‘Government has failed to deliver’

By Jawwad Rizvi

LAHORE: The government has failed to deliver and the escalating inflation is eating up everything. Good governance and management is the need of the hour to counter the inflation, which has entered the phase of stagflation.

Giving up extra expenditures, the government should give the Charter of Economic Recovery, coming out of the Charter of Democracy. The government has given nothing to the general public, rather their wrong policies have even snatched the bread and butter from them.

These views were expressed by the participants of the Jang Economic Session on 'New Inflation Blast, Ways Out for Public and Government' held here on Tuesday.

The participants included former finance minister Dr Salman Shah, Pakistan Sugar Mills Association (PSMA) Chairman Javed Kiyani, Pakistan Electric Power Company (PEPCO) director general Muhammad Khalid, former president of the Lahore Stock Exchange Dr Yasir Mehmood and Civil Secretariat Employees Association President Malik Ijaz. The discussion was hosted by Sikandar Hameed Lodhi and Intikhab Tariq.

Dr Salman Shah said the economic conditions had deteriorated and the rulers needed to admit that they were not capable of running the government affairs. "Economy has entered the stage of stagflation as a result of the government policies. The IMF is also involved in bringing the economy to this stage."

The growth rate has come down to zero percent from 8 per cent in 2007 , foreign direct investment (FDI) to one billion US dollar from $8 billion, investment to GDP to 15 per cent from 24 per cent and stock market to 10,500 points from 16,000 points, he said.

He said that there was no economic management in the country, adding that when international oil prices touched the highest level, the two political parties' prime focus was on the Charter of Democracy and on how to make a coalition. Three finance ministers were changed by the present government while the first finance minister, who was basically an accountant only, had announced bankruptcy of the country, pushing the rupee-US dollar parity to Rs 85 for one US dollar.

The capital flight had increased while foreign direct investment stopped, he said, adding that the government had cancelled the Global Depositary Receipts (GDRs) of the state owned institutions of $4 billion. By doing all these things, it had stopped the inflow of foreign investment into the country. The payment of $5 billion as oil import bill had compelled the government to ask the IMF for loans at tough conditions. The discount rate had increased to 15 per cent from single digit, affecting the industry and creating unemployment besides decline in production.

He said the present government was promoting the cartels in every sector and creating mafia at every level, bringing the inflation to the present level. He said that, until the mafias and cartels were broken, inflation would not be controlled.

PSMA Chairman Javeed Kiyani said that the sheer mismanagement on the part of the government was the cause of inflation, especially in sugar prices. He said that PSMA had informed the government about 1.2 million metric tons sugar shortfall at the start of the season but it had imported so far only 400,000 metric tons through the Trading Corporation of Pakistan (TCP). He said that industry stocks had vanished now while the government did not offload its stocks in open market. He said that previous government had maintained strategic sugar stocks and timely intervention in the market, keeping the sugar prices in equilibrium during their tenure. He said that the government had ignored the supply side economy, adding that despite the fact that we are an agrarian economy, the country was facing food items shortage due to mismanagement. He was of the view that the increase in fuel prices and energy tariff would directly increase the cost of production. He said that two per cent monthly proposed increase in power tariff would result in 19.02 per cent by the end of this financial year, pushing inflation higher.

PEPCO director general Muhammad Khalid said that the gas companies had curtailed gas supplies to the thermal power plants of PEPCO, leading to increase in electricity cost. Hydel-thermal mix was another factor of the increase in the power rates. He said the purchasing price of one unit electricity was over Rs 9 while selling price was Rs 7.05, adding that the difference between the sale and purchase price was creating circular debt. To end the debt, increase in electricity tariff was crucial, he added.

Malik Ijaz termed the inflation a gift of democracy and the democratic government. He said the government had forgotten the sacrifices of the general public for democracy and were focused only on their own interests. He said that two big political parties were doing corruption in the country and were least concerned about the general public. He criticised the government for selling education, saying that education was being sold because it was not provided by the government.

Dr Yasir Mehmood said that the democratic governments always brought policy shift and focused on the agriculture sector in order to ensure transfer of wealth to rural areas. He said that the government subsidied the agriculture input while increased the rates of the output.

He said that it was crucial to increase the tax to GDP ratio, calling for addressing the issue on priority basis by increasing direct taxes. "No holy cow should be exempted from tax," he added.

He said that uncertainty about the economic policy had reached its zenith as no one knew how long an economic decision of the government would stay. No investment would come, until clear policies were be made for the economic development of the country.