable the government to look into activities in economy to curb tax evasion. Documentation of economy will help us fighting terrorism financing and money laundering as well. Now when Molana Dharna is over and Mr. Nawaz Sharif is out of country, it is expected that political unrest will be at ease which will further impact positively on Pakistan’s economy. Please note that the government managed to perform very well on macro-economic stimulants despite of ongoing political chaos in the country. With such ease at political front we expect from the government to perform more aggressively on both the levels i.e. Macro and Micro Economy.

The writer is Corporate Finance Specialist and a Chartered Banker UK