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ISLAMABAD:
In a demeaning report, an independent think tank has said that the incumbent government underperformed during the ongoing tenure and failed to fully implement its election manifesto on the economic front, hardly achieving six of the 89 goals.
Even in areas where it had initially shown some progress, the performance deteriorated during January-June period of 2017, says the report from the Islamabad-based Policy Research Institute of Market Economy (PRIME).
The PRIME report gauges the economic performance of the ruling party on the basis of implementation of its economic manifesto announced before the elections. It is the ninth such report covering January-June period of the fourth year of the PML-N government.
According to the report, the progress has been reversed on eliminating VIP culture by reducing expenses incurred on the Prime Minister Office and the Presidency; appointing independent professional boards of state-owned entities; eliminating circular debt; and notifying the tariffs determined by the National Electric Power Regulatory Authority.
Similarly, the progress on the goals of improved regulatory environment at the national level, publication of an annual tax directory and determining upfront tariffs for wind, solar, small hydel and biomass projects was also reversed, says the report, noting that the load-shedding of power persisted and “it may not be a far-fetched proposition that it’s not going away any sooner, even in the next year”.
The report points out that of the 89 targets, only six stand achieved, although there are serious question marks on the claim of achievement of budget deficit reduction target.
After the completion of four years, the average score in the area of economic revival stands at 4.28, which is below the satisfactory level and indicates lack of policy direction. The average score in the area of energy security remains 4.71.
The PML-N’s overall average score for four-year period now stands at 5.05. “The 5.05 doesn’t mean a glass half full, but it means a glass more than half empty,” according to the PRIME.
Govt borrowed Rs2tr to finance budget deficit in 2016-17
The areas where the government’s performance was bad were the economic growth rate target, which the PML-N could not double to 6 per cent as it promised in the election manifesto. It had also promised to bring down the budget deficit to 4 per cent but the latest estimates show that the deficit will be over 5.3% of the GDP for fiscal year 2016-17. The average score on budget deficit target was 4.45.
The only visible progress was on bringing down the inflation to single digit, which was mainly because of the overall low global inflationary environment. On the target of industry and trade, the average score was 4.19.
One of the worst performing areas was tax reforms where the score remained close to the bottom -2.87. Similarly, the government could not reverse the deteriorating fiscal and administrative performance of state-owned enterprises, with an average score of 3.25.
The government somehow managed to build confidence of the private sector but it was still not up to the mark.
The two components where it performed well were infrastructure building and creating job opportunities.
Energy Security
In the energy sector, the government could not reform NEPRA and its average score was just 3.38. Likewise, the reforms could not be introduced in power distribution and generation companies where the PML-N’s average score remained below 3.8.
These entities kept on causing heavy losses, which the government tried to cover by charging various kinds of surcharges from the power consumers.
The PML-N also failed to meet its election promise of permanently eliminating the circular debt that has again piled up to Rs400 billion. The average score on this target was only 3.38.
The Oil and Gas Regulatory Authority could not be reformed either and the PRIME gave the government a poor score of 3.75.
There was no development on the goals of converting at least 50 per cent of the remittances from Overseas Pakistanis into investments and reforming tariffs to eliminate anti-export bias. The PML-N could not establish an Equity Fund to facilitate investment by private and public sectors. It could not either fulfill its promise to tax all income, including the agriculture income, and failed to reduce the number of federal and provincial taxes, according to the PRIME.
Status quo maintained
There were areas where the previous status persisted, which did not mean that the government showed any improvement. There was no further progress in reduction in losses of PSEs and developing clusters for industries. The status quo was also maintained on the goal of bringing informal economy into the tax net, reducing tax evasion, rationalising tax rates and ensuring tax compliance by small businesses.
The government could not meet its promise of rationalising sales tax by ensuring standard rates for all items.
https://tribune.com.pk/story/1464298/pml-n-govt-failed-fulfill-manifesto-vows/
PML-N’s economic scorecard: a story of under-performance
ISLAMABAD:
PML-N’s economic performance in the last four years can be looked at from multiple perspectives which will lead to different conclusions. When we look at economic growth, it was in the range of 3% before 2013 but now hovers above 5%. If one looks at the budget deficit numbers, the current government deserves credit for reducing it from 8% to around 4%.
Similarly, whatever factors may be at work, the headline inflation rate has been tamed to around 5%. Spending on the public sector development programme and foreign investments from China are at an all-time high. Some of these achievements have been highlighted by international credit rating agencies which have already dubbed Pakistan to be on the path of sound economic progress.
If you ask independent economists, most of them are unconvinced of these statistics due to issues with data reliability, rising trade deficit and exploding current account deficit. What should be the best criteria to judge the economic performance of PML-N? Can we look at what PML-N promised to the nation due to which it won a comfortable majority in the parliament?
A local think tank, PRIME, has been doing exactly this. Its 9th Manifesto Tracking report has awarded a score of 4.66 in Economic Revival and 5.43 in Energy Security, giving an overall average score of 5.05 to the incumbent government.
The score is based on three parameters: policy (2.5), institutional environment (2.5) and implementation (5). The score of 5.05 is not unimpressive on the surface, but the devil lies in the details. In its manifesto, PML-N promised 89 quantifiable targets. Out of these, only six targets have been partially achieved. The targets were: bringing down budget deficit, bringing down inflation, setting up Export-Import bank, rationalisation of electricity tariffs, blanket ban on CNG stations, and priority to public transport for the use of CNG.
The latest tracking report states that in seven areas, the progress made has been reversed leading to a score of zero. Two of the important reversals are the deterioration of the regulatory environment at the national level and resurgence of the circular debt. During the last six months spanning January-June 2017, the scorecard report indicates progress on 29 goals and decline in 13 goals. The table provides the overview.
It is not difficult to guess what worries the businesses in Pakistan the most. If you guess it is electricity, you are wrong. If you guess it is corruption, you are even further away from reality. If you say it is taxation policy, you are closer to reality. The biggest threat to any business can be a policy which is impossible to predict ie policy instability. Dar, unfortunately, has come to symbolise unpredictability and discretionary power.
Load-shedding to be eliminated by end of Nov this year
The big elephant in the room is of course none of these economic goals- it is the China-Pakistan Economic Corridor (CPEC). As Pakistan Institute of Developmental Economics (PIDE) economist Ali Kemal has rightly analysed, the economic growth that we have witnessed is largely a function of CPEC-related investments. The most important question is whether it will help in securing the economic revival that was promised? Will it help in private sector development?
There are two fundamental assumptions which are at work. One is that energy security will be improved and Pakistani industry will use this newly generated electricity to increase its production and especially exports. However, the opinion is sharply divided on whether the influx of 10,000 megawatts from Chinese IPPs will increase or decrease the average cost of electricity.
Dr Nadia Farooq, an analyst at the government funded CPEC Center of Excellence, maintained that it will bring the average cost down, something which has been disputed. The rationale is that Pakistan has promised 27% Return on Equity to the Chinese IPPs, as compared with the 17% return that forms the basis of tariff for other IPPs.
Coupled with the guarantee of making up cash shortfall exclusively to Chinese IPPs the electricity is likely to become more expensive. Comparatively, the electricity cost is already quite high and thus the demand by at least industrial consumers may not escalate quickly. In the short run, it implies a very huge current account deficit.
If what the President of Rawalpindi Chamber of Commerce and Industry Amer Iqbal said recently about the CPEC and the possibility of the further erosion of Pakistani industrial base is representative of the business sentiment, PML-N faces double jeopardy. Economists perceive CPEC skeptically and the business community, where PML-N’s vote bank is concentrated, views it suspiciously. The CPEC may not be just bad economics; it will be bad politics too.
The writer is the Founder of PRIME Institute, an independent economic policy think tank based in Islamabad
Published in The Express Tribune, July 24th, 2017.
In a demeaning report, an independent think tank has said that the incumbent government underperformed during the ongoing tenure and failed to fully implement its election manifesto on the economic front, hardly achieving six of the 89 goals.
Even in areas where it had initially shown some progress, the performance deteriorated during January-June period of 2017, says the report from the Islamabad-based Policy Research Institute of Market Economy (PRIME).
The PRIME report gauges the economic performance of the ruling party on the basis of implementation of its economic manifesto announced before the elections. It is the ninth such report covering January-June period of the fourth year of the PML-N government.
According to the report, the progress has been reversed on eliminating VIP culture by reducing expenses incurred on the Prime Minister Office and the Presidency; appointing independent professional boards of state-owned entities; eliminating circular debt; and notifying the tariffs determined by the National Electric Power Regulatory Authority.
Similarly, the progress on the goals of improved regulatory environment at the national level, publication of an annual tax directory and determining upfront tariffs for wind, solar, small hydel and biomass projects was also reversed, says the report, noting that the load-shedding of power persisted and “it may not be a far-fetched proposition that it’s not going away any sooner, even in the next year”.
The report points out that of the 89 targets, only six stand achieved, although there are serious question marks on the claim of achievement of budget deficit reduction target.
After the completion of four years, the average score in the area of economic revival stands at 4.28, which is below the satisfactory level and indicates lack of policy direction. The average score in the area of energy security remains 4.71.
The PML-N’s overall average score for four-year period now stands at 5.05. “The 5.05 doesn’t mean a glass half full, but it means a glass more than half empty,” according to the PRIME.
Govt borrowed Rs2tr to finance budget deficit in 2016-17
The areas where the government’s performance was bad were the economic growth rate target, which the PML-N could not double to 6 per cent as it promised in the election manifesto. It had also promised to bring down the budget deficit to 4 per cent but the latest estimates show that the deficit will be over 5.3% of the GDP for fiscal year 2016-17. The average score on budget deficit target was 4.45.
The only visible progress was on bringing down the inflation to single digit, which was mainly because of the overall low global inflationary environment. On the target of industry and trade, the average score was 4.19.
One of the worst performing areas was tax reforms where the score remained close to the bottom -2.87. Similarly, the government could not reverse the deteriorating fiscal and administrative performance of state-owned enterprises, with an average score of 3.25.
The government somehow managed to build confidence of the private sector but it was still not up to the mark.
The two components where it performed well were infrastructure building and creating job opportunities.
Energy Security
In the energy sector, the government could not reform NEPRA and its average score was just 3.38. Likewise, the reforms could not be introduced in power distribution and generation companies where the PML-N’s average score remained below 3.8.
These entities kept on causing heavy losses, which the government tried to cover by charging various kinds of surcharges from the power consumers.
The PML-N also failed to meet its election promise of permanently eliminating the circular debt that has again piled up to Rs400 billion. The average score on this target was only 3.38.
The Oil and Gas Regulatory Authority could not be reformed either and the PRIME gave the government a poor score of 3.75.
There was no development on the goals of converting at least 50 per cent of the remittances from Overseas Pakistanis into investments and reforming tariffs to eliminate anti-export bias. The PML-N could not establish an Equity Fund to facilitate investment by private and public sectors. It could not either fulfill its promise to tax all income, including the agriculture income, and failed to reduce the number of federal and provincial taxes, according to the PRIME.
Status quo maintained
There were areas where the previous status persisted, which did not mean that the government showed any improvement. There was no further progress in reduction in losses of PSEs and developing clusters for industries. The status quo was also maintained on the goal of bringing informal economy into the tax net, reducing tax evasion, rationalising tax rates and ensuring tax compliance by small businesses.
The government could not meet its promise of rationalising sales tax by ensuring standard rates for all items.
https://tribune.com.pk/story/1464298/pml-n-govt-failed-fulfill-manifesto-vows/
PML-N’s economic scorecard: a story of under-performance
ISLAMABAD:
PML-N’s economic performance in the last four years can be looked at from multiple perspectives which will lead to different conclusions. When we look at economic growth, it was in the range of 3% before 2013 but now hovers above 5%. If one looks at the budget deficit numbers, the current government deserves credit for reducing it from 8% to around 4%.
Similarly, whatever factors may be at work, the headline inflation rate has been tamed to around 5%. Spending on the public sector development programme and foreign investments from China are at an all-time high. Some of these achievements have been highlighted by international credit rating agencies which have already dubbed Pakistan to be on the path of sound economic progress.
If you ask independent economists, most of them are unconvinced of these statistics due to issues with data reliability, rising trade deficit and exploding current account deficit. What should be the best criteria to judge the economic performance of PML-N? Can we look at what PML-N promised to the nation due to which it won a comfortable majority in the parliament?
A local think tank, PRIME, has been doing exactly this. Its 9th Manifesto Tracking report has awarded a score of 4.66 in Economic Revival and 5.43 in Energy Security, giving an overall average score of 5.05 to the incumbent government.
The score is based on three parameters: policy (2.5), institutional environment (2.5) and implementation (5). The score of 5.05 is not unimpressive on the surface, but the devil lies in the details. In its manifesto, PML-N promised 89 quantifiable targets. Out of these, only six targets have been partially achieved. The targets were: bringing down budget deficit, bringing down inflation, setting up Export-Import bank, rationalisation of electricity tariffs, blanket ban on CNG stations, and priority to public transport for the use of CNG.
The latest tracking report states that in seven areas, the progress made has been reversed leading to a score of zero. Two of the important reversals are the deterioration of the regulatory environment at the national level and resurgence of the circular debt. During the last six months spanning January-June 2017, the scorecard report indicates progress on 29 goals and decline in 13 goals. The table provides the overview.
It is not difficult to guess what worries the businesses in Pakistan the most. If you guess it is electricity, you are wrong. If you guess it is corruption, you are even further away from reality. If you say it is taxation policy, you are closer to reality. The biggest threat to any business can be a policy which is impossible to predict ie policy instability. Dar, unfortunately, has come to symbolise unpredictability and discretionary power.
Load-shedding to be eliminated by end of Nov this year
The big elephant in the room is of course none of these economic goals- it is the China-Pakistan Economic Corridor (CPEC). As Pakistan Institute of Developmental Economics (PIDE) economist Ali Kemal has rightly analysed, the economic growth that we have witnessed is largely a function of CPEC-related investments. The most important question is whether it will help in securing the economic revival that was promised? Will it help in private sector development?
There are two fundamental assumptions which are at work. One is that energy security will be improved and Pakistani industry will use this newly generated electricity to increase its production and especially exports. However, the opinion is sharply divided on whether the influx of 10,000 megawatts from Chinese IPPs will increase or decrease the average cost of electricity.
Dr Nadia Farooq, an analyst at the government funded CPEC Center of Excellence, maintained that it will bring the average cost down, something which has been disputed. The rationale is that Pakistan has promised 27% Return on Equity to the Chinese IPPs, as compared with the 17% return that forms the basis of tariff for other IPPs.
Coupled with the guarantee of making up cash shortfall exclusively to Chinese IPPs the electricity is likely to become more expensive. Comparatively, the electricity cost is already quite high and thus the demand by at least industrial consumers may not escalate quickly. In the short run, it implies a very huge current account deficit.
If what the President of Rawalpindi Chamber of Commerce and Industry Amer Iqbal said recently about the CPEC and the possibility of the further erosion of Pakistani industrial base is representative of the business sentiment, PML-N faces double jeopardy. Economists perceive CPEC skeptically and the business community, where PML-N’s vote bank is concentrated, views it suspiciously. The CPEC may not be just bad economics; it will be bad politics too.
The writer is the Founder of PRIME Institute, an independent economic policy think tank based in Islamabad
Published in The Express Tribune, July 24th, 2017.
Very much same kpk but only new faces who are spending all their time and energy in opposition of PLN(N) and Nawaz in Punjab rather than performing in KPK where they got the mandate
