ISLAMABAD - The government on Monday unveiled the Economic Survey 2018-19 that showed that all the major economic targets had been missed during the current fiscal year.

The provisional growth of GDP for the outgoing fiscal has been estimated at 3.29 percent, almost half of the target of 6.2 percent and the lowest in past nine years.

The survey showed that most of the sub sectors of the economy, including agriculture, industrial and services sector, have missed their targets. The government also missed the inflation, investment and savings rates targets.

Addressing a press conference at its launch, Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh did not share the details of the survey and chose to speak about the economic situation of the country instead.

“It is a fact that we [the PTI government] have missed the major targets but we have to see how these targets were set and by whom,” he said in an effort to shift the whole blame to the previous government of PML-N.

Prime Minister Imran Khan had already said that tough decisions would be taken over next one and half years to stabilise the economy, he said, indirectly confirming the fears that the upcoming budget – being presented in the National Assembly today – would add to the miseries of the inflation-hit citizens.

Agriculture 1.4pc growth against 7.6pc target

Services 4.7pc growth against 6.5pc target

Inflation rate to remain around 7.5pc against 6pc target

Current account deficit narrows by 7.5pc in 10 months

Federal Minister for Petroleum Omar Ayub Khan and Minister for State for Revenue Hammad Azhar were also present at the press conference.

Shaikh said that the incumbent government had taken loan of Rs2,824 billion during its ten months tenure. However, a major chunk of the loan, valuing Rs1221 billion, accumulated due to rupee depreciation, he added.

He said the public debt was around Rs31,000 billion while the foreign debt stood at $97 billion when the incumbent government took charge in 2018. The government would have to pay huge price of this loan in terms of interest payments, which would cost around a debilitating Rs3 trillion in the next fiscal year, he added.

“This is an important issue which threatens Pakistan’s economy. We are highly exposed to foreign loans and foreign exchange which is not matched by our capacity to pay it back. No one has paid any attention to increasing this capacity,” the adviser said. On the other hand, he said, there was zero percent growth in the exports of the country in last 10 years. In last two years, foreign exchange reserves had tumbled to $9 billion from $18 billion. The current account deficit had touched $20 billion and trade deficit swelled to $32 billion, he said.

He said that our institutions — power, gas, steel, PIA, railways and insurance etc — have all been hollowed out over the years. They have been looted systematically over an extended period of time.

Combined losses of these Public Sector Entities swelled to Rs1,300 billion, Shaikh said, adding that the money which was to be used on health, education and other facilities to people was rather spent on these white elephants to the tune of Rs1300 billion.

Due to the government’s measures, the adviser said, the imports had been controlled which helped in narrowing the current account deficit. The government had also taken measures to enhance the exports of the country by reducing the prices of electricity and gas, he added.

 

 

Aid from ‘friends’ and IMF

The incumbent government after assuming charge had approached friendly countries for improving external sector. The countries including China, Saudi Arabia and United Arab Emirates had provided $9.2 billion to Pakistan.

Shaikh said that the oil facility provided by Saudi Arabia worth $3.2 billion per year for three years would become operational on July 1. Similarly, the Islamic Development Bank had also provided $1.2 billion deferred oil facility to Pakistan.

He further said that Pakistan had also decided to enter into IMF programme. “The IMF programme will send a good signal to the international community that Pakistan wishes to take its economy forward in a disciplined manner and people will find incentive to form alliances and partnerships with us.”

The IMF programme would also help Pakistan secure $2-3 billion inflows from the World Bank and Asian Development Bank, the adviser added.

 

 

The Survey

Agriculture: The Economic Survey showed that the growth of the agricultural sector has been projected at 0.85 percent during ongoing fiscal year as against the target of 3.8 percent. The government also missed all its sub-sector targets except livestock, which recorded 4 percent growth rate.

The production of major crops contracted by 4.4 percent and other crops also saw a negative growth of 6.6 percent. Cotton ginning grew at a pace of less than 2 percent. The forestry sector grew by 6.5 percent but could not meet its target while the fishing sector grew by only 0.8 percent against the 1.8 percent target.

Crop sector faced the consequences of acute water shortages during the first half of the 2018 and thus only wheat depicted positive growth of 0.5 percent and cotton, rice and sugarcane witnessed negative growth at -17.5 percent, -3.3 percent, and -19.4 percent, respectively.

 

Industrial sector: The industrial sector’s growth has been estimated at a disappointing 0.85 percent during current financial year as compared to target of 7.6 percent.

The mining and quarrying sector declined by 1.96 percent. The construction activity has decreased by 7.6 percent.

The large scale manufacturing (LSM) sector, which is driven primarily by QIM data (from July 2018 to February 2019), showed a contraction of 2.1 percent.

Electricity and gas sub sector has grown by 40.5 percent mainly due to better performance of WAPDA and distribution companies and IPPs.

Services: The services sector is estimated to register growth of 4.7 percent as against the target of 6.5 percent during present fiscal year.

Though this sector also failed to achieve the set target, its relatively better performance remained a major contributor to economic growth.

Within services sector, wholesale and retail trade sector grew by 3.1 percent whereas transport, storage and communication sector registered a growth of 3.3 percent.

Finance and insurance sector showed an overall increase of 5.1 percent on account of positive contributions from scheduled banks (5.3 percent), non-schedule banks (24.6 percent) and insurance activities (12.8 percent) despite decline in central banking by 12.5 percent.

The general government services has grown by 7.99 percent and other private services, a set of computer related activities, education, health & social work, NGOs etc contributed positively at 7.1 percent.

 

Inflation: Inflation rate is projected to remain around 7.5 percent against the target of 6 percent for the ongoing fiscal year. Inflation is at higher side mainly due to the impact of the incumbent government’s economic policies, especially currency devaluation, increased gas and electricity prices and massive borrowing from the central bank.

 

Revenue collection and budget deficit: Like other economic targets, the government has also failed to restrict the budget deficit. The overall budget deficit might cross 7.5 percent of GDP or Rs2.8 trillion until the end of June.

The previous (PML-N) government had estimated budget deficit at 5.1 percent of the GDP for the entire current fiscal year. However, the deficit has already swelled to the budgeted target in only nine months period.

The major reason behind increase in budget deficit is massive shortfall in tax collection which has widened to Rs440 billion in the first eleven months of this fiscal year.

The FBR has provisionally collected Rs3.31 trillion in taxes during July to May period of the current fiscal year against the target of Rs3.75 trillion. The overall shortfall might exceed Rs500 billion by the end of current fiscal year.

 

Current account deficit: The increase in the current account deficit, which had touched record high $18 billion in last fiscal year, has narrowed 27 percent in first 10 months of fiscal 2019, mainly due to a weak rupee and sluggish economy which slowed demand for imports.

The country posted a current account deficit of $11.586 billion in July-April period of fiscal 2019, narrowing from a deficit of $15.864 billion a year earlier, according to the central bank data.

The trade deficit fell 12.82 percent to $26.302 billion in July to April 2018/19 fiscal year, with imports having declined 7.88 percent to $45.471 billion from $49.360 billion.

Exports showed a growth of 0.12 percent in 10 months of this fiscal year. Exports stood at $19.169 billion compared with $19.191 billion in the same period last year.