Nawaz Sharif's Report Card 2013-18

The last five years of Pakistan's outgoing government of the Pakistan Muslim League (Nawaz) have seen the revival of Pakistan's economy and completion of many long delayed infrastructure and energy projects. Mr. Nawaz Sharif deserves full credit for it.  At the same time, the PML government is responsible for slow progress on human development indicators, major decline in exports, growing twin deficits of budget and external accounts, mounting public debt and lack of transparency in financial matters.  It is the lack of transparency that has been brought in sharp focus with the removal of Prime Minister Nawaz Sharif by the nation's Supreme Court in the aftermath of Panama Papers. The leak of these papers revealed his family's ownership of undeclared and unexplained substantial assets abroad.

Terrorism Toll in Pakistan. Source:


Pakistan achieved 5.8% growth in gross domestic product (GDP) in fiscal 2017-18, the highest in the last 13 years.  Many long delayed projects ranging from roads, ports, dams and irrigation projects to power plants were finally completed.  Examples of such long delayed projects include M8 and M9 motorways, Lyari Expressway, New Islamabad Airport, Neelum-Jhelum Hydroelectric Project and Kachhi Canal. The PMLN government's performance was boosted by a number of factors including the following:

1. Pakistan Army's anti-terror operations Zarb e Azb and Radd ul Fasad dramatically reduced the level of violence and significantly improved security in the country. It resulted in increased confidence of businesses, investors and consumers in the economy. 

2.  Growth of Chinese investment in China Pakistan Economic Corridor (CPEC) related infrastructure and energy projects. Ongoing execution of CPEC projects is transforming some of the least developed areas of Pakistan and creating hundreds of thousands of new jobs.

3. Major decline in energy prices, particularly prices of liquified natural gas (LNG), helped boost the energy and the power sector which in turn helped increase industrial production and transport sectors.  Pakistan is now among the world's fastest growing LNG markets


Structural problems in Pakistan's economy remained unaddressed. Current account deficits widened as exports declined and imports jumped, putting pressure on the nation's foreign exchange reserves. Increased deficit spending resulted in bigger budget deficit and heavy borrowing. Public debt and debt service costs climbed. School enrollment and literacy rates remained essentially flat in the last 5 years and Pakistan continued to rank low on human development indices. Here are some of the details:

1.  Pakistan's exports have plummeted from about $25 billion in 2013-14 to about $20 billion in 2016-17 under PMLN government.  Exports in first 9 months of current fiscal year 2017-18 have been recorded at $17 billion.  The trade deficit for the first nine months of fiscal 2017-18 reached $27.3 billion.  This situation has forced the government to borrow more in international debt markets at commercial rates. The country now faces the prospect of going back to the International Monetary Fund (IMF) for yet another bailout.

Pakistan's External Debt. Source: Wall Street Journal
2.  Pakistan's net primary enrollment is stuck at about 57% while the literacy rate is flat at about 60%. This is in spite of fact that the country now spends almost as much on education as on defense.  Pakistan's public spending on education has more than doubled since 2010 to reach $8.6 billion a year in 2017, rivaling defense spending of $8.7 billion. Private spending on education by parents is even higher than the public spending with the total adding up to nearly 6% of GDP. Pakistan has 1.7 million teachers, nearly three times the number of soldiers currently serving in the country's armed forces. Unfortunately, the education outcomes do not yet reflect the big increases in spending. Why is it? Let's examine this in some detail.

Source: Economic Survey of Pakistan 2015-16
Mujhe Kyun Nikala (Why was I ousted?): 

When former Prime Minister Nawaz Sharif repeatedly asks "Mujhe Kyun Nikala" (Why was I ousted),  he appears to be arguing that, because of his government's unquestionably better performance than his predecessor PPP government's,  he deserves to be forgiven without explicitly asking for forgiveness.  What are his sins? His biggest sin is that he and his family have accumulated large amount of unexplained wealth in offshore shell companies during his three terms as Pakistan's prime minister. He and his family did not disclose this wealth until they were forced to acknowledge it after Panama Papers leaks.  They were given ample opportunity by the Pakistan Supreme Court to prove that it was acquired by legitimate means. But they failed to do so.

Mr. Sharif and his family are not unique as owners of unexplained offshore wealth. Washington-based Global Financial Integrity (GFI) estimates that developing countries have lost as much as $13.4 trillion through unrecorded capital flight since 1980. Bloomberg reports that Pakistanis own $150 billion worth of undeclared offshore assets, attributing this estimate to Syed Muhammad Shabbar Zaidi, a partner at Karachi-based A.F. Ferguson and Co. -- an affiliate of PricewaterhouseCoopers LLP.

Iqama (Foreign Residency) vs Panama:

Mr. Sharif says that he was removed for "iqama", not "Panama". What he doesn't acknowledge is that having "iqama" (foreign residency) facilitates "Panama", the hiding of assets in offshore locations.

Assets held by people in offshore tax havens are tracked by their country of residence, not by their citizenship, under OECD sponsored Agreement On Exchange of Information on Tax Matters. Pakistan is a signatory of this international agreement.  When Pakistan seeks information from another country under this agreement,  the nation's FBR gets only the information on asset holders who have declared Pakistan as their country of residence. Information on those Pakistanis who claim residency (iqama) in another country is not shared with Pakistani government. This loophole allows many Pakistani asset holders with iqamas in other countries to hide their assets. Many of Pakistan's top politicians, bureaucrats and businessmen hold residency visas in the Middle East, Europe and North America.


The last five years of Pakistan's outgoing government of the Pakistan Muslim League (Nawaz) have seen the revival of Pakistan's economy and completion of many long delayed infrastructure and energy projects. Mr. Nawaz Sharif deserves full credit for it.  At the same time, the PML government is responsible for slow progress on human development indicators, major decline in exports, growing twin deficits of budget and external accounts, mounting public debt and lack of transparency in financial matters.  It is the lack of transparency that has been brought in sharp focus with the removal of Prime Minister Nawaz Sharif by the nation's Supreme Court in the aftermath of Panama Papers. The leak of these papers revealed his family's ownership of undeclared and unexplained substantial assets abroad.

Related Links:

Haq's Musings

South Asia Investor Review

CPEC Transforming Pakistan's Least Developed Regions

Pakistan: The Other 99% of the Pakistan Story

How Pakistan's Corrupt Elite Siphon Off Public Funds

Bumper Crops and Soaring Credit Drive Tractor Sales

Panama Leaks

How West Enables Corruption in Developing Countries

Declining Terror Toll in Pakistan

Riaz Haq's YouTube Channel


Riaz Haq said…
Country’s (Pakistan's) installed electricity capacity increases by 30pc to 29,573MW

Economic Survey 2017-18 unfolds that Pakistan’s installed capacity to generate electricity has surged up to 29,573MW by February 2018 which stood at 22,812MW in June 2013, showing the growth of 30 percent.

As far as the transmission and distribution losses are concerned, the Economic Survey says average losses were at 18.9 percent in 2013 which have now reduced to 17.9 percent in 2018 showing the government has succeeded to reduce the losses by 1 percent.

The recovery of the billed amount of electricity sold to the consumers stood at 89.6 percent. During the period from 2013 to 2018, as many as 39 projects with cumulative capacity of 12,230MW have been added. Due to significant improvement in the energy mix, the country’s reliance on expensive oil has been reduced.

The better energy supply has helped large scale manufacturing (LSM) and in turn manufacturing to both grew above 6 percent in FY 2017-18, which is an 11-year high. In power sector, per capita electricity consumption is considered one of the most important economic welfare indicator regarding availability of affordable energy. Pakistan is bestowed with enormous hydro and coal potential which, if carefully exploited, can ensure our future energy security on long-term basis. Further, the expansion in generation capacity requires supporting expansion in the transmission infrastructure for evacuation of the power.

China-Pakistan Economic Corridor (CPEC) is another major breakthrough in the development of the country’s energy sector, under which financial outlay of around $35 billion has been made for energy sector projects including power generation and transmission projects to be implemented in IPP mode. In case of natural gas, the gap between demand and supply was widening due to increase in gas demand and depletion of existing sources.

The government has made efforts to exploit indigenous resources as well as import gas though transnational pipelines and LNG to mitigate the shortfall. Indigenous crude oil meets only 15 percent of the country’s total requirements, while 85 percent requirements are met through imports of crude oil and refined petroleum products. The indigenous and imported crude is refined by six major and two small refineries. The present government not only made concerted efforts for upgradation of existing refineries, but also made addition of six depots with inland freight equalisation margin. Further, to promote fuel efficiency, the government has introduced marketing of 92 RON premier motor gasoline replacing the existing 87 RON PMG under the regulated environment.

Pakistan has large indigenous coal reserves estimated at over 186 billion tons which are sufficient to meet the energy requirements of the country on long-term basis. There has been significant increase in import of coal due to commissioning of new coal based power plants at Sahiwal and Port Qasim.

Riaz Haq said…
India’s Power Mess Is Enron Times 20
Banks are on the hook for $26 billion in loans to stressed electricity projects.

Enron Corp. is long gone, but the scandal it left behind in India has beguiled the country’s lenders for almost two decades.

However, if the bankers who financed the U.S. energy company’s unviable power plant in Maharashtra state aren’t ruing that 2,000-megawatt debacle any more, it’s only because they’re now staring at a mess 20 times bigger.

India’s total electricity-generation ability is 344,000 megawatts, a 72 percent increase over six years. The country, notorious for its outages, still doesn’t have a power surplus. But coal-fired plants in the private sector that ran at 84 percent capacity utilization at the start of the decade are struggling to stay alive with load factors of 55 percent. As much as 40,000 megawatts of capacity — equal to 20 Enron plants — has become stressed assets for the banking system.

Struggling to Stay Open
Capacity utilization of India's coal-based power plants in the private sector has collapsed

Lenders, on the hook for $26 billion, are yet to classify these exposures as nonperforming, let alone provide for losses out of (their increasingly nonexistent) profits. However, now that the central bank is forcing them to clean up their act, they’re trying to think of creative solutions. According to BloombergQuint, the banks will convert debt that’s unsustainable into equity and sell those shares to a jointly owned asset management company. The AMC will hawk its controlling stakes in power producers after a turnaround.

A better idea may to be to fix the underlying profitability of the power business.

Forget long-term power purchase agreements. State utilities are shy to sign such contracts anyway and prone to ditch them at the first hint of cheaper electricity in the wholesale market. Let most of the demand and supply move to exchanges with open access for all bulk buyers and sellers, says Hemant Kanoria, chairman of India Power Corp., a 99-year-old company involved in both electricity generation and distribution.

The share of power trading in the country’s overall demand-supply equation has been stagnant for years at about 10 percent. This needs to change.

The other big issue, as Kanoria rightly notes, is coal. India has no shortage of the fuel, but its dominant miner, which met 95 percent of its 600 million ton production target last year, needs to crack the whip on underperforming subsidiaries.

Power plants’ coal inventories are falling, and linking domestic availability to whether a producer has a long-term electricity purchase agreement with a state utility isn’t helping. Rather than continue with a less-than-satisfactory auction system, let Coal India Ltd. fix a price at which it would assure supply to whoever is willing to pay and take away the feedstock.

Running Low
Despite massive growth in India's power capacity, coal inventory at electricity plants is below this decade's average

Finally, financing costs, which have ballooned to half of the total expense of putting up a power plant, need a tweak. Restructuring unserviceable loans into other instruments — such as preference shares — would give producers some breathing room, Kanoria says.

It’s silly of lenders to expect that debt with annual interest rates of 16-percent-plus won’t eventually turn bad. Dragging borrowers to the bankruptcy tribunal won’t solve anything. Most assets would sell for scrap value; jobs would be lost. Sweeping the problem under the carpet of an asset management company may preserve employment, but the immediate financial hit to banks could upset their already weak capital position. Besides, if existing owners are booted out, who will run the plants?

It was relatively easy to leave Enron’s Indian unit in the care of a couple of state-run companies, as the government did in 2005. That can’t be a template for a problem 20 times larger.
Riaz Haq said…
Punjab Chief Minister Shahbaz Sharif claims PMLN worked tirelessly and delivered in several sectors.

He said Punjab invested in the setting up power projects, and the entire country benefited. He said their government invested Rs150 billion in power projects, and although it was not their responsibility, electricity was provided to the whole nation.

“We have always believed in the notion that investment of Punjab, and power to entire Pakistan,” he said adding that it was the goodwill gesture that entire nation should benefit from it.

He said that patients were compelled to seek treatment in India, and were not even issued visas, which was rather shameful for them. Therefore, the government set up new medical colleges and hospitals so that kidney and liver transplantation procedures can be performed within the country.

“In a couple of days, transplantation machinery will arrive in Pakistan. Don’t go to India anymore. We have beat them in transplantation, and we have to fight and defeat them economically,” he said.

He said the Pervez Musharraf duped the country by just laying the foundation stone of Basha Dam in 2007, while it was their government who released billions to purchase the lands. He vowed that, if given the opportunity, they will win the case for water with India.

He said that public transport is the hallmark a society, which was in shambles and citizens couldn’t reach in old dilapidated buses. Therefore, they provided cost-efficient and effective metro buses and Orange Line services.

He said the KP government, which criticised the Lahore metro service previously, is now setting up but has instead ruined the city. “This is their planning. What will they do for the economy, exports and providing employment,” he said lashing at the now dissolved PT-led government.

He said the Peshawar High Court had taken notice of the matriculation results last year, and children in the province were forced to work in brick kilns. “KP, Sindh, and Balochistan’s children are working on brick kilns,” he said.

He said the Punjab provided interest-free loans to over two million youth worth Rs40 billion. “Tell me which province has potential to set up small dams and hydel power? KP, but they produced minus six megawatts electricity,” he said.

While on the other hand, he said the Punjab government produced 5000 megawatts and saved Rs682 billion, and even reduced cost by billion by the lowest bidder, and returned it in form of money or natural resources, which is unprecedented by any government since 1947.

“I swear in the month of Ramazan, each and every penny is well accounted for. The achievements of the PML-N are being left to the people.”

Shehbaz Sharif even credited his government for handing over Karachi to the Rangers, and making the critical decision in 2014 to ensure peace and metropolis. He said that law-enforcement agencies have rendered tremendous sacrifices, and even fortified the border area in South Waziristan to ensure peace.
Riaz Haq said…
#Pakistan’s #trade deficit touches record high of $34b in July-May FY18. #Imports $55.3 billion, up 14%. #Exports $21.32 billion, up 4.7% from last year. … via @Profitpk

Pakistan’s trade deficit clocked a record high of $34 billion during the eleven months of the outgoing financial year 2017-18.

This poses a major challenge for the next government to rein in the widening current account deficit as trade deficit increased 13.3 percent for the first eleven months (July-May) of FY18, according to official data, reported Dawn.

In May, the trade deficit increased to $3.76 billion posting an 8.6 percent year-on-year (YoY) increase.

The last FY17 had witnessed trade deficit to a then-record high of $32.58 billion, surging 37 percent from the previous FY16.

Imports clocked in at $55.3 billion, posting a 14 percent rise during July-May FY17 compared to $48.54 billion in the corresponding period of last year.

The import bill posted a 15 percent on a month-on-month basis, touching $5.9 billion in May against $5.09 billion in April 2018.

The commerce ministry said the imports in May had exhibited an increase mainly because of high oil prices and rise in volumes of imports of fuels and machinery to overcome energy deficit.

The total increase in imports during July-May FY18 was around 14 percent compared to corresponding last FY17.

The increase in import bill was attributed to an increase in arrival of petroleum products, food products and capital goods.

And exports continued their recovery which started early last year. Exports exhibited figures of above $2 billion for the third month running since March 2018 and during May it posted an increase of 32 percent year-on-year compared to same month last year.

The highest ever month-on-month (MoM) increase was posted in dollar terms as export proceeds rose to $2.14 billion in May 2018 against $1.62 billion in May 2017.

Yearly export growth reached 15 percent for July-April FY18 compared against 14 percent in the corresponding period of last year.

Overall exports in July-May FY18 touched $21.32 billion, which is roughly $1 billion more than annual figures for FY17.

During May, the merchandise exports earned Rs247.5 billion for the national exchequer against Rs169.7 billion earned in the corresponding period of last year.

This reflects additional revenues of roughly Rs80 billion for exporters in May 2018 which translates to a major gain of 46 percent.
Riaz Haq said…
#Pakistan’s foreign borrowing surges to $10b in 11 months. #debt #PMLN #NawazSharif

Pakistan has received nearly $10 billion in foreign loans in the past 11 months, and almost three-fourths have been utilised for budgetary support and meeting external financing requirements, underscoring that the amount cannot be returned without resorting to fresh borrowing.

The total loan disbursement from July through May of fiscal year 2017-18 stood at $9.98 billion, reported the Economic Affairs Division on Monday. The 11-month disbursements were significantly higher than the budgetary estimate of $7.7 billion.

As compared to five years ago, when about two-thirds of the loans used to be taken for project financing, now around 75% are obtained for budgetary support and building foreign currency reserves. This suggests that these loans have not been put into productive sectors of the economy, making it impossible to retire them without taking new loans.
From July through May, project financing stood at a mere $2.8 billion or 28% of the total disbursements, according to the EAD – a division working under the Ministry of Finance. Over half of the project financing went into only three projects – Orange Line Metro project, Thakot-Havelian project of the China-Pakistan Economic Corridor (CPEC) and Multan-Sukkur section of the CPEC – showed official statistics.

Pakistan receives $9.2b in foreign loans, but reserves still plunge

China disbursed $836 million for the Multan-Sukkur project, $296 million for Thakot-Havelian and $334 million for the Orange Line project, Lahore – the flagship scheme of former chief minister Shehbaz Sharif.

Overall, the government of China and its financial institutions provided $3.8 billion or 38.5% of the total loans received during the first 11 months of the current fiscal year. This includes $1.64-billion project financing from China and $2.2 billion as commercial loans by Chinese banks.

In addition to $3.8 billion direct disbursement of loans, China has also extended a $3-billion credit facility that Pakistan has also almost fully utilised to stabilise its nose-diving foreign currency reserves.

In May, Pakistan received another $493 million as foreign commercial loan from a consortium of Credit Suisse AG, taking the European bank’s contribution to $750 million during the current fiscal year.

Pakistan received $3.5 billion in foreign commercial loans in 11 months, which is equal to 35% of the total loans received during this period. It also floated $2.5 billion Eurobonds during the current fiscal year.

Pakistan’s external debt, liabilities touch $89 billion

With the fresh borrowing of $10 billion, total foreign loans the last PML-N government obtained during its third stint (July 2013 to May 2018) have now increased to a record $44.8 billion.

Most of these loans have been obtained to help boost foreign currency reserves, finance a bulging current account deficit and for budgetary support.

Pakistan’s external debt and liabilities have soared to a record $92 billion as of March-end, an increase of over 50% or nearly $31 billion in the past four years and nine months, according to the State Bank of Pakistan (SBP). Out of total external debt and liabilities, the government’s public debt obligations including that of foreign exchange liabilities were $76.1 billion as of end March.

The public debt-to-gross domestic product (GDP) ratio peaked to 70.1% – as against 63% at the end of the PPP tenure. This ratio is far higher than the sustainable levels for a country like Pakistan. High debt levels are consuming over 30% of the federal government budget on account of debt servicing cost.

Riaz Haq said…
Building a new Pakistan

by Dr. Atta ur Rahman

The single biggest opportunity to develop Pakistan lies in its 100 million people who are below the age of 20. We need to focus on their development to build a new Pakistan.

The country has abundant natural resources, the fifth largest river system in the world, which could be a huge source of cheap, and clean hydel power. Similarly, we have ample reserves of coal, as well as areas in Sindh and Balochistan that are suitable for wind energy projects. Given an honest and sensible government, we could have been producing energy at an average price of less than Rs3 per kilowatt hour.

However, the country has been eaten away by corrupt leaders who have built palaces abroad and accumulated mountains of wealth in the UK, UAE, Switzerland and many other countries, while the industry in the country lies devastated – with exports stagnating at about $21 billion annually. If we can produce energy at such low rates (as is already being done in the UAE through solar farms) we can hugely boost our industrial production, resulting in the expansion of the industry and provision of jobs to our qualified youth.

The second area that we can tap into is the IT sector. There is a worldwide demand for software for a variety of applications, particularly due to the fast emergence of machine intelligence. These applications are finding use in a number of businesses. We need to tap into this fast-growing source of wealth by setting up a network of high quality training centres in the country for IT graduates so that their skills can be honed to meet the demands of businesses. The global IT market has risen to about $1,400 billion, with a significant increase in the last couple of years, particularly in the software development sector.

The advent of the Fourth Industrial Revolution has opened up a number of exciting opportunities for Pakistan’s youth, provided that they are properly trained. The rise of artificial intelligence and its integration into almost every sphere of human activity has created unprecedented opportunities for our youth. New and more powerful computers are being developed that will be able to take over many conventional jobs and lead to an expansion in some fields. Most industrial assembly plants will no longer require humans as their functions will be taken over by intelligent bots. This has opened up fantastic opportunities for IT professionals capable of developing powerful algorithms to tackle specific industrial and service requirements.

Free or low-cost legal and medical advice is already being given by IBM’s computer, aptly named Watson. Before long, lawyers, judges, doctors, nurses, restaurant waiters, film actors and other professionals will be replaced by intelligent bots. Autonomous vehicles driven by computers will replace 95 percent of the vehicles on our roads, drastically reducing accidents. Most automobile manufacturers will go out of business as there will be no need to have personal vehicles with the availability of cheap and efficient autonomous taxi services.

Therefore, machine intelligence is one area to which our government must give the highest priority, by setting up centres of excellence in every university to meet the growing demands of high-quality professionals in this field. The transition from vehicles powered by combustion engines to electric vehicles is also occurring at a fast pace. This is creating research and development opportunities for our youth in the field of electric batteries.

Bioinformatics is another exciting field that our youth should be trained in as it is linked to genetic engineering. The ability to process large genomics data with powerful computing systems and to analyse it in order to arrive at meaningful conclusions will impact the health and agriculture sectors. New plant and animal species are already being developed with exciting properties, and the demand for suitably trained youth in this field will grow at an accelerated pace.

Popular posts from this blog

Pakistani Women's Growing Particpation in Workforce

Project Azm: Pakistan to Develop 5th Generation Fighter Plane

Pakistan's Saadia Zahidi Leads World Economic Forum's Gender Parity Effort