Encouraging response to construction package
REPORTEDLY FBR’s Policy Wing while briefing the new Chairman Dr Muhammad Ashfaq regarding progress made on Prime Minister’s relief package for the construction industry revealed that 2125 projects worth Rs.494 billion had been registered so far since the launch of the initiative in April 2019.
Out of these registered projects, 1750 were new projects whereas 350 were existing undertakings.
The response seems quite encouraging and without doubt has played a significant role in reviving the economy which had touched the rock bottom due to impact of Covid-19.
This prudent and imaginative initiative was part of the government initiative to make sure that the economy was kept alive and kicking along with the efforts to save lives because it was rightly felt that complete lock-down could kill more people with hunger than by the virus.
The government rightly gave the status of an industry to the construction and housing sector and announced a package of incentives for the investors.
The construction industry is linked with at least 40 other industries and it was rightly thought that investment in this sector will have considerable spill-over effect on those industries, giving desired boost to the economy besides creation of jobs.
The package of incentives for the construction industry had a cut-off date of 31st December 2020 which also applied to individual buyers of houses who were exempted from declaring their sources of income.
The government in view of the demand of the construction industry and realizing the fact that the period given for investment under the package of incentives was not long enough to achieve the objectives of the initiative, rightly granted extension in the date for the fixed tax regime besides extending the date for non-disclosure of income till 30 June 2021.
At the same time the projects that were to be completed by Sept 30, 2023 were also extended by one year.
According to the data compiled by Pakistan Bureau of Statistics, the amnesty scheme has generated tremendous economic activity in the country.
Cement output has grown by 57.24 due to greater demand after the start of construction activities and increase in exports. In the steel sector, the production of billets and ingots grew by 57.65pc. The production of paints and varnishes was up by 76.28%. Similarly, other industries have also shown positive trends in their production.
In view of the impact of Covid-19 IMF had projected Pakistan’s GDP growth rate at 1.5 per cent for the current fiscal year 2020-21 compared to negative 0.4 per cent for the previous fiscal year 2019-20.
However the PTI government had envisaged GDP growth rate target of 2.1 % with the expectation that the recovery of economic activities will help achieve the growth trajectory in the aftermath of overcoming COVID-19 pandemic.
But at the end of the year the GDP growth rate turned out to be 3.94 % which surprised many and gave an opportunity to the detractors of the government to challenge the veracity of these figures.
The first thing that comes to mind is that the projections are merely expectations about the performance of the economy made on the basis of existing trends in regards to specific period of time and any change in the circumstances and economic variables can alter the final outcome.
So there is a difference between projections and the real outcomes. The endorsement of Pakistan’s growth rate of 3.94 % beyond the projected figures finally also came from IMF.
In its World Economic Outlook report for 2021 it revised up its projection for Pakistan’s real Gross Domestic Product (GDP) growth rate to 3.9% which surely lends currency to the government claims and rubbishes the assertions of the critics about the figures being fudged.
The finance minister riding on the success achieved in regards to the revival of the economy, was right on money in his budget speech to claim that the economy had stabilized and was now moving towards sustained economic development.
While the construction industry through the investments made in it and the economic activity generated consequently played a significant role in enabling the government to reverse the trend of negative growth, the other factors that also contributed to this achievement include growth in remittances by 24% attributable to measures adopted by the government and the central bank to block illegal and informal money transfers into and out of the country to comply with FATF conditions.
The country also witnessed bumper wheat, maize, cotton and sugarcane crops which gave tremendous boost to the economy. Growth in the large scale industrial sector reportedly has been in the vicinity of 8-11 %.
Current account deficit has turned into plus. The government also claims that per capita income has also increased from $1496 to $ 1608.
The Minister for Energy Hammad Azhar therefore may not have been off the mark when he claimed that the GDP had increased from $263 billion to $ 296 billion registering an increase of 33% during the current fiscal year.
All the foregoing factors, some of them unpredictable like the crop yields have surely helped surpass the given projections at the beginning of the year.
These are verifiable figures and do lend currency to the government claim regarding growth having surpassed the given projections.
The trickle-down effect surely has a time-lag. It would be legitimate to hope that the government after consolidating the economy would also take appropriate steps to arrest the hydra-head inflation.
— The writer is former Director General Ministry of Information and Broadcasting, based in Islamabad.