Title: Comparison of Economic Performance: PTI vs PDM Governments
In a recent analysis, a comparison was drawn between the economic performances of the PTI (Pakistan Tehreek-e-Insaf) and PDM (Pakistan Democratic Movement) governments. The surprising findings shed light on their respective management of the economy, particularly during the initial period of their governance.
When the PTI government came into power in August 2018, it faced immense criticism and scrutiny regarding its ability to handle the economic crises inherited from the previous PML-N government. The scale of the crises at the start of the PTI government was compared with the situation inherited by the PDM government in April 2022, ensuring a fair comparison by focusing on a similar initial period.
Notably, the PTI government inherited a current account deficit of 6.1 percent of GDP, which was about one-third worse than the deficit inherited by the PDM government, standing at 4.6 percent of GDP. Additionally, the State Bank of Pakistan’s net reserves were at $3 billion when the PTI government took over, while the PDM government saw an increase to $6 billion in net reserves. Clearly, the external crises that the PTI government inherited were considerably more severe.
Examining the results obtained by both governments in dealing with the external crises, it was observed that steps taken to address the crises resulted in a slowdown of the economy and a rise in inflation. This is a common consequence of short-term demand constriction to reduce the gap between inflows and outflows of foreign currency.
Analyzing the aspect of growth, the first year of the PTI government witnessed a GDP growth rate of 3.1 percent, with manufacturing growing by 3.5 percent. Although growth slowed down as per the intended plan, it remained positive and exceeded the population growth rate. Contrastingly, the PDM government experienced a significant slump in GDP growth, with only 0.3 percent growth. This decline led to a decrease in per capita income as the population continued to grow at a rate of 2.5 percent per annum. Manufacturing also took a hit and declined by 8.0 percent, severely impacting the overall economy.
Another crucial indicator during the adjustment period was the inflow of non-debt foreign currency. In the first year of the PTI government, exports and remittances increased by $1.3 billion. Conversely, during the first year of the PDM government, exports and remittances declined by $9.1 billion. This collapse in non-debt inflows had a significant impact on global markets, which flagged a serious risk of Pakistan defaulting on its external debt in 2022-23.
Inflation, an essential factor affecting citizens and businesses, was also compared. During the first year of the PTI government, inflation increased by 4.3 percent, with the consumer price index rising from 6.2 percent to 10.5 percent. However, during the PDM government’s first year, inflation soared to 36.4 percent from the initial 13.4 percent, marking a staggering increase of 23 percent. This inflation spike was the worst in Pakistan’s history, stating the severe impact it had on millions of Pakistanis.
The collapse of non-debt inflows during the PDM government, coupled with the consequential impact on the currency, contributed to the intensified inflation. The Pakistani rupee depreciated significantly by Rs33 against the US dollar during the PTI government’s first year. In contrast, during the PDM government’s first year, the rupee plummeted by Rs100 per dollar.
In conclusion, the comparison revealed that the PTI government inherited a more severe external crises situation compared to the PDM government. Amid these circumstances, the PTI government managed the situation more effectively, maintaining better growth rates and lower inflation compared to the PDM government. These findings shed light on the economic performance of both governments and provide valuable insights into their ability to navigate turbulent economic waters.
Disclaimer: This article solely represents the analysis and opinions of the author, who served as the finance minister from 2018 to 2019 under the PTI government.
