The PTI government believes its economic policies have already started showing signs of stabilisation. It believes its policies will put the country on a sustainable growth and development path within 12 to 24 months in stark contrast to past growth spurts fuelled by borrowed money and deficit financing.
In a brief interview, Minister of State for Revenue Hammad Azhar said the government contacted the International Monetary Fund (IMF) soon after coming to power. It simultaneously engaged with friendly countries for alternative financing options to minimise the pain that might have come due to rushed acceptance of fund conditions.
Following is the edited version of his comments.
Minister of State for Revenue Hammad Azhar tells Dawn popular support for the government will not decline as long as the ruling party sticks to its core pledges of accountability, transparency and reforms
There is a perception that had the government approached the IMF sooner, the growth momentum could have been saved. Do you agree?
We established contact with the IMF around 10 days after coming to power. The IMF team was in Pakistan exactly three weeks after we formed the government. As for the growth momentum, global data and experience strongly suggest that the conditions associated with the IMF programme drastically slow down the economy.
The pace of deficit reductions, energy price adjustments and short-term revenue-generating manners envisaged in most IMF programmes is rapid. It has a strong tendency of shocking the economy and rapidly slowing it down. Therefore, these conditions need to be carefully evaluated and not accepted in a rushed manner. The government’s strategy of exploring alternative bilateral financing options has proven to be a wise, timely and successful decision in this regard.
Expectations of GDP growth have been lowered by over two percentage points to four per cent from 6.2pc. How will the government improve revenue collection and create employment in a sliding economy?
The earlier expected growth rate of 6.2pc was fuelled by high levels of debt-financed government spending and dangerously high fiscal deficits (6.6pc in 2017-18). The result of this deficit-financed growth was that Pakistan’s economy plunged into a serious crisis. Our economic history is testament to the fact that short spurts of such economic growth that are consumption-led and financed by borrowing prove to be unsustainable. Fiscal and current account deficits exposed the superficial nature of such growth periods. The PTI government believes that investment, productivity and export-led growth are imperative if Pakistan is to embark on a sustainable economic growth trajectory and finally bridge its recurring financing gaps.
On the revenue front, Pakistan’s tax potential is enormous given the size of our informal economy. Revamping the Federal Board of Revenue (FBR), broadening the tax base and reforming the current tax policies can lead to fresh and large revenue streams.
Finally, employment opportunities will be created by reviving and enhancing our export industries and embarking on our industrialisation strategy. That is where the investment- and productivity-led growth model plays a vital role. The PTI’s flagship housing scheme is also a huge employment-generating project and holds the potential to become the engine of economic growth.
Low growth and high inflation can erode popular support. How will you manage public expectations? How long will it take to mend the economy?
It is a well-known fact that this government inherited an economic crisis. People understand that stabilising the economy in the short run was necessary to save it from collapse. There will be no drop in popular support for the new government as long as the PTI sticks to its core pledges of accountability, transparency and reforms. The public has been made aware of the fact that decades of neglect and shying away from structural reforms by successive governments have brought the country to a point where tough measures are necessary in the immediate term to manage and rescue the economy. Recent surveys have clearly demonstrated that the public is overwhelmingly supporting the PTI government.
The economy is already showing signs of stabilisation. In the medium term, which we believe is 12 to 24 months, our reforms will begin to yield dividends. We will Insha Allah have embarked on a sustainable growth and development path.
Published in Dawn, The Business and Finance Weekly, November 26th, 2018