Pakistan’s GDP growth rate came to a crawl in the ongoing fiscal year — one of the worst in terms of meeting annual macroeconomic targets — dragged down by agitational politics, cataclysmic floods, trade barriers, and a dangling International Monetary Fund (IMF) bailout on top of bare minimum foreign exchange reserves, Pakistan Economic Survey 2022-23 revealed Thursday.
Finance Minister Dar presented the pre-budget document at a press conference in Islamabad.
He said Pakistan Muslim League-Nawaz (PML-N)-led government faced three major problems when it took charge in 2013. “The economy was in tatters, there was loadshedding of 18 hours, and terrorism was on the rise.”
He added: “We followed our ‘three-E’s’ concept and Pakistan saw macroeconomic growth. Now, we are focusing on five-E’s — exports, equity, empowerment, environment, and energy.”
The financial czar termed the five-E’s as the driving areas of the economic growth saying this is the government’s roadmap for the next year. “This year, obviously, was a challenging year and the government did its best to handle the economic situation.”
This year, he further said, information and technology were added to the economic survey as stand-alone, saying this sector alone has the potential to boost economic growth.
Pakistan’s economy, which was among the growing economies in 2017, is now in a dismal condition, Dar said, adding that the government wanted to “take the economy back to where it stood in 2017”.
Key takeaways:
- Real GDP posted a growth of 0.29% in FY23.
- GDP at current market prices stand at Rs84,657.9 billion in FY23, showing a growth of
- 27.1% over last year (Rs 66,623.6 billion).
- Per capita income stood at $1,568 as compared to $1,765 last year.
- Investment to GDP ratio stood at 13.6% in FY23 compared to 15.6% in FY22.
- Growth of agriculture sector estimated at 1.55% in FY23.
- The industrial sector posted a negative growth of 2.94% in FY23.
- Services sector witnessed meager growth of 0.86%.
He recalled that economists had predicted in the last PML-N tenure that Pakistan was on path to become a member of the G-20 in the coming years.
The finance minister further said that the government’s aim is to achieve macroeconomic stability along with inclusivity and resilience. “We want it to be inclusive to avoid the uneven distribution of resources.”
He went on to say that the PML-N’s government led by then-prime minister Nawaz Sharif in 2013 merged the country’s stock exchanges which he said helped the Pakistan Stock Exchange (PSX) to grow substantially.
“The market capitalisation was around $100 billion during 2013-2017. This was huge. It is our duty to take Pakistan back to the track of growth.”
He said that it was natural that financing needs increased with the rise in benchmark rate which the government increased substantially to contain the runaway inflation.
“I believe that if this government hadn’t taken charge, then God knows what might have happened.”
According to Dar, the country’s foreign exchange reserves declined by $6,400 million before the PDM-led government came to power in 2022. “We have survived five quarters. Had we been going at that pace, then I don’t know what could have happened.”
He added: “Recently, we have been hearing repeatedly that Pakistan would default on external payments. I have always said that have faith. Allah Almighty has always protected Pakistan. We are trying to ensure that Pakistan moves towards economic growth fast.”
He said the danger of economic collapse had been averted and added that now it was moving towards stability. “When this government came in, the GDP rate was 6%. But, remember, that the GDP rate before that was -1%. The base was very low. So, all of you understand, when the base falls, the next year and in the successive years, you have a new baseline.”
Since there is economic turmoil across the globe, it has affected Pakistan as well — from trade to finances, Dar said adding that the country cannot evade the impacts of the global economic crisis.
“We also faced unprecedented floods. Our physical and economic losses crossed $30 billion. You must remember that several multilaterals estimated the amount [losses].”
He said the international pledges that the country received during the donors’ conference were more than expected. “Alhamdulillah, things are on their way. The planning minister and his ministry are doing their job.”
The federal minister said the IMF programme should have been completed in 2022 and added that only the PML-N-led government completed the global lender’s bailout package during its 2013-18 tenure.
Dar said the government paid all the debts on time and prioritised food items and medicines in imports.
“However, rupee depreciation creates all the problems as it increases inflation and exports do not increase.” He added that the real value of the dollar was less than 200 against the rupee.
“40 to 45 rupees reduction in dollar price is possible even today,” said the finance minister.
As per the economic survey, the growth rate in accommodation and food sector was 4.11%, while in IT and telecom it stood at 6.93%. The economy grew by 27.1% this year.
The data also showed that the size of the economy was Rs8.4 trillion.
The per capita income stood at $1,568 this year compared to last year’s $1,765.
Growth
In the document, the ministry mentioned that the real GDP posted a growth of 0.29% in the outgoing fiscal year as the economy faced tremendous challenges of macroeconomic imbalances, supply shocks, and international economic slowdown — which dampened the economic growth.
In the first quarter of FY23, floods engulfed a large part of agricultural land and disrupted the domestic supply.
Flood damages, GDP loss, and rehabilitation expenditures are Rs3.2 trillion ($14.9 billion), Rs3.3 trillion ($15.2 billion), and Rs3.5 trillion ($16.3 billion), respectively.
“The increase in international prices and currency depreciation which led to an increase in domestic commodity prices has reduced the aggregate demand in FY23,” the document mentioned.
The GDP, at current market prices, stood, at Rs84,657.9 billion in FY23, showing a growth of 27.1% over last year (Rs66,623.6 billion).
The document mentioned that the investment-to-GDP ratio stood at 13.6% in FY23 compared to 15.6% in FY22 mainly due to a slowdown in global and domestic economic activity and contractionary macroeconomic policies.
Meanwhile, the per capita income stood at $1,568 compared to $ 1,765 last year on account of currency depreciation, lower GDP growth and rising population.
Dar’s first budget for the PDM government’s complete fiscal year would be eagle-eyed by the analysts for any hints about populist dole-outs and they would also try to ascertain if the government was willing to pursue the economic discipline required to enter another IMF programme.
PM hails economic team’s performance
Before holding the presser, the government’s economic team led by Finance Minister Dar called on Prime Minister Shehbaz Sharif in Islamabad and presented the economic survey document.
The prime minister commended the economic team’s one-year performance for economic stability and development.
He said regardless of the economic challenges left behind by the previous government and unprecedented floods, the services of the economic team for the country’s economy are appreciable.
PM Shehbaz said that the government will invest a substantial amount in the next budget for the uplift of agriculture and IT sectors.
He said the small farmers will be provided with high-quality seeds and equipped with state-of-the-art agriculture equipment.
The PM said that the interest-free loan programme for small farmers will also be expanded in the next budget.
He also announced that the government will award prizes to the farmers achieving higher per acre yield.
More to follow…