The survey confirms a 5.97% growth in the GDP, however, factors such as the widening trade deficit and current account deficit, depreciating rupee and spiraling inflation present bad news for the economy.
Minister for Planning, Development, and Special Initiatives Ahsan Iqbal, Federal Minister for Power Khurram Dastgir, Minister of State for Finance and Revenue Aisha Ghaus Pasha, and government officials attended the inauguration ceremony of the Pakistan Economic Survey for the outgoing fiscal year.
Finance Minister Mr. Miftah Ismail has launched the Pakistan Economic Survey 2021-22 alongwith Fed Min Planning Mr. Ahsan Iqbal, Fed Min Energy Khurram Dastgir, MoS Dr Aisha Ghous Pasha and Finance Secretary and Economic Adviser l. pic.twitter.com/KtZ0Ot7ZAf
— Ministry of Finance, Government of Pakistan (@Financegovpk) June 9, 2022
Pakistan Economic Survey is an annual report that evaluates the performance of the national economy by assessing and analyzing macro-economic indicators such as the GDP growth rate, current account and trade balance, currency performance, inflation rate etc. The survey report is released on the eve of the budget so as to help the finance ministry in devising the new budget. The document presents significant economic figures and the performance of several economic sectors separately during the fiscal year.
This is the first time that a government is unveiling the Pakistan Economic Survey for the performance of its predecessors.
Although, the 5.97 percent growth in economy against the set target of 4.8 percent is a good news in itself, it is dampened by widening deficits in trade and current account, unprecedented inflation rate and the free-falling currency value. All these factors point to an unsustainable economic growth. As the Finance Minister puts it “achieving growth was not an issue for Pakistan, the real issue is achieving sustainable growth”.
This year GDP growth is 5.97pc growth … but as usual the current account deficit has once again shown that we have a balance of payments issue,” Miftah Ismail said while unveiling the survey. The issue has also been highlighted in the survey that despite exceptional GDP growth rate “underlying macroeconomic imbalances and associated domestic and international risks have dampened celebrations”.
The GDP growth of 5.97 percent is a combination of 4.40 percent growth in agriculture, 7.19 percent growth in industries, and 6.19 percent growth in services against the targets of 3.5 percent, 6.5 percent and 4.7 percent, respectively. This growth beyond targets represents a boom in all three major sectors of Pakistan’s economy.
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Explaining the ballooning trade deficit, the finance minister cited the highest ever $77 billion import bill. While cumulative exports stood at 28.8 billion during the July-March period of fiscal year 2022. The PES citied the global surge in commodity prices, covid-19 vaccine imports and the demand-side pressure as the contributing factors to the rising imports.
“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 read.
As a result, the trade deficit has reached the “historically high” level of $32.9 billion after a surge of 55 percent.
Likewise, the current account deficit has also grown, as even the record level of remittances by the overseas Pakistanis was not able to cover the gap in the trade balance. The PES cited the “sizable, broad-based increase” in the imports bills as the primary cause of the significant widening of the current account deficit. The widening of the current account deficit resulted in the 14.1 percent depreciation in the value of rupee during July-March and the pressure on the of foreign exchange reserves of Pakistan, which in turn lead to unprecedented inflation in the country. During July-March period of the outgoing fiscal year, the current account posted a deficit of $13.8 billion.
Inflation during the July-April term of the outgoing fiscal year was recorded at 11 percent, in contrast to the target of 8 percent. An abnormal increase in global commodity prices, especially crude oil and edible oil was cited as reason behind inflation by the PES.
A growth of 28.5 percent in FBR tax collection during July-April FY 2022, is a good news for the economy. The growth resulted in a tax collection of Rs4,855.8bn during the same period of time. According to the survey the increase in tax collection was a result of various policy initiatives and administrative measures by FBR.
The survey depicted a complete picture of Pakistan’s economy, and the picture is not a very bright one. However, Finance Minister Miftah Ismail has vowed to lead the country towards responsible, sustainable and inclusive growth. The upcoming budget will prove decisive for the country’s economic future; hence all eyes are set on it.
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