Economic targets: Govt has failed to deliver on most of its promises

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Need some expert opinion on this. @desert_bird

Economic targets: Govt has failed to deliver on most of its promises – The Express Tribune

**ISLAMABAD: **In its first year, the PML-N government could not achieve all but one of the economic targets it promised to deliver in its election manifesto and prospects for the current year also remain uncertain, shows the findings of an independent think tank.

Reduction in budget deficit was the only target the PML-N delivered in its first year in power, said Dr Hafiz Pasha, a renowned economist and a former finance minister, while sharing findings of the Institute for Policy Reforms (IPR).
In its elections manifesto, the PML-N outlined 14 economic targets out of which nine were related to macroeconomics, two in the power sector and three in the social sector.
Dr Pasha said there was some improvement on three goals but progress remained below the desired results. He added that the situation remained the same in five areas while it deteriorated in the case of five critical sectors.
The IPR noticed improvements in areas of tax-to-GDP ratio and though collection fell short of the target, there was slight improvement in public debt to GDP ratio and increase in health spending as percentage of GDP.
The tax-to-GDP ratio improved from 9% to 9.3% but fell short of the target of 10.2%. The public debt-to-GDP ratio slightly improved but was still in violation of statutory limit.

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Most sectors remained almost at a standstill. In the case of Large Scale Manufacturing (LSM) growth, technical and line losses remained at 17.5%, spending on education as percentage of GDP was still at 2.1% and social protection spending was 1.1% of the GDP.
However, there was marked deterioration in the case of economic growth, inflation, investment, non salary expenses and recovery of electricity bills. The electricity bills recovery ratio fell to 90% from the level of 94% in the last year of the PPP government.
The PML-N manifesto is an impressive document but what is required is the implementation of the promised reforms, said Dr Pasha.
Dr Pasha said there was clear success in reducing the fiscal deficit to the targeted level but the work of “creative accounting cannot be ruled out”.
He said heavy reliance on foreign borrowing remained the hallmark of the previous year and the PML-N government added $5 billion to the country’s external debt. He suggested the government to focus on the revival of the economy.
Dr Pasha said the most worrisome aspect was that the economic growth rate did not improve. He said although the government did not officially release the revised GDP growth rate figure, the IPR’s assessment, which is based on official data, suggests that the growth was in the trajectory of 3.3% to 3.5% last year.
“The economy seems to be locked in a slow growth trap and underlying economic weaknesses persist,” said Humayun Akhtar Khan, former minister for commerce and chairman of IPR Board. He said with the decline in both public and private investment, people do not know from where the driver of growth will come.
Future prospects
“The new fiscal year has not started very well and there is a reversal of few positive developments that took place in the last fiscal year,” said Dr Pasha. He said the 4.9% fiscal deficit target will be missed, development budget is expected to be cut due to shortfall in tax revenues, investment will not pick up and economic growth rate will remain at best at 4% due to uncertainty, floods and persistent load shedding.
He urged the finance minister to improve coordination with other economic ministers.
Dr Pasha said the government slashed Rs65 billion in federal development spending during the first three months.
He said prices of wheat, palm oil, cotton and crude oil fell significantly in the international market in the first quarter but there was no benefit to domestic consumers.
Dr Pasha said despite slight improvement in fuel mix, which warrants reduction in fuel price adjustment, the electricity prices were increased through power equalisation surcharge.
Published in The Express Tribune, November 21[SUP]st[/SUP], 2014.

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Re: Economic targets: Govt has failed to deliver on most of its promises

**‘Government missed all macroeconomic targets’](http://www.dailytimes.com.pk/national/21-Nov-2014/government-missed-all-macroeconomic-targets)

‘Government missed all macroeconomic targets’**

**** Fiscal deficit termed only exception during the first quarter of current fiscal

***ISLAMABAD: Speakers at a moot titled “Economic Review” on Thursday claimed that the performance of the incumbent government has been very poor and it missed all the macroeconomic targets, excepting fiscal deficit during the first quarter of the current fiscal.

Former finance minister Hafeez Pasha expressed these views while speaking at the event organised by the Institute for Policy Reforms to review the country’s economic performance for the first quarter (July-September) fiscal 2014-15 as well as government’s economic performance scorecard vis a vis objectives set in the 2013 elections manifesto. He said the current fiscal year will close with fiscal deficit of 6 percent and inflation would be around 6 to 6.5 percent, which was low but still on the higher side given the decline in prices of oil and essential commodities in the international market

Criticizing the government policies, he said fiscal deficit was achieved in the first quarter by squeezing release of development funds which was only 8 percent against the benchmark of 20 percent releases. The government decision to impose regulatory duty on wheat and sugar as well as increase electricity prices would contribute to inflation. Pasha pointed out that the international wheat price declined by 20 percent while its price in Pakistan is on the rise. He said that price of flour would go up by 8 percent due to government decision to impose regulatory duty on wheat.

Former minister regretted that when the price of sugar in the international market was on the decline, the government increased sugarcane price to Rs170 to Rs180. International commodity prices have declined in recent months, but these were yet to be transmitted to domestic prices, he added. He said investment was very low and private credit grew by Rs5 billion in the first quarter as opposed to Rs32 billion in the same period last year. He said it was unclear how the government planned to deal with the uncertainties in both political developments as well as the possibility of a hiatus in the ongoing International Monetary Fund (IMF) programme. He hoped that the Fund’s Executive Board would release the 1.1 billion dollar fourth and fifth tranche.

Tax collection remained a concern. First quarter receipts alone showed a shortfall of Rs49 billion. Outlook on growth is uncertain. The economy was unlikely to achieve the targeted growth rate of 5%. He forecast a growth rate of 3.5 to 4% for the current fiscal year. Public finances targets too were uncertain. Fiscal deficit target will worsen if tax collection continued to slip and the energy circular debt was not settled. IPR forecast a fiscal deficit of 5.5% to 6% of GDP higher than the target of 4.9%. BoP improvements were contingent on IMF’s decision on the next tranche. If that was postponed again, the rupee value would decline despite increase in home remittances. Investment would also fall short of target at an estimated 14% to 14.5% of GDP.

Chairman IPR, Humayun Akhtar Khan stated that the country’s economic growth rate is a source of concern. For a number of years economic growth has remained much below four percent and there seems to be no improvement in the first quarter of the current fiscal year. In response to a query Pasha said that the Finance Ministry was dominating not only in the financial sphere but also political sphere. He said that poverty has been increasing by three million annually and since 2008 middle class has been shrinking. Pasha said that middle class, which was 45 percent of the total population during Musharraf rule, has shrunk to 30 percent of the total population; and in South Punjab alone there are two million idle youth, which can be attracted to crime and militancy.

Pasha deplored what he claimed was the Pakistan Bureau of Statistics gaining the status of gauging and creating statistics at present. About privatisation process, he said that PML-N manifesto was to improve the performance of loss making state own enterprise through restructuring and there is no mention sale of profit making institutions, like OGDCL, PPL etc, shares.