Prime Minister Nawaz Sharif, during his ongoing tenure, announced two major packages to promote two poorly performing critical sectors of the economy; notably, farm and export sectors.
The farm package was announced in September 2015 at an estimated cost of 341 billion rupees, and the export package had an estimated cost of 180 billion rupees which was announced this month. Data suggests that the farm package was the need of the hour but did not succeed in fuelling output.
The Economic Survey (2015-16) reported that in 2015-16 (in comparison to the year before) agriculture growth was negative 0.2 percent with important crops registering a growth of negative 6.3 percent, other crops at negative 7.2 percent and cotton ginning at negative 21.3 percent. ABusiness Recorder exclusive reveals that the reason behind the failure of the farm package to achieve its objective is due to the failure of the government to release the cash assistance announced in the package by the Prime Minister with only Rs 25 billion disbursed out of the Rs 40 billion earmarked for the purpose.
In addition, cash assistance of Rs 5000 per acre to cotton and rice farmers excluded those provinces where these two crops are not grown notably Khyber Pakhtunkhwa and Balochistan; while Sindh has accused the federal government of not extending any cash assistance to cotton and rice growers of the province. Fertilizer subsidy that as per the federal budget of the current year envisaged equal share by the provinces and the federal government suffered a serious setback as the provinces refused to pay their share due to paucity of funds attributed to the insistence of the federal government to generate ever larger provincial surpluses. Farmer groups also informedBusiness Recorder that the package was hijacked by influential farmers and almost completely bypassed poor farmers. In this context it is relevant to note that the rich farmers' yield is many times more than that of small farmers - a fact which explains why the total yield per acre in Pakistan is much lower than in India.
The question is whether the package is generating higher growth rate in the farm sector today? State Bank of Pakistan's website updated on 27 January 2017 notes that the crop output grew by 3.39 percent during the current year in comparison to the period last year when growth was negative while agriculture growth rate that includes crops, livestock, fishing and forestry registered negative 6.7 percent growth. Critics also point to the penchant of the Sharif administration to manipulate data to argue that the crop growth rate may have been manipulated to show a better performance than is in fact the case.
Pakistan's exports have been steadily declining for the past several months and the reasons cited by economists are four-fold: (i) an overvalued rupee that is making our exports uncompetitive in world markets; (ii) inordinate delays in disbursing sales tax refunds which is creating severe liquidity issues for exporters prompting many to borrow which, in turn, is raising their costs of production, (iii) continuing energy issues, and (iv) taxes on raw material which are negatively impacting on exports.
The export package itself focuses on allowing duty drawbacks only to the textile sector (thereby creating anomalies with respect to other export sectors) and as per the Chairman Pakistan Readymade Garments Manufacturers and Exporters Association there are ambiguities in the package for the textile industry as well which need to be removed; and he has requested a meeting with the Federal Board of Revenue to discuss the issues and remove them.
To conclude, it is worrying that the Prime Minister announced packages that have not been fully implemented nor carefully thought out to iron out all ambiguities. This is indeed reminiscent of Donald Trump's recent executive orders that have mobilised hundreds of thousands of protesters and have also been challenged in a court of law. But while one can overlook Trump's decisions as he is a novice in government this is Nawaz Sharif's third tenure as the country's Prime Minister. One can only hope that he takes the relevant ministries to task for failing to implement the two packages that have been named after him. -Business Recorder
