Context:
On July 23, 2019, Prime Minister Imran Khan spoke at the United States Institute of Peace (USIP) where he claimed that his government inherited “the biggest Current account and fiscal deficit.”
Claim:
When the PTI government took power, Pakistan had the “biggest current account and fiscal deficit”
Claimant:
Prime Minister of Pakistan, Mr. Imran Khan
Source of Claim:
https://www.youtube.com/watch?v=IV3S2PNxnV8&t=1633s (at 27:00-27:15)
Status:
True
Sources:
- https://data.worldbank.org/indicator/BN.CAB.XOKA.CD?locations=PK&view=chart World Bank current accounts data.
- https://tradingeconomics.com/pakistan/government-budget-value SBP sourced values of Pakistan’s fiscal deficits.
- https://tradingeconomics.com/pakistan/government-budget SBP sourced values of Pakistan’s fiscal deficit as a percentage of GDP.
- https://tradingeconomics.com/pakistan/current-account-to-gdp SBP sourced values of Pakistan’s current account as a percentage of GDP
- https://www.investopedia.com/terms/d/debtgdpratio.asp Explanation as to why we use debt-to-GDP ratio.
- Detailed data on Capital Accounts and Budgets can be found at http://www.finance.gov.pk/ and http://www.sbp.org.pk/
Report/Ruling:
The Prime Minister is correct. Both current account deficit and fiscal deficit of Pakistan in 2018 stood at US $ 18.25 billion and 2.26 trillion PKR respectively, the highest ever in Pakistan’s history.
The caveat, however, is that these figures are not indicative of the state of economy because these are not at their highest historical value when expressed as percentages of GDP. Our Current account deficit, as a percentage of GDP in 2018 was 5.8%, and our fiscal deficit, as a percentage of GDP, was 6.6%. Our highest current account deficit as a percentage of GDP was 8.5% in 2008, and our highest fiscal deficit, as a percentage of GDP, was 8.8% in 2012. Larger economies can repay larger debts more easily, and hence can afford larger deficits. Hence, looking at current account & fiscal deficits as percentages of GDP provides better indicators of economic performance.
Thus, while the Prime Minister’s statement is correct, it does not necessarily reflect accurately on the state of the economy his government inherited in 2018.
