GDP posted 2.38pc growth, targets missed

Pakistan Economic Survey 2023-24

Rs18 trillion budget 2024-25 to be tabled in Parliament today.

6.25pc growth in agriculture sector highest in last 19 years n Industrial sector posted 1.21pc growth. Services sector witnessed growth of 1.21pc. Finance minister says inflation has come down to 11.8pc. PIA will be privatised within two months. Had IMF deal not been signed, situation would have been very different: Aurangzeb.

ISLAMABAD   -   The federal government on Tuesday launched the ‘Pakistan Economic Survey 2023-24’ with major economic targets missed including economic growth, industrial sector growth, and inflation rate while agriculture sector recorded unprecedented growth.

“It is important to see that the GDP growth was in contraction of 0.2 percent, the level of inflation in 2022-23. [In this] year, the Pakistani rupee suffered nearly 29 percent depreciation and the foreign reserves went to just two weeks of import cover,” Finance Minister Muhammad Aurangzeb said while addressing the launching ceremony of the Economic Survey. The finance minister was flanked by Minister of State for Finance Ali Pervaiz and the economic team.

At the start of the current fiscal year 2023-24, the prime minister had taken “courageous step” in signing a nine-month Stand-by Agreement with the IMF, saying it had brought the country to a better place. “Without it, God forbid, we wouldn’t be here discussing the targets. We would have been in a different situation, and we would have had the same discussion in a very different context.”

The government has missed the economic growth target, as it remained at 2.38 percent as against the projected 3.5 percent. Talking about the economic performance in 2023-24, the finance minister said that the Large Scale Manufacturing (LSM) sector was in trouble due to higher interest rate and energy situation. Industrial sector recorded growth of only 1.2 percent against the targeted 3.4 percent. However, the agriculture sector has shown healthy growth of 6.25 percent, which is the highest in the last 19 years. This growth has been mainly driven by 16.82 percent growth in important crops such as wheat, rice and cotton.  Meanwhile, the services sector saw modest growth of 1.2 percent below the targeted 3.6 percent.

He said that said the agriculture sector is the major pillar of the country’s economy and added that everything related to the agriculture and the IT sector has nothing to do with the IMF. “Half of the agricultural sector is dairy production and livestock,” the finance minister said.

On the fiscal sector, the finance minister said that tax collection has recorded unprecedented growth of 30 percent and the primary budget was in surplus in the outgoing fiscal year. The current account deficit was well under the government’s control as it is projected to be around $0.2 billion as against the target of $6 billion. He claimed that the current account balance would be in surplus for the consecutive fourth month in May when the final figures would come in the next few days.

He informed that currency was stable during the outgoing year mainly due to the administrative measures taken by the caretaker government to curb the illegal ways of Hundi, Hawala and Afghan transit trade and structural changes introduced by the State Bank of Pakistan to end the speculations regarding currency value. The country’s foreign exchange reserves have recorded at around $9 billion, which are enough to cover two months imports of the country, he added.

Minister Muhammad Aurangzeb informed that talks with the International Monetary Fund (IMF) for a new loan programme were productive. He further said that the conclusion of nine months’ Stand-by arrangement with the IMF had demonstrated discipline and proved capable of implementing the necessary reforms. “I have said this many times, I see this as a Pakistan programme, which is being aided, supported, and funded by the IMF,” he reiterated.    

The Finance Minister said that there is no ‘scared cows’ in the country as everyone would have to pay the taxes. Schools, hospitals, and universities can run through philanthropy, but not countries, they run on taxes.  He further said that power distribution companies would be run by the private sector instead of the public sector.

He claimed that the government would improve enforcement in the Federal Board of Revenue and stop the tax leakages. He informed that Pakistan would rollover the loan with friendly countries and the country would receive borrowing from the commercial banks of Middle East countries. Furthermore, Panda bonds may be issued this year, whereas external debt repayments will also continue with support from the IMF programme.”

The finance minister stated that the government is all set to private the Pakistan International Airlines (PIA) within next two months. Meanwhile, it would also outsource the Islamabad International Airport. To a question about the capacity payments to the independent power producers, the finance minister said such payments had to be obliged under the sovereign commitments.

The minister shed light on the unsustainable nature of the current financial burden, mentioning a whopping Rs1 trillion in losses incurred by the state-owned enterprises (SOEs). On the Pakistan Steel Mills (PSM), he said the fate of the steel giant had been sealed as it would not be revived. “People are still employed there, and gas is being used, but the PSM will only be sold for scrap,” Aurangzeb said.

According to the Economic Survey in the fiscal year 2024 Pakistan’s GDP increased by 2.38%. Valued at current market prices, it reached Rs106,045 billion ($375 billion), with a 26.4% increase from the previous year’s Rs83,875 billion ($338 billion).

The per capita income rose to $1,680, from $1,551 in the previous year, driven by improved economic activity and a stable exchange rate. The investment-to-GDP ratio for FY2024 remained at 13.14%, a decrease from 14.13% in FY2023, attributed to a global slowdown, political instability in the country along with restrictive macroeconomic policies.

Inflation rate target was also missed. CPI inflation for the period July-April FY24 was recorded at 26.0% as against 28.2% during the same period last year as compared to the target of 21 percent.

The fiscal deficit during July-March FY24 was recorded at 3.7% of GDP, the same as last year. Meanwhile, the primary balance posted a surplus of Rs1615.4 billion (1.5% of GDP) during July-March FY2024, compared to the surplus of Rs503.8 billion (0.6% of GDP) last year.

According to the economic survey, the expenditures for the Public Sector Development Programme registered an increase of 14.2pc to Rs1,158.1bn in the nine-month period of Jul-Mar FY2024 against Rs1,014bn in the last year. The document said during the year the government prioritised vital development projects and followed a strategy to rationalise the expenditures so that more resources could be available for flood-related activities

Meanwhile, the incumbent government is all set to present its first federal budget for the fiscal year2024-25, with an estimated outlay of over Rs18 trillion, on Wednesday (today). The budget for fiscal year 2024-25 would be presented before the National Assembly by Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb.

The budget had been formulated while considering the existing challenges being faced by the economy at domestic and international fronts. Hence, mitigating people’s sufferings, transforming agriculture sector, promoting Information Technology (IT), boosting exports, promoting industrial growth and bolstering businesses, would be the main focus of the document, the sources said.

The government is firmly committed to presenting a pro-people, business-friendly and progressive Federal Budget FY 2024-25. It will pursue policies aimed at fiscal consolidation to contain budget deficit.

In addition to fiscal management, revenue mobilization, measures for economic stabilization and growth, reduction in non-development expenditures, job creation and people-friendly policies for the socioeconomic prosperity of the country, would feature in the budget.

It would also focus on social sector development besides introducing reforms for improving governance and boosting the private sector for investment.

On the revenue side, the government would introduce measures for bringing improvements in the system of tax collection, broadening the tax base, and facilitation to tax-payers.

Keeping in view the robust growth of revenues during the current fiscal year (2023-24), the government is likely to set the revenue collection target at over Rs.12 trillion for the fiscal year 2024-25.

The sources said the preparations for the announcement of the federal budget for fiscal year 2024-25 continued in full swing in accordance with the prescribed timeliness.

The budget is being prepared in close coordination between all departments and ministries involved in budget related events including the presentation of the budget in the Parliament and launching of the Economic Survey, sources added.

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