PTI virtually waltzed into power last year helped by a populist but deeply flawed and simplistic economic narrative which blamed the alleged corruption by the previous PML(N) and PPP governments for virtually all the economic ills of the country, especially widespread poverty and high levels of fiscal and current account deficits. The ground for PTI’s victory was prepared through extensive political engineering by the renegade elements of the deep state. It was topped by the alleged rigging of the polls to ensure that PTI comes into power at the Centre and in Punjab besides retaining its hold in KPK. The PTI governments at the Centre and in Punjab and KPK are now faced with the consequences of their failure to deliver in accordance with the tall claims made by the Party prior to and during the election campaign last year. This has led to widespread disappointment and frustration among the people who were promised a marked improvement in their living standards and enhanced prosperity of the country in a short span of time.

PTI’s anti-status quo propaganda fell on receptive ears because of the exploitative and oppressive nature of the prevalent system in the country in which the weak and the poor always find themselves on the receiving end. The masses readily believed the promises made by Imran Khan and his PTI colleagues that there would be instantaneous improvement in their lot once PTI came into power. For instance, Imran Khan claimed that the reason for Pakistan’s high fiscal deficits was that people did not want to pay taxes to a government headed by corrupt leaders. The moment he came into power, he asserted, the people would start paying taxes because he was free of charges of corruption. He specifically mentioned that the annual revenues of the Federal Government would double from roughly Rs.4000 billion to Rs.8000 billion if PTI came into power, thereby, solving the Federal Government’s fiscal deficit problem and enabling it to spend more on the welfare of the people. He also promised to reduce government expenditure by ending corruption and waste.

Similarly, according to him and his supporters, corruption was the root cause of the high level of Pakistan’s public debt. The rapid growth in public debt in turn rapidly increased the debt servicing liability further aggravating fiscal pressures of the Federal Government. The PTI leaders often quoted the figure of Rs.6 trillion as the level of public debt in 2008 when the Musharraf era came to an end. According to them, the level of public debt increased to Rs.14 trillion by 2013 when PPP handed over the reins of the government to PML(N) during whose five-year tenure the public debt grew to Rs.30 trillion.

The narrative given above is simplistic and misleading. It does make some accurate references to the harsh realities of our economy which demand necessary corrective measures to overcome its oppressive and exploitative character. But beyond that it is essentially based on misrepresentation of facts and figures. Consequently, its policy conclusions are deeply flawed and likely to lead to disappointing results as the PTI leadership is now discovering. To begin with, Imran Khan’s claim that with him in power the government revenues would double has not been borne out by the PTI government’s actual experience. According to the latest reports, as against the tax revenue target of Rs.4,398 billion for the current financial year, FBR is likely to collect slightly over Rs.4,000 billion with a shortfall of Rs.398 billion. During the first nine months of 2018-19, FBR has collected only Rs.2,681 billion as against the target of Rs.2,998 billion indicating a shortfall of Rs.317 billion instead of a sharp increase in tax revenues predicted by Imran Khan. Should we conclude, therefore, that his government is more corrupt than the previous one since the shortfall in tax revenues last year was less than Rs.200 billion?

Despite some narrowing of our high current account deficit due to massive devaluation of the rupee, the growth in our exports has been negligible. The tightening of the fiscal and monetary policies has sharply lowered the GDP growth rate, thereby, aggravating poverty and increasing unemployment in the country. The inflation has once again entered the double digit territory. Contrary to PTI’s pre-election promises, government’s current expenditure has increased while that on development, especially on education, health and infrastructure, has registered a marked decline. Net foreign direct investment has also declined by 51% to $1.273 billion in the first nine months of the current financial year as against $2.62 billion during the corresponding period last year.

According to Pakistan Economic Survey for 2017-18, the country’s public debt was estimated to be Rs.22.8 trillion at the end of December, 2017, which constituted 66.3% of GDP. It increased to Rs.24.2 to trillion by the end of June, 2018 and to Rs.24.7 trillion by August, 2018 when the PTI government took over. So it was nowhere near the figure of Rs.30 trillion that Imran Khan and his supporters keep mentioning in their statements. This shows that the public debt increased at the average rate of Rs.2 trillion per annum during the tenure of the previous PML(N) government. According to the State Bank of Pakistan, Pakistan’s public debt increased to Rs.27.1 trillion by the end of January, 2019, that is, an increase of Rs.2.4 trillion in just five months since August, 2018. This is more than double the rate of increase in the public debt recorded during the tenure of the previous PML(N) government!

These figures lead one to the inescapable conclusion that PTI’s economic narrative was both flawed and misleading. The real reason for Pakistan’s economic problems lies in policy shortcomings and failures and not just in corruption which needs to be eradicated in any case. For overcoming our economic problems we need to adopt far reaching economic reforms in various sectors. The fundamental cause of Pakistan’s high fiscal deficit is our low tax to GDP ratio. We need to raise it rapidly to over 20% from the current level of 10% through a radical reform of the taxation system to provide additional fiscal space to the government to fulfill its responsibilities. High current account deficits, which reflect the excess of our national investment over national saving, are the direct result of our tendency as a nation to live far beyond our resources. The remedy lies in raising our national saving rate to over 25% of GDP as against the current level of 12% through policies of austerity and self-reliance in addition to a realistic exchange rate for the Pakistan rupee and other steps to facilitate the growth of the country’s exports and reduce its imports.

Perhaps the PTI government’s biggest failure is the steep fall in the GDP growth rate from 5.2% in 2017-18 to the anticipated GDP growth rate of 3.4% during the current financial year and to 2.7% during the next financial year, according to the World Bank projections. The only sustainable way to raise the GDP growth rate to 7% or above, which would enable us to create the required new jobs to absorb the new entrants in the job market, is again to raise the national saving and investment rates to 25% or above. Failing that, PTI’s promises of creating 10 million additional jobs or making 5 million new houses during its five-year tenure will remain a pipe dream as will its promises to reduce poverty and usher in an era of rapid economic growth and prosperity in Pakistan.