Finance Minister Miftah Ismail on Thursday said the Pakistan Muslim League-Nawaz (PML-N) government, along with its coalition partners, saved Pakistan from default after coming into power.
He said this while unveiling the Pakistan Economic Survey (PES) 2021-22, which revealed a growth rate of 5.97 per cent against a target of 4.8 per cent. At the same time, the report suggested that this growth is unsustainable due to “glaring macroeconomic imbalances”.
The balance of payments situation of the country particularly stood out with trade deficit jumping almost 50 per cent and the current account deficit spiralling out of control over the last year.
The economic survey is an annual report on the performance of the economy, focusing in particular on major macroeconomic indicators. Interestingly, this time – perhaps a first – a new government is presenting the economic performance of a previous government.
The finance minister, while unveiling the survey, said “achieving growth was not an issue for Pakistan; the real issue is achieving sustainable growth”.
“This year GDP growth is 5.97 per cent … but as usual the current account deficit has once again shown that we have a balance of payments issue,” he said.
This overall growth came on the back of 4.4 per cent growth in agriculture, 7.19pc growth in industries, and 6.19pc growth in services, meaning that all three major sectors surpassed their targets of 3.5%, 6.5% and4.7%, respectively.
Even though the country surpassed overall growth expectations as well as sector-wise growth targets, “underlying macroeconomic imbalances and associated domestic and international risks have dampened celebrations,” according to the survey document.
The minister said imports came in at $77 billion and will end up being the highest-ever import bill in terms of GDP.
During Jul-Mar FY2022, goods exports grew by 26.6% and amounted to $23.7 billion, whereas services exports grew by 17.1 per cent and amounted to $5.1bn, according to the survey. “Despite the encouraging export performance, the country’s imports have also risen significantly. The broad-based surge in global commodity prices, Covid-19 vaccine imports, and demand-side pressures, all contributed to the rising imports,” the PES said.
Resultantly, trade deficit grew by 55.5 per cent and amounted to $32.9 billion or 8.6 per cent of the GDP, which is “historically high”, according to the survey document.
Despite export receipts and workers’ remittances both reaching record-high levels during the nine-month period, import payments registered a “sizable, broad-based increase”.
As a result, the current account deficit widened considerably over the last year, it revealed. “These payment pressures manifested on the interbank PKR-USD exchange rate, which depreciated 14.1pc during Jul-Mar FY2022. The SBP’s foreign exchange reserves also came under pressure from Q2 onwards, dropping $5.9bn during the first nine months of the fiscal year to $11.4bn by end March 2022.”
Therefore, during this period, the current account posted a deficit of $13.8bn, or 3.6 per cent of the GDP, against a deficit of $0.5bn last year. “The widening of the current account deficit together with a build-up in inflationary pressures in the backdrop of the geopolitical situation (especially the Russia-Ukraine conflict) has created significant challenges for sustainable economic growth. In addition, the recent emergence of domestic conditions (including political instability) is eroding business confidence. Thus, all in all, inflationary and external sector pressures have created macroeconomic imbalances in the economy,” the PES added.
The minister said the tax-to-GDP ratio will remain at 11.1 per cent. He further said that Pakistan will need to allocate Rs3,900 billion for debt-servicing in the upcoming financial year. According to the minister, the foreign exchange reserves of Pakistan would improve by $2.4 billion to over $12 billion by early next week. “The reserves would increase after China rolls over $2.4 billion,” Miftah added.
Meanwhile, the incumbent coalition government is all set to present a 9.5 trillion budget for fiscal year 2022-23 in the parliament today (Friday), with a special focus on fiscal consolidation to contain budget deficit.
The budget would be presented by Miftah Ismail. According to reports, the budget has been formulated while considering the existing challenges being faced by economy at domestic and international fronts. Hence, mitigating people’s suffering, transforming agriculture sector, promoting information technology, boosting industrial and bolstering businesses would be the main focus of the document.
Keeping in view the robust growth of revenues during the current fiscal year (2021-22), the government is likely to set the revenue collection target at over Rs7 trillion for FY 20222-23. The coalition government has reportedly decided to allocate Rs800 billion for the Public Sector Development Programme (PSDP) in the next fiscal year.
Zardari hosts partners:
Also, Pakistan People’s Party (PPP) Co-chairman and former president Asif Ali Zardari hosted a dinner in honour of leaders of the ruling parties and agreed to steer the country out of all kinds of crises together.
At the dinner, the leadership further discussed the political situation of the country. Leaders of all political parties expressed confidence in Prime Minister Shehbaz Sharif and also appreciated the efforts of former President Asif Ali Zardari.
The budget was also discussed in detail and they even gave suggestions to the PM. Foreign Minister Bilawal Bhutto Zardari did not attend the dinner as he was in quarantine.