Another five-year plan

With the budget set to be announced today, it will have to be assessed against the ambitious 12th Five Year Plan 2018-23 approved by the National Economic Council (NEC). Will the PTI budget correspond with the objectives laid out in the macroeconomic development framework set forth in the document? There is no doubt that the numbers presented in the executive summary look good – considering the economic environment of doom prevalent today. GDP growth will hover around five percent, exports will increase from $24.8 billion to $34 billion, imports will be kept at $65 billion, and 10 million new jobs will be created. The numbers themselves are significantly lower than what the outgoing government promised, especially given its commitment to over seven percent GDP growth, but much higher than the IMF predictions of around three percent GDP growth for the next two years. Any observer would be right to wonder whether to trust the IMF, the NEC or the PTI government on this question. The current year has reminded us that in disputes between the Pakistani government and the IMF, it is usually the latter that comes out victorious. One must hope that the decision to approve a robust – albeit underwhelming – Five Year Plan means that the government understands the resolve it will need to stand up to international pressure.The trouble is that Pakistan’s record of implementing Five Year Plans does not show much promise. One could argue that the last Five Year Plan 2013-18 was an unmitigated disaster. Despite around five percent growth, inequalities grew, the investment-to-GDP ratio remained extremely low, and the agricultural sector arguably shrunk. On paper, there was growth to show, but there was little real economic development. Instead, growth was financed through high imports, which left Pakistan with an unmanageable current account deficit. Moreover, there was limited growth in jobs, with only 5.7 million jobs created compared to 6.9 million jobs created in the preceding five years. Ironically, GDP growth was much lower in the PPP years compared to the PML-N years, but job growth was much higher.It is right to wonder how the government will deliver 10 million new jobs after its own predictions of at least two years of economic slowdown. Moreover, the high rate of government and private borrowing imposed via the State Bank of Pakistan creates even more serious doubts about the ability of the government to deliver on the GDP growth rate in itself. The current plan claims that it will be based on the mobilization of domestic resources for investment, but the monetary policy decisions are not consistent with an investment friendly environment. Can the PTI government deliver on its Five Year Plan? The answers will lie in its first budget.

from The News International - Editorial http://bit.ly/2MCXh16