ISLAMABAD  -   The ministry of finance has claimed that Pakistan’s economy is progressively moving on higher inclusive and sustainable growth path as it is forecasted to grow at a rate of 4.8 percent during current fiscal year.

“The economic performance during the first half of current fiscal year indicated that the economy is progressively moving on higher inclusive and sustainable growth path. The envisaged growth will be driven on the basis of targeted growth of 3.5%, 6.5% and 4.7% in agriculture, industrial and services sector, respectively,” the Ministry noted in its mid-year budget review 2021-22. In the medium term, the growth target is set at 5-6% with price stability. The realization of this goal requires economic stability. “The government is highly committed and working diligently to cope with these challenges by introducing comprehensive set of economic policies in all sectors of economy such as industrial package, incentives for export promotion, promulgating investment promotion strategy and social sector development programs etc”.

“However, there are certain challenges which may impact the growth prospects such as increasing trend in global oil and food prices, which may affect domestic inflation, widening current account deficit due to constantly growing import volume of energy and non-energy commodities”. New Covid19 variants are potential downside risks for global growth. Its spill over impact may bring further challenges for Pakistan’s economy.

The government is introducing economic policies that are focused on strengthening the economy, based on price stability and sustainability of the external and fiscal sectors. The impact of these policies has already become visible in terms of encouraging performance of key economic indicators. In the agriculture sector, the production of important crops like cotton, sugarcane, rice, wheat, is encouraging for Rabi FY 2021-22. In industries, LSM recorded a growth of 3.3 % during Jul-Nov FY 2021-22 (6.9 % last year). Similarly, high frequency data has shown significant performance indicating robust domestic economic activity.

CPI inflation (Jul-Dec FY 2021-22) is recorded at 9.8 percent as against 8.6 percent in last year. Pakistan is a net importer of food and oil items. The upsurge in international food, fuel prices and supply chain disruptions has been transmitted in the domestic prices of these items. However, the government is taking policy initiatives, administrative actions and introducing relief measures to control inflationary pressure in the country without passing full inflationary pressure to the domestic consumers.

As a result of effective implementation of monetary and fiscal policies, Pakistan has witnessed a significant rise in exports as it grew by 29 percent during July-December FY 2021-22. Remittances increased by 11.3 percent in Jul-Dec FY 2021-22. FDI grew by 20.1 percent during Jul-Dec FY 2021-22. Current account posted a deficit of $9.1 billion (5.7 % of GDP) for Jul-Dec FY 2021-22 against a surplus of $1.2 billion (09% of GDP) due to constantly growing import volume of energy and non-energy commodities. In addition, rising trend in the global commodities prices especially oil, Covid-19 vaccines, food and metals, built pressure on import bill.

Within the fiscal sector, FBR has posted a healthy growth in revenue collection by exceeding target. The net tax collection grew by 32.5% during Jul-Dec FY 2021-22. The fiscal deficit during Jul-Dec FY 2021-22 has been contained. The report noted that current account deficit recorded at $9.1 billion (5.7 per cent of GDP) in the first half (July–December 2021) of the year, the mid-year review reported massive slippages on account of non-tax revenues, particularly because of lower petroleum levy and gas infrastructure development cess (GIDC).

Finance ministry confirmed significant cuts to the public sector development programme (PSDP). “The increase in current expenditure is expected due to rising interest payments, Covid-related spending, energy subsidies, social safety net expenditures and running civil governments,” noted the review, adding that “adjustments are, however, required to be made in PSDP allocations due to higher than estimated recurrent expenditure”. The overall mid-year fiscal indicators have shown encouraging results as considerable growth in net revenue and effective expenditure control measures have helped in containing the overall fiscal deficit to 2.1pc of the GDP. A primary surplus at 0.1pc of GDP has been achieved. The federal government achieved a 9pc increase in the net revenue receipts during the first half of the current fiscal year in comparison with the same period last fiscal year. The 19pc increase in the total expenditure during this period was primarily due to Covid vaccines expenditures and energy subsidies. The fiscal indicators showed a marked difference because of the change in the GDP base year. At the time of budget approval in June 2021, GDP (market price) for FY22 was estimated at Rs53,867b.