M Jahangir Hayat
The Calendar Year 2019 has proved the toughest year for the economy of the country as all section of the society remained complaining about the lowest economic activities and the highest level of prices. However, the economic indicators started showing a slight improvement at the tail end of the year and on the basis of that very improvement the government is hopeful that the year 2020 will be the year of growth and development.
Will it be so?
Earlier, before the start of the year 2019, the first half of the financial year 2018-19 was observed as a tough time for the economy of the country.
As soon as the Calendar Year 2019 (second half of FY 2018-19) started the State Bank of Pakistan (SBP) stated that the Pakistan’s economy moved along the stabilization phase led by demand management policies, vulnerabilities in the external and fiscal sectors persisted during Jul-Mar FY19. The pace of economic growth slowed down considerably during FY19, mainly in response to policy measures taken to curb the twin deficits. These measures affected the performance of the industrial sector and dampened manufacturing activities in the country.
On the other hand, expenditure increased sharply during Jul-Mar FY19, specifically the current expenditure that more than offset the decline in the development expenditure. Inflation stubbornly kept an upward trajectory. Despite several rounds of policy rate hike since January 2018, the average CPI inflation during Jul-Mar FY19 exceeded the full year target.
On the external front, the current account deficit (CAD) declined on the back of lower import payments for both goods and services, and a decent growth in workers’ remittances was witnessed.
However, given the elevated level of CAD and insufficient foreign investments to fill the financing gap, the country had to resort to bilateral and commercial sources for external financing.
In simple word, every section of the society has to see the tougher ever times against their hopes that the new government led by Imran khan will provide relief to the masses. But all went against the wishes of the people. In order to contain the current account deficit the government cut the imports significantly, bringing down the current account deficit to a significant level. The mega cuts in imports to contain the current account deficit and condition of registration of CNIC above the purchase of Rs 50,000 for the purpose of documentation of the economy and unending chase of the National Accountability (NAB) after the holders of black money aggravated situation and shattered the confidence of the investors resulting in large scale layoffs, stagnation in further investments and cut in salaries. The severe halt in the economic activities, as per an estimate, made over 1.5 million jobless. This also reduced the purchasing power of the masses that was translated into low demand of the good articles which further forced the businesses to shut down setup.
Where the Large Scale Manufacturing (LSM) came to a standstill the vegetables and fruits also went off the reach of common people due to adverse weather conditions and shortage of water. The skyrocketing general level of the prices of goods and articles directly impacted the lower strata of the society.
The government also admitted the fact that high rate of inflation has deprived the people of relief.
At the end of the year 2019, Prime Minister Imran Khan vowed that the 2020 will be the year for public relief, improvement in living standards of the common man as the benefits of economic stabilization will be passed on to the public. Khan urged Pakistan Tehreek-e-Insaf and allied parties to focus during the coming year on highlighting and resolving, through legislation, issues of public interest. He said the incumbent government was striving to implement its agenda of reforms and public welfare despite a struggling economy.
“Our efforts for economic stabilization are paying off, restoring confidence of the business and investors communities,” he said. The World Bank and other leading international institutions have also acknowledged the improvement in the country’s indicators, he added.
Though the government seems cognizant of the fact that the people suffered from hard times during 2019 and vowed that the 2020 will be the year of public relief due to a number of economic indicators’ improvement, yet the experts are of the view that in order to provide relief to the general public and put the economy on track during 2020, the government must have to curtail its expenditure, initiate Projects of Public Sector Developments (PPSDs) and give in borrowing from the domestic sources to meet the budget deficit. Over Rs 11 trillion loans browed by the government from both external and domestic sources during the last 15 months have cut down the private sector lending clogging the growth and development of the sector.