With growth disrupting stability under the PML-N government and stabilisation eroding the growth rate under the PTI government, the space for long-term development planning is being squeezed further.
Over the past few decades, many three-year stability programmes virtually superseded Pakistan’s five-year development plans. It is becoming more and more difficult to address the stubborn structural imbalances. All stability programmes propelled by fiscal and monetary policies have been in the nature of firefighting.
Low levels of private investment and government spending amidst little or no growth are viewed by some economists as evolving secular stagnation — rather than a cyclic or short-term economic downturn — that is supposed to be tackled by heavier doses of debts. Pakistan’s current reforms are supported by mounting debts with no policy for reducing external dependence in sight.
Sustainable, inclusive economic growth remains elusive for want of sound, long-term planning and strategies needed for synchronised, integrated and organic growth of all segments of the economy. Imbalances, unaddressed as a continuing and ongoing process, are allowed to develop into a full-blown crisis.
After pursuing the stabilisation programme over the past year and a half, the PTI government wants to increase the growth momentum from the next financial year. The economy has achieved short-term stabilisation but medium-term uncertainties remain, says Saad Siddiqui, head of JP Morgan’s London-based department of Emerging Market Strategy for Europe, the Middle East and Africa. The government’s reform efforts, while pointing to the right direction, are still in their infancy, he adds.
Sustainable growth remains elusive for want of sound planning. Imbalances are allowed to develop into full-blown crises
The Planning Commission is now working on a set of new priority initiatives, which will be dovetailed with the three-year stability programme to spur growth. The initiatives include the launch of a three-year economic growth strategy and revitalisation of the Planning Commission by the end of June. This will be followed by the implementation of UN Sustainable Development Goals (SDGs) to improve people’s living standards.
Some space may be created for the initiation of growth strategy following the changes made by IMF officials in their projections in the first programme review. The IMF realised that the stabilisation programme would require less intensive use of policy instruments, especially the foreign exchange and interest rates, says a leading financial analyst. The rupee is stable at least for the time being. The interest rate will need to be reduced gradually from the next fiscal year to coincide with the launch of the economic growth strategy.
To promote the public-private partnership (PPP) mode for development projects, Planning and Development Minister Asad Umar told a news conference in Islamabad on Feb 7 that he would like the government to release the number of projects to be executed under the PPP mode along with their estimated costs as part of the next year’s budget. The Public-Private Partnership Authority, which he described as a rudderless ship, would be made fully operational within six months.
However, there is no move yet to help create and empower civil society organisations to undertake programmes for implementing the SDGs as suggested by its UN promoters.
The financing of the growth strategy, involving federal spending, is expected to face serious challenges owing to slower than targeted growth in revenues. Even for budgeted development projects, financial releases are subject to approval by the finance ministry, which controls the purse strings. The finance ministry’s main concern is still balancing the books.
For example, a recent meeting of the Economic Coordination Committee chaired by the premier’s adviser on finance and revenue rejected the proposal of the Ministry of Industries and Production, duly approved by Prime Minister Imran Khan, to import tax-free and duty-free 300,000 tonnes of sugar owing to a revenue loss, high cost of landed sugar and sufficient stocks while the sugar cane crushing was still on.
However, the slow pace of development spending has prompted IMF officials, currently visiting Islamabad for the second review of the programme, to reiterate that efforts should be made to fully utilise the development budget at the federal and provincial levels.
Planning Secretary Zafar Hassan says 171 of the 1034 projects under the ongoing federal public-sector development programme (PSDP) were expected to be completed by the end of last month.
Only 27 per cent of the total budgeted annual federal development expenditure was utilised in the first seven months of 2019-20 against the usual range of 21-28pc. Earlier, the full-year utilisation ended up between 83pc and 96pc. The overall PSDP budgeted for this fiscal year was already down by 30pc to Rs701 billion. A total of Rs188bn was spent by the end of January against Rs429bn authorised by the Planning Commission.
Similarly, PTI-run Punjab spent less than 30pc or Rs103.1bn of the provincial annual development plan (ADP) of Rs350bn in the first half of 2019-20. In the same period, according to a press report, Sindh released Rs85bn of which only Rs50bn was utilised against the provincially financed ADP of Rs208bn.
The Planning Commission has lost its relevance and importance over the years in driving the country’s policies and planning direction as the focus shifted to Q Block, the seat of the Ministry of Finance, says Mr Umar.
Often delays in financial releases and the utilisation of funds at the execution level result in huge cost overruns. Hardly any exercise is carried out to determine the cost-benefit analysis after the completion of projects by either the government or foreign lending agencies.
The planning minister says that the project development, monitoring and evaluation system, weakened over the years, will be revamped by June. According to a recent report of the Prime Minister’s Inspection Commission, an average cost overrun of 191pc of all projects has been witnessed owing to project delays of six to eight years.
The past stabilisation programmes and reforms have not helped improve the institutional capacity for economic development. The government should enable business and community organisations to achieve long-term objectives.
Published in Dawn, The Business and Finance Weekly, February 17th, 2020
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