Pakistan falls short of all economic targets
Says govt rescued crippling economy, averted default; Fiscal deficit rose from 5.8 pc in 2018 to 7.9 pc in 2022; Rupee’s real value is around Rs 240/$; Global supply disruptions, depreciation, political uncertainty major causes of inflation
Ijaz Kakakhel Islamabad
Finance Minister Ishaq Dar on Thursday said the government has rescued the crippling economy and averted default in the face of serious inherited challenges on internal and external fronts.
He made these remarks while launching Economic Survey for the outgoing fiscal year at a ceremony in Islamabad on Thursday. Addressing the ceremony, the minister said the government economy based on five Es including exports, equity, empowerment, environment, and energy. “There are 17 chapters in the survey,” he added. He went on to say that Pakistan’s economy took a downward slope from world’s 24th largest economy in 2018 to 47th position in 2022. “It speaks all about economy,” he added.
He maintained his argument, however, that the rupee’s real value is in the 240s against the dollar
Now our objective is 3.5% growth for next year, said Dar. “The baseline is core inflation, which is in the range of 16-20%. The world over the core inflation is followed and not the headline inflation,” he added.
Higher international commodity prices (crude oil, edible oil, pulses etc), global supply disruptions, damages of major and minor crops due to flood, currency depreciation, administrative price adjustment and political uncertainty are major factors responsible for high inflation, said Finance Minister Ishaq Dar on Thursday.
Global GDP growth has experienced a decline of over 50% since 2021, slowing down from 6.2% in 2021 to 2.8% in 2023.
The current government has successfully repaid $6.5 billion of international commercial loans, with $1.0 billion of that amount being in the form of international Sukuk, he said.
The GDP growth stood at 0.29 pc, adding that growth for agriculture, industry, and service sector stood at 1.5pc, 2.59 pc, and 0.86 pc, respectively. The GDP growth is a realistic assessment and nothing could be better than this, he added.
The government, he said, expected the GDP growth of 3.5 pc for the
next fiscal year. “PSDP expectation is no less than Rs1600 billion for provinces,” he added. The federal PSDP would cross the mark of Rs1.15trillion, he said.
IT export target had been set at $15 billion for the next five years with $4.5billion for the next year, he said. “We have set a target to shift energy to 20 pc green energy by 2025 and 30pc by 2030,” he added. It would save us, he said, primary energy by 15-20pc.
As for the CPI, he said, it remained at 16 pc for urban sector, and rural inflation around 20 pc with an average of 18 pc.
The FBR tax collection was at $ 6210 billion till end of May, increase from $5348 billion in the preceding year, he held. The department had set a target of $7000 billion, he added.
Dar said the PML-N government left the stock market at 52,000 in 2018. Highlighting Pakistan’s position as the PDM-led government took oath in 2022, he said there had been talks of Pakistan defaulting, adding that the government had to uplift it. “Pakistan’s fiscal deficit rose from 5.8 pc in 2018 to 7.9 pc in 2022,” he added. Investment on anti-terrorism operations made it reach 5.8 pc, he said, otherwise it would have been on 4.8 pc.
As for as the trade deficit, he said, it rose from $30.9 billion in 2018 to $39.1 billion in 2022. “The current account deficit increased to 4.7 pc of the GDP,” he added. Foreign direct investment shrunk from $2.8 billion to $1.9 billion, he added.
He went on to say that the PML-N government left circular debt at $1148 billion and inherited $2467 billion in 2022. “Public debt percentage of GDP increased from 63.7 pc in 2018 to 73.9 pc in 2022,” he added.
The finance minister said debt servicing increased from $1800 billion in 2018 to over $7000 billion today. “Pakistan’s credibility and trust was also shaken in the world,” he added.
He said the global GDP had decreased and inflation had increased in recent years, adding that the global trade saw a five time decline. “The world is a global village and these have repercussions,” he added. The “unprecedented floods” caused a damage of $30 billion to Pakistan, he said.
Mr Dar maintained that Pakistan completed only one IMF program and that too in 2013-16, adding that government paid political cost for the recent negotiations with the lender. “We are ready for the IMF’s ninth review,” he added.
He said the revival of the program was necessary to restore Pakistan’s credibility, adding that the government had to take difficult decisions. “We had two choices; carrying a deficit of $6400 billion or fulfilling sovereign commitments. We took the latter path,” he added.
After that, food and pharmaceuticals, and export-related spare parts were the government’s priority, he said. “We are engrossed in a vicious cycle of devaluation,” he added.
The finance minister said lack of trust in Pakistan had brought exchange rates from estimated Rs244 to the current rate of around Rs300. “It will be revived automatically,” he added.
He said tight fiscal discipline would continue, adding that everyone should play their role in uplifting the economy. “Despite all the constraints, the PDM-led government did this,” he added.
Planning and Development Minister Ahsan Iqbal said the outgoing fiscal year was an year of force majeure, adding that Pakistan’s economy had to face three accidents. “First accident is $50 billion trade deficit; second pertained to no release of development budget in last quarter; and third was concerned with unprecedented loss of $30 billion by floods,” he added.
He said that targets and numbers had no correlation, adding that this must be taken into account. “The government increased higher education budget from Rs26billion to historical high of Rs60billion,” he added.
He said Rs80 billion had been spent on projects related to future of Pakistan under the PM’s initiative program.
Finance Minister Ishaq Dar said the outgoing fiscal year was a challenging one. However, the government tried to effectively cope with the situation. As a result, he said, the declining trend has stopped and now efforts are underway to revamp economy and bring financial stability to the country.
Presenting the statistics of the Economic Survey, Ishaq Dar said primary balance surplus of over Rs99 billion has been recorded while the Current Account Deficit reduced by 76 percent to 3.3 billion dollars during the first ten months of the current fiscal year. He said the tax collection increased by eighteen point one percent to Rs6938.2 billion.
The Finance Minister said GDP posted a growth of 0.29 percent, terming it a realistic one. He said agriculture grew by 1.55 percent while industry, manufacturing and construction sectors showed negative growth due to slowdown in global and domestic economic activity and contractionary macroeconomic policies.
Ishaq Dar said electricity, Gas, and Water Supply and the other sub-sector of Industry posted a growth of six percent. Services Sector growth remained 0.86 percent. During July-Mar FY2023, 21,117 new companies were incorporated with Securities and Exchange Commission of Pakistan, which is 5.9 percent higher than the same period last year.
The Finance Minister said government’s vision is to restore macroeconomic stability and achieve inclusive and resilient growth trajectory. He said the government has now given a roadmap of five Es for the next year. He said exports, equity, empowerment, environment and energy will serve as a driving force for the economy.
Ishaq Dar was highly critical of the fiscal management of previous government saying its failure to fulfill sovereign commitments shook the country’s credibility. He said we took the most difficult structural reforms at a huge political cost just to put the direction right.
Responding to a question, Finance Minister Ishaq Dar assured that given the space available, the government will try its best to extend maximum relief to the salaried class. However, he made it clear that increase in salaries would be link with core inflation.