ISLAMABAD: The economic situation of the country a few months ago was bad, but now it is worse, since the official figures of the main economic indicators show that the financial situation of the country is really disappointing.
Instead of showing an improvement after the agreement with the IMF, the country’s economic situation has deteriorated further amid reports that former finance secretary Younis Dhaga had warned the government that the agreement with the IMF would be disastrous for the country.
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However, Dhaga was removed and the government had appointed another officer as secretary of finance. Due to his serious reservations about the negotiations between the government and the IMF, Younis Dhaga, despite being secretary of finance, retired from the IMF negotiations and did not attend the last three sessions.
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The other day, the government admitted that the trip to improve the economy was not easy, since tax revenues could not be increased.
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When asked about the worsening fiscal position where the deficit increased to 8.9 percent of GDP during the last fiscal year, the government said that of the total tax revenue collected of Rs3.8 billion, debt service consumed Rs2.1 billion and then after providing participation to the provinces, the government had to borrow to cover the defense, development and operation of public spending.
A comparison of macroindicators at the end of fiscal year 2018 with fiscal year 2019 suggests that there has been an accelerated deterioration of the economic situation during the last year of the PTI rule.
The following are the key indicators that show how things have gone wrong in Pakistan’s economy.
- GDP growth was recorded at 5.8 percent in 2018. As a result of the economic slowdown, the growth rate for 2019 is expected to be 3 percent or even less.
- The fiscal deficit increased to Rs3.4 trillion at the end of June 2019 compared to Rs2.2 trillion when the PML-N government left in June 2018. In quantitative terms, this is the biggest deficit in our history. In terms of percentage, the fiscal deficit has been recorded at 8.9 percent compared to 6.6 percent at the end of June 2018. As a percentage of GDP, 8.9 percent is the highest in the last 30 years and 8.9 percent One hundred should also be against the established PTI target of 5.1 percent in September last year. Losing the goal for miles reflects a complete lack of understanding by the PTI economic team. The high fiscal deficit has a direct consequence on the amount of the loans, as will be reflected in the following debt numbers.
- Total debt and liabilities at the end of June 2018 were Rs 30 trillion, which have now increased to Rs 40 trillion. This is the largest increase in debt and liabilities in a year. Pakistan’s total debt and obligations in the first 71 years was Rs 30 trillion, but under the PTI government, a third more has accumulated. This is unprecedented and reflects poor management of expenses and income. It is feared that if the trend continues like this, the entire economic structure would collapse, since our economy will not be able to sustain this.
- Tax revenues reached a record level of more than Rs3.8 billion in 2018. For the first time in the history of Pakistan, tax revenues did not register any increase during 2019. During the five years of the PML-N government, the Tax revenue increased 20 percent per year in 4 of 5 years. This was despite extremely low inflation and without significant devaluation, the two factors that automatically help increase tax revenues. It is said that the current revenue target of Rs.5,550 million seems very difficult to achieve. It is approximately 44 percent higher than last year’s royal collection.
- Inflation reached a record low of 3.9 percent in 2018. The last inflation figure reported by the current government is 10.3 percent.
- The (political) interest rate of SBP was 6.50 percent in mid-2018. It has been 13.25 percent by the PTI government.
- The stock market was 42,847 at the end of the PML-N government. Now around 30,000 after touching 28,000.
- Currency reserves were $ 15,913 million (SBP reserves $ 9,510 million) at the end of the gob