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    What is Imran Khan’s real problem?

    Synopsis

    Imran Khan vowed to curb tax evasion and graft before coming to power but little has been done so far by the administration

    ET Bureau
    Imran Khan has been hyper-aggressive on Kashmir. But the real scary scenario is where Pakistan’s economy is headed. Here’s what happened to the main indicators since Khan assumed office in August 2018.

    1. Pakistan's economic growth rate fell from 5.5% in FY18 to 3.3% in FY19
    Budget documents peg growth for FY20 even lower at 2.4% (Pakistan's fiscal year: July- June)

    2. Pakistani rupee has lost a fifth of its value against the dollar since the beginning of this fiscal year

    3. 13% inflation expected over the next 12 months, reaching a 10-year-high

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    GOVT FINANCES
    Fiscal indicators witnessed deterioration during first nine months of current fiscal year

    FISCAL DEFICIT
    7.1% of GDP
    (FY20, highest in last 7 years)

    GROSS PUBLIC DEBT/GDP
    77.6% (2019-20)

    FDI
    DURING JULY-APRIL FY19
    Foreign direct investment dropped 51.7%
    Foreign private investment declined 64.3%

    IN DIRE STRAITS
    Pakistan is in the midst of a crisis. The growth rate has almost halved, the balance of payments is in poor shape, the Pakistani rupee has depreciated significantly, and external debt is large and rising, according to UNCTAD’s Trade and Development Report 2019. While support from China and Saudi Arabia and a large IMF loan have helped address the immediate problem, the crisis has not been resolved.

    MAIN ISSUES
    1. Ever-increasing debt both domestic and international. Islamabad continues to borrow to repay past debt. In July it signed yet another deal with IMF for a bailout worth $6 billion

    2. Ballooning public deficits and losses in state-owned companies

    3. Increase in trade deficit and keeping the exchange rate constant

    4. Rising inflation, growth skewed toward consumption, low investment and job creation

    5. Only 1% of Pakistanis pay taxes. The country has one of the lowest tax-to-GDP ratios (11%) in the world

    6. Imran Khan vowed to curb tax evasion and graft before coming to power but little has been done so far by the administration

    7. A recent tax amnesty scheme implemented by the government failed to kick off

    8. Not only has Khan’s government failed to increase revenue flows, it has also been unable to cut non developmental expenditures

    9. Post debt servicing, the biggest source of non-developmental spending is the military, which officially receives around 17-22% of the annual budget

    10. The funds the military receives from the state budget is in addition to the revenue it gets from its large business operations. It recently moved into the mining,and oil and gas exploration sectors, some of which were facilitated by Khan’s government. Reports peg the size of Pakistani army’s commercial empire at $100 billion, which covers banking, cement and real estate sectors.

    Sources: Pakistani govt data, IMF data, media reports
    (Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

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    2 Comments on this Story

    Debasish Bhaumik343 days ago
    The Kashmiri people are the most previlrdged Indian citizens in our country. They should have no reason to worry.
    Kerisna Rao353 days ago
    Imran Khan is fighting to take control of the rivers in Kashmir. That''s what it has always been
    with Kashmir. Not the Muslim people. This is my belief.
    The Economic Times