The Institute for Policy Reforms, while reviewing the government claim of ‘One Year of Economic Turnaround’ has observed that there have been some significant achievements in the first year by the PML(N) government, especially in stabilizing the economy. But a strong and sustainable ‘economic turnaround’ remains elusive in the presence of slow agricultural growth, recent loss of momentum in manufacturing, fall in investment and saving rates, severe energy shortages, stagnating exports, low tax-to-GDP ratio and a rising external debt burden.

“First, of great importance is that the external payments position has been stabilized and the rupee has appreciated significantly since March 2014. Foreign exchange reserves have shown growth of over 50% in one year. However, it needs to be emphasized that this improvement has occurred on the back primarily of large one-off inflows. Net external borrowings in 2013-14 are $6.3 billion, the highest in the last four years. By the end of the year, external debt has crossed $66 billion, over 25% of the GDP.”

It is to be noted that the PML (N) government has recently highlighted through media the ‘One Year of Economic Turnaround’ with ‘facts that speak for themselves’.

The major achievements in 2013-14 are listed and a comparison made of some economic growth indicators for 2013-14 with 2012-13. IPR has reviewed the stated achievements and indicators.

The IPR, in its report issued here on Wednesday, stated that other achievements include, first, the successful 3G auction which had been pending for some years. Second, the Benazir Income Support Program has been expanded in coverage and the monthly stipend increased by 50%. This demonstrates due concern of the government for the plight of the poor, in a period of rising food prices and unemployment. Other successes are more qualified in nature. First, two major hydel projects (Dasu and Diamer-Basha dam) have been initiated.

Second, there has been success in selling Eurobonds of $2 billion, but at a high cost. Third, remittances have shown growth of almost 14%, but this is only a continuation of the trend of 17% growth annually since 2007-08. Fourth, the KSE index and market capitalization have shown high growth in 2013-14.This is also not a new phenomenon. In 2012-13, the KSE index showed even faster growth of 53%, as compared to 41% in 2013-14. Fifth, the big increase in credit to the private sector is not reflected in the level of private investment, which fell to its lowest level ever and by as much as 27% in the manufacturing sector.

Then there are successes highlighted of a disputed nature. The biggest controversy surrounds the government’s claim that GDP growth rate in 2013-14 was the highest in six years, at 4.1%. This is considered as the prime indicator of the economic turnaround.

IPR estimates the growth rate at 3.5%, while the IMF believes that it is 3.3%. These latter growth rates imply that the GDP growth in 2013-14 is actually the lowest in the last four years.

The other area relates to developments in international trade of Pakistan. Based on PBS data, the Government claims that the growth rate of exports (at 3%) is higher than that of imports (at below 1%) in 2013-14 and, consequently, the balance of trade has improved by 3%. But the story is entirely different if the more relevant SBP database is used. The balance of trade has deteriorated by 8%, due to slower growth in exports (1%) than imports (4%) in 2013-14.

A similar problem arises with regard to the size of the budget deficit. The Government reports a major improvement in the deficit from 8.2% of the GDP in 2012-13 to 5.7% in 2013-14. This is based on a combined surplus of the provincial governments of almost 0.7% of the GDP, but the provincial budget documents report this at less than 0.2% of the GDP. Further, pending liabilities of over Rs.300 billion of circular debt in the power sector has not been taken care of in 2013-14.

The advertisement also claims that FBR has achieved its revenue target. But despite two major downward revisions, there has been a shortfall.