A data-centric review of trade statistics might counter the hyperbole that dominates the airwaves.
Each of Pakistan's three leading political parties contends that no one can steer the country's economy better than them. A review of Pakistan’s trade statistics, however, paints a contrasting picture instead.
It is no secret that the current state of the economy is in a precarious position; Prime Minister Imran Khan’s government has spent the last eight months borrowing from friendly countries and negotiating a bailout plan with the International Monetary Fund (IMF).
At the same time, Pakistan Tehreek-e-Insaf (PTI) has continued to accuse previous governments of bequeathing a mismanaged economy — akin to a sinking ship— to the newly elected government.
While it is too early to judge PTI’s performance, a data-centric review of the past two decades of trade statistics might counter the hyperbole that dominates the airwaves.
So which party is a better steward of Pakistan’s economy?
Relying on data visualisation will perhaps make it easier to see trade statistics varied over time, and under different regimes.
The accompanying chart presents Pakistan’s exports (blue line) and imports (orange line) in billions of US dollars. The blue coloured vertical lines highlight the periods when various regimes were in power.
The Musharraf regime governed from 1999 to 2008.
It was followed by the five-year rule of Pakistan Peoples Party (PPP) whose tenure ended in the first half of 2013.
Pakistan Muslim League – Nawaz (PML-N) governed from 2013 to the summer of 2018.
And finally, Imran Khan took oath as Pakistan’s 22nd prime minister on August 18, 2018. However, the data is available only up until 2018 and hence trade under the PTI government is not included in the chart.
Busting myth 1: In truth, Pakistan’s trade statistics from 1999 to 2008 suggest a disconnect with the popular narrative of 'tremendous economic growth' under General Musharraf.
Statistics suggest that trade increased under the Musharraf regime. However, starting from 2003 to 2004, one could also see a widening gap between imports and exports.
The economy during the Musharraf regime benefited from American financial support that increased considerably after 2001.
The US economic assistance to Pakistan from 2001 to 2008 equalled $4.4 billion. Although, the more significant influx of funds was military assistance, including the Coalition Support Funds, which totalled $9.5 billion for the same period.
This massive influx of foreign exchange is likely to have impacted the trade statistics.
Nevertheless, it's the year 2004 that is quite important and relevant to our current discourse on Pakistan’s economy.
The PTI government blames the PML-N (2013 – 2018) for the massive trade deficit, where the imports far exceeded the exports.
While it is true that the trade deficit increased both in absolute and relative terms under PML-N, the PML-N economic leadership dismisses these concerns citing the increase in the import of machinery and equipment for CPEC-related projects.
But a relevant question to ask is: is the trade deficit solely the responsibility of the PML-N government?
Let’s return to 2004. The trade deficit that started to increase under General Musharraf, widened even further under the PPP government — only to reach greater magnitude under PML-N.
Busting myth 2: The same trade statistics help us further challenge the narrative that PPP has not been a good steward of the economy.
PPP formed a government during the Great Recession in 2008, when global trade was on a decline. Despite assuming power under challenging conditions, during its tenure, the PPP government increased imports and exports.
The PPP regime faced two significant challenges: first, ubiquitous terrorist violence across the country created an environment not conducive for growth or investment.
Second, the PPP government could not resolve the infrastructure deficits whose most apparent manifestation was blackouts that hit the industry hard. Had PPP been able to address these challenges, it could have made a more significant impact on trade.
Busting myth 3: Where the PML-N had propagated an image of being better minders of the economy, the trade statistics do not agree with the sentiment.
The PML-N formed a government in 2013 when exports were rising. However, the first few years of the PML-N rule experienced a decline in exports while the imports remained flat. It was only in 2016 that the imports started to increase and the exports followed, albeit with a lag.
The PTI government took control in 2018 when Pakistan’s imports and exports were both on the rise. It will be interesting to see how the PTI government will manage trade over the next four years.
PM Khan promised change and change he has delivered, repeatedly: in the last nine months, he has changed his finance minister, the governor of the State Bank and the head of the Federal Bureau of Revenue.
But will the changes at the top have a trickledown effect at the bottom? Only time will tell.
The data clearly shows that the trade deficit started to become a problem in 2003 to 2004, under General Musharraf.
Thus, PML-N can’t be solely held responsible for the trade deficit. The structural changes in the economy, which predated the PML-N regime, are partly to blame. However, the trade deficit reached unprecedented proportions under PML-N rule.
Surprisingly, trade statistics also show that the PPP regime, despite harsh global economic conditions, grew imports and exports.
While data provides perspective and context, the discourse surrounding Pakistan's economy lacks substantial statistical data and evidence.
Based on solid numbers, the PTI government will be judged and evaluated for its performance. Myth-making will not be sufficient.
Murtaza Haider is a Toronto-based academic and the director of Regionomics.com.
He tweets @regionomics