Consequences of Tabdeeli – The Change

Not many political parties, across the globe, take the risk of losing their voter base for the sake of unpopular decision making. Pakistan’s economy is currently under long-delayed chemotherapy, that has its consequences. Most of the governments used to avoid change and structural reforms because they are painful, they take a long time, and they are resisted by vested interests. However, the current PTI government dared to take urgent policy actions on the economic front.

Situation before General Elections 2018

Let us go back in time, the state of affairs before PTI came into power:

Exports were declining and imports were on the rise. The external account balance was negative. Pakistan’s economy was running on the imports-based consumption model. Domestic and exports-oriented businesses were marginalized. Foreign reserves were depleted because of higher outflows than the inflows. National saving and tax to GDP ratio were quite low.

The Pakistani rupee was maintained and controlled artificially by keeping it overvalued, through loans. Debt servicing of these loans was piling up. This situation was equivalent to subsidizing the imports for the elite / upper class, along with destroying the local industry. This fixed exchange rate regime was one of the main causes of the widening current account deficit.

Consumption-driven boom resulted in the decomposition of real growth and productivity. The country’s twin deficits were at a peak. Hence, the macroeconomic imbalances were leading to a situation of possible country’s default.

Reforms initiated by PTI government and their Outcomes

The finance and economic team of PTI government have the courage to address the long-awaited reforms. Following policy decisions have been taken by Imran Khan-led government for the economic revival:

Shift in Exchange Rate Policy

Pakistani Rupee is brought to its real value through currency depreciation. The exchange rate has been allowed to adjust, rather than keeping it stagnant artificially. This transition from a fixed-exchange-rate to a market-based exchange rate system helped in lowering the current account deficit.

Real Growth and Productivity

It is argued that policy measures taken by current government are at the cost of reduction in growth and severe contraction of national economy. The reality is, however, the opposite. Ever since the reforms have been implemented by PTI government, the export volumes have begun to grow. The high export volumes mean more production and real growth, that derives into additional jobs and employment opportunities. Though, the significant growth in export volumes did not translate into value terms because of softening global unit prices. Furthermore, luxury import items are being limited to lower the import bill. The deceleration of GDP growth rate and domestic demand compression is because of monetary tightening and planned fiscal consolidation. Nevertheless, the country’s economic growth is expected to recover from the fiscal year 2021-22 onwards.

Taxation

Widening of tax base, improving tax compliance, and documentation drive have been initiated to increase the revenue collection. War against tax evasion and documentation of economy by bringing the people into tax net are the core areas of PTI’s manifesto.

Industrialization

A series of incentives and facilitation provided to the business community through export development package, export refinancing scheme, subsidy to industries on electricity and gas, long-term trade financing, etc.

Inflation Management

The fiscal measures, upward adjustments in overdue electricity and gas rates, and the transition to a market-driven flexible exchange rate are the core causes of rise in inflation. The increase in utility prices was necessary to bring down the budget deficit.

For keeping the inflation in control, PTI government implemented various measures including an increase in policy rate, monetary tightening adjustments, austerity drive, subsidy for low-end electricity and gas consumers, and zero borrowings by Govt from the State Bank of Pakistan.

Poverty Alleviation

Relief measures by the current government for underprivileged citizens include Sehat Insaf Cards (free medical facility), Panahgah (shelter homes), Ehsaas Program, Roti Tandoors, Pakistan Bait-ul-Mal programs, etc. Vulnerable segments of the society are protected by PTI Govt from the sore consequences of unavoidable fiscal consolidation.

Jobs Creation

New employment opportunities are on-the-way through commencement of Kamyab Jawan Program, Youth Digital Skill Development, Naya Pakistan Housing Program, Tourism sector development, e-Rozgaar, National Agriculture Emergency Plan, Clean Green Pakistan Movement, and 10 Billion Tree Tsunami.

Prime Minister Imran Khan has proven himself brave enough to take the above-mentioned bold decisions for the stabilization of economy.

All in all

35% reduction in trade deficit, 64% drop in current account deficit, 16% increase in tax collection, 36% decline in fiscal deficit, and 137% increase in foreign investment recorded for the period of July–September 2019 as compared to same period of last year.

And most importantly, Pakistan has improved by 28 places on World Bank’s Ease of Doing Business ranking 2020 as compared to last year (from 136 to 108). This is an unprecedented jump as the country has been ranked 6th among the top ten economies that improved the most, this year.

These macroeconomic numbers indicate a positive outlook of Pakistan’s economy. Hence, the journey towards sustainable economic growth has just started.

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26 Comments

  1. akmal moemin says

    good write,i wish pak pple could understand that for the first time someone is trying to sort things out for good of pak & not themselves & know this good things always take time but they last

    1. Zaid Munir says

      Rightly said. Thanks a lot for the appreciation, dear.

  2. Zahid says

    Good, Mr.Zaid, I think you also have attained some personal benefits fron ruling govt so, you are not considering the voice of the poor.
    Has the living standard of common man improved!? According to your story, narrated here in column, you showed all that, after that there must be no reason of greivances among common people.Sorrowly the condition you are not seeing!!

    1. Zaid Munir says

      Thank you brother, for taking interest in the article. You have raised the right questions in your comment. I have pointed the same in my article:
      – “Pakistan’s economy is currently under long-delayed chemotherapy, that has its consequences.”
      – “Most of the governments used to avoid change and structural reforms because they are painful, they take a long time.”
      – “The deceleration of GDP growth rate and domestic demand compression is because of monetary tightening and planned fiscal consolidation.”
      – “The fiscal measures, upward adjustments in overdue electricity and gas rates, and the transition to a market-driven flexible exchange rate are the core causes of rise in inflation.”
      – “The increase in utility prices was necessary to bring down the budget deficit.”
      Painful consequences are short-term effects, however the reforms will lead to a sustainable economic development that is going to benefit the people in near future InshAllah.

    2. zaher sufi says

      How long did it took for europe to recover from world war,,,,ages. Similarly don’t expect miracles overnite from a situation where the monthly account deficit was $2 billion. U need measures to overcome these policies made by daku & idiots. It will take time. It would had been VERY easy for PTI govt to continue on the same path , while borrowing from outside just to keep those POORS happy.

      1. Zaid Munir says

        @Zaher Sufi, well said. It will take time.

  3. Basit Hameed says

    Ik has done good in reforms regarding texation, fiscal deficit reduction, corrultion. But still has to do a lot in ease of doing business for locals, police reforms, education reforms, development of infra structure

    1. Zaid Munir says

      Well said. Thank you for the comment, Sir.

  4. Mrs. Riaz says

    This blog forgot to mention The person who wrote this column lives on an other planet.

    1. Zaid Munir says

      Appreciated your interest in the article. God bless you, Ma’am.

  5. Mrs. Riaz says

    This blog forgot to mention The person who wrote this column lives on an other planet. Plus he is blinded to the reality

    1. Zaid Munir says

      Thanks a lot for reading the article, Ma’am. I respect your opinion. Kindly elaborate, which point I missed regarding reality?

    2. zaher sufi says

      Please elaborate the “so called” reality which probably very few are aware of, unless its the copy/paste version of Geo.

      1. Zaid Munir says

        @Zaher Sufi, thanks a lot for reading the article.

  6. Ammar karim says

    Well said bro… Our prayers are with pti government… May Allah give success to the pti government in every policy… From which the economic growth can increase

    1. Zaid Munir says

      InshAllah, dear. Thank you for reading the article.

  7. Tabassum Huda from Dammam KSA says

    Common man is still facing so many problems…but we hope that situation will get better with the passage of time….in sha Allah

    1. Zaid Munir says

      Thanks a lot, @Tabassum Huda. Yes, situation will get better InshAllah.

  8. Abdullah says

    All quoted facts n figures are wrong…. above all he wrongly says IK’s economic team to a team enforced by the IMF and militablishment.

    1. Zaid Munir says

      Thank you for taking interest in the article, @Abdullah.
      I respect your opinion. However, all the quoted facts and figures in the article are authenticated.
      You may cross-check the numbers and pinpoint any wrong stat that you find out. I’ll be more than happy to correct my mistake (if any) and apologize, in case you identify any misleading number.

  9. John kahn says

    All quoted facts n figures are wrong…. above all he wrongly says IK’s economic team to a team enforced by the IMF and militablishment.

    1. Zaid Munir says

      Thank you for taking interest in the article, @John Kahn.
      I respect your opinion. However, all the quoted facts and figures in the article are authenticated.
      You may cross-check the numbers and pinpoint any wrong stat that you find out. I’ll be more than happy to correct my mistake (if any) and apologize, in case you identify any misleading number.

  10. Naseem Butt says

    I believe this blog should be an eye opener for those who are against the PTI Government,
    No doubt that PTI needs to revamp few other matters, however this will take time.
    So every one Relax and give this Govt some time. do not push them and be realistic.

    1. Zaid Munir says

      Thanks a lot for your interest and acknowledgement, @Naseem Butt.
      Rightly said, we have to be realistic.

  11. AP says

    blah blah blah… Imran khan is just a passenger. All the economic, financial decisions are being done by IMF. Imran khan did not “take unpopular decision” for love of Pak, but there is no other way out. He has no vision / lacks ability to execute – basically a clueless guy. His own contribution like Langar is at best cosmetic only.

    1. Zaid Munir says

      @AP, thanks a lot for your comment. You are right, “there is no way out”, but to take the tough decisions that have their sore consequences. This is exactly what PTI Govt has done for the revival of economy. The past Governments used to avoid such harsh unavoidable decisions because of the fear of losing their voter base. However, Imran Khan is not afraid of risking his popularity and he is brave enough to take the challenge head-on.

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