200 days of PTI Govt Analysis by Hammad Azhar
The worst case of inaccurate numbers and half-truths was presented by Muhammad Zubair in his cooked up 18 points about Pak's economy under PTI msg. Below is its reality;
1) More than 400 development projects shut down? Pmln included hundreds of projects in PSDP without allocating even 5% funds for it. It was nothing but a political gimmick in election year. PTI removed those unapproved projects from PSDP as it mere fluff.
2) Gas Tarriffs have increased by 143%? A classic half-truth. Gas Tarriffs are cascaded with a 10% increase for lowest consumer group and a 143% increase for highest income groups. Govt is bound to notify OGRA prices within 15 days which pmln govt did not do for 2.5 years leading to losses above Rs 150 billion in 2 years.
3) Electricity Tarriff has increased by PKR 2.70? Same cascading as Gas. Highest tarriff increase for highest income groups and no increase for 70% of the consumers falling in the lowest consumption bracket. Power sector losses increased by Rs 452 billion in just one year of pmln.
4) Decrease of USD $1.75 in forex reserves? During PMLN's tenure, forex reserves were depleting at a rate of approx USD 1 bn/ month. PTI not only arrested this slide after its 6 months but forex reserves actually rose by USD 40 mln in Jan.
5) New Taxes worth 178 Billion imposed in Mini Budget? Incorrect. Taxes and RD's in luxury goods and consumption items of high income groups worth Rs 90bn levied. Remaining were administrative measures of Rs 92 billion with no change in any taxes.
6) Internal and external debt increased by Rs 2000 billion? Rs 1300 Billion of this is due to devaluation's impact on old debt stock that was borrowed by PPP and PMLN. Remaining borrowing in first 6 months of this FY is less than for same period last year.
7) Inflation gone up to 8.2%- almost double from last year? Inflation was 5.8% when pmln left govt. It has not doubled in PTI's first 6 months. Although inflation did double in PMLN's first 6 months in power in 2013.
8) Policy Rate gone up to 10.25% from 5.75%. Policy rate started increasing from Jan 2018 when PMLN was in power and had to be increased to maintain the Real Interest Rate (adjusted for inflation) at the regional average of 4%. It is pertinent to note that private sector borrowing has jumped by 92% during PTI's first 6 months.
9) Tax revenue growth worst in 6 years? PMLN missed its revenue target by Rs 260 Billion in outgoing year yet gave its last budget that eliminated more than 100 Billion of govt revenue streams. PTI did not resort to harsh indirect revenue measures to make up for the shortfalls the last govt left. Also Rs 100 billion of telecom taxes stayed by SC in June and PTI has reduced GST of petroleum products from 28% to 17% (2.75% gst in first 3 months) causing a revenue decline of Rs 60 billion.
10) GDP growth in fast decline with large scale magnufacturing negative, agriculture growth almost stagnant? The last 10 years have seen lowest average econ growth period since 1971. But the economy has still had to be stabilised thanks to the deficit financed artificial growth in last 2 years of pmln. That facade of growth caused fiscal deficit to cross Rs 2300 Billion, C/A deficit to rise by 7 times in 5 years landing Pak in a massive forex crises. However, C/A deficit fell by 48% in jan 19 and trade defecit by 25% after buliding up for 5 years. The econ is out of danger now but still being stabilised from a consumption led artificial growth period of last 2 years that bankrupted us.
11- Fiscal defecit widens significantly compared to last year. Expenditure also goes up? Despite higher interest and defence related payments, the fiscal defecit will be lesser than last year at the close of this FY. Current expendituresof fed govt (minus interest and defence) have risen by 3% despite inflation higher than 3%.
12) Circular debt gone up from Rs 1.1 tr to 1.6 tr- fastest increase in our history? Wrong. The build up of circular debt is much slower less than last year. PMLN added Rs 453 Billion to circular debt in just its last year. It also failed to incoroprate capacity charges it had signed with various power plants thereby significantly adding to power sector losses.
14) at the end of june, pti govt will post the highest fiscal deficit (amount wise) in our history? Fiscal deficit as a % of GDP will be less than last year. Although 'Amount Wise'(correct term is absolute numbers), the fiscal deficit that pmln left was the highest in Pak's history.
15) in spite of massive devaluation, exports increased by only 2% in last 8 months. Compare that with 13% increase in last fiscal year? This is where we expose the deceit of PMLN numbers spin. Note that they say that exports increased by 13% in their last year but dont disclose that it kept decreasing in the preceding years. Exports as a % of GDP almost halved during PMLN's 5 years and also decreased in absolute terms by USD 1.6 bn in 5 years instead of increasing to USD 100 billion that NS promised in 2013. The devaluation and energy price reductions to exporters that PTI has offered came in place post november and with a short time lag, we expect exports to show strong growth IA.
16) regarding debt increases, its the fastest accumulation in our history? Minus devaluation's impact on older debt stock in rupee terms, debt accumulation is slower than last year. The pmln mentioned in its last budget document that the massive deficits it was leaving the nation with will have to be financed purely by debt. But PTI will create non debt inflows during its term IA.
17- unemployment rising and expected that 600,000 will lose jobs by year end? Pure conjecture. With private sector borrowing up and exporters gearing up for higher productions and foreign investors showing unprecedted interest, pakistan is readjusting for investment and employment led growth.
18) more than 4 million Pakistani's will go below poverty line? Pure conjecture again and fake propaganda. Also, the most comprehensive and consolidated poverty alleviation program is being developed that is to be unveiled soon.
Instead of feeling embarassed and red faced over the complete bankruptcy that pmln left us with, it is sad that their spokespersons resort to number gimmickry and fake propaganda. Pakistan's economy is healing from deep damage caused by the highest ever twin deficits, tripling of SOE losses, halving of exports as a % of GDP, multiplication of circular debt, first time losses in gas cos during last 5 years of pmln. InshAllah the economy will not only turn around during PTI's term but our growth path will be higher and sustainable as compared to last 10 years.
Hammad Azhar
1) More than 400 development projects shut down? Pmln included hundreds of projects in PSDP without allocating even 5% funds for it. It was nothing but a political gimmick in election year. PTI removed those unapproved projects from PSDP as it mere fluff.
2) Gas Tarriffs have increased by 143%? A classic half-truth. Gas Tarriffs are cascaded with a 10% increase for lowest consumer group and a 143% increase for highest income groups. Govt is bound to notify OGRA prices within 15 days which pmln govt did not do for 2.5 years leading to losses above Rs 150 billion in 2 years.
3) Electricity Tarriff has increased by PKR 2.70? Same cascading as Gas. Highest tarriff increase for highest income groups and no increase for 70% of the consumers falling in the lowest consumption bracket. Power sector losses increased by Rs 452 billion in just one year of pmln.
4) Decrease of USD $1.75 in forex reserves? During PMLN's tenure, forex reserves were depleting at a rate of approx USD 1 bn/ month. PTI not only arrested this slide after its 6 months but forex reserves actually rose by USD 40 mln in Jan.
5) New Taxes worth 178 Billion imposed in Mini Budget? Incorrect. Taxes and RD's in luxury goods and consumption items of high income groups worth Rs 90bn levied. Remaining were administrative measures of Rs 92 billion with no change in any taxes.
6) Internal and external debt increased by Rs 2000 billion? Rs 1300 Billion of this is due to devaluation's impact on old debt stock that was borrowed by PPP and PMLN. Remaining borrowing in first 6 months of this FY is less than for same period last year.
7) Inflation gone up to 8.2%- almost double from last year? Inflation was 5.8% when pmln left govt. It has not doubled in PTI's first 6 months. Although inflation did double in PMLN's first 6 months in power in 2013.
8) Policy Rate gone up to 10.25% from 5.75%. Policy rate started increasing from Jan 2018 when PMLN was in power and had to be increased to maintain the Real Interest Rate (adjusted for inflation) at the regional average of 4%. It is pertinent to note that private sector borrowing has jumped by 92% during PTI's first 6 months.
9) Tax revenue growth worst in 6 years? PMLN missed its revenue target by Rs 260 Billion in outgoing year yet gave its last budget that eliminated more than 100 Billion of govt revenue streams. PTI did not resort to harsh indirect revenue measures to make up for the shortfalls the last govt left. Also Rs 100 billion of telecom taxes stayed by SC in June and PTI has reduced GST of petroleum products from 28% to 17% (2.75% gst in first 3 months) causing a revenue decline of Rs 60 billion.
10) GDP growth in fast decline with large scale magnufacturing negative, agriculture growth almost stagnant? The last 10 years have seen lowest average econ growth period since 1971. But the economy has still had to be stabilised thanks to the deficit financed artificial growth in last 2 years of pmln. That facade of growth caused fiscal deficit to cross Rs 2300 Billion, C/A deficit to rise by 7 times in 5 years landing Pak in a massive forex crises. However, C/A deficit fell by 48% in jan 19 and trade defecit by 25% after buliding up for 5 years. The econ is out of danger now but still being stabilised from a consumption led artificial growth period of last 2 years that bankrupted us.
11- Fiscal defecit widens significantly compared to last year. Expenditure also goes up? Despite higher interest and defence related payments, the fiscal defecit will be lesser than last year at the close of this FY. Current expendituresof fed govt (minus interest and defence) have risen by 3% despite inflation higher than 3%.
12) Circular debt gone up from Rs 1.1 tr to 1.6 tr- fastest increase in our history? Wrong. The build up of circular debt is much slower less than last year. PMLN added Rs 453 Billion to circular debt in just its last year. It also failed to incoroprate capacity charges it had signed with various power plants thereby significantly adding to power sector losses.
14) at the end of june, pti govt will post the highest fiscal deficit (amount wise) in our history? Fiscal deficit as a % of GDP will be less than last year. Although 'Amount Wise'(correct term is absolute numbers), the fiscal deficit that pmln left was the highest in Pak's history.
15) in spite of massive devaluation, exports increased by only 2% in last 8 months. Compare that with 13% increase in last fiscal year? This is where we expose the deceit of PMLN numbers spin. Note that they say that exports increased by 13% in their last year but dont disclose that it kept decreasing in the preceding years. Exports as a % of GDP almost halved during PMLN's 5 years and also decreased in absolute terms by USD 1.6 bn in 5 years instead of increasing to USD 100 billion that NS promised in 2013. The devaluation and energy price reductions to exporters that PTI has offered came in place post november and with a short time lag, we expect exports to show strong growth IA.
16) regarding debt increases, its the fastest accumulation in our history? Minus devaluation's impact on older debt stock in rupee terms, debt accumulation is slower than last year. The pmln mentioned in its last budget document that the massive deficits it was leaving the nation with will have to be financed purely by debt. But PTI will create non debt inflows during its term IA.
17- unemployment rising and expected that 600,000 will lose jobs by year end? Pure conjecture. With private sector borrowing up and exporters gearing up for higher productions and foreign investors showing unprecedted interest, pakistan is readjusting for investment and employment led growth.
18) more than 4 million Pakistani's will go below poverty line? Pure conjecture again and fake propaganda. Also, the most comprehensive and consolidated poverty alleviation program is being developed that is to be unveiled soon.
Instead of feeling embarassed and red faced over the complete bankruptcy that pmln left us with, it is sad that their spokespersons resort to number gimmickry and fake propaganda. Pakistan's economy is healing from deep damage caused by the highest ever twin deficits, tripling of SOE losses, halving of exports as a % of GDP, multiplication of circular debt, first time losses in gas cos during last 5 years of pmln. InshAllah the economy will not only turn around during PTI's term but our growth path will be higher and sustainable as compared to last 10 years.
Hammad Azhar
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