Finance Minister Miftah Ismail presented the Pakistan Economic Review (PES) 2021-22. on Thursday that revealed growth rate of 5.97% against goal of 4.8 percent.
Nonetheless, growth story — recovering from the pandemic (when economy under contract) and maintaining a V-shape recovery publishing real GDP growth of 5.97% is year – was dehydrated in in face of glaring macroeconomic imbalances suggesting that this growth is unstable.
Balance of payment situation of the country was especially out with trade deficit jumped by almost 50% and current rising account deficit out of control over last year.
The Pakistan Economy Review is an annual report. on in performance of in economyfocus in specific on main macroeconomic indicators. Interestingly, this time – maybe first – a new government (PML-N-led coalition) represents the economic performance of previous government (PTI).
Finance minister, presenting the survey, said that “achievement growth was not issue for Pakistan, real issue achieves sustainable growth”.
“This year GDP growth 5.97 pcs. growth … but as usual current there was a deficit in the account again shown that we have a balance of payments issue” Ismail said.
It’s common growth came on in back of 4.40 pcs. growth in Agriculture, 7.19% growth in Industry and 6.19% growth in Services – This means that all three major sectors have surpassed their targets. of 3.5 pcs, 6.5 pcs and 4.7 pcs. respectively.
Although the country as a whole has outperformed growth expectations, as well as by sector growth goals “underlying macroeconomic imbalances and related internal and international risks overshadowed the celebration,” the study document said.
minister said the import had come in by $77 billion and will end up being highest ever import bill in terms of GDP. “Imports have increased significantly, but exports have also increased,” Ismail said.
According to the survey, in July-March 2022, exports of goods grew by 26.6% to $23.7 billion, while exports of services grew by 17.1% to $5.1 billion.
“Despite the encouraging export performance, the country’s import also rose significantly. Splash on a wide base in global commodity prices, Covid-19 vaccine imports and demand-side pressure, all this contributed rising imports,” the statement said.
As a result trade the deficit increased by 55.5 p.p. and amounted to $32.9 billion or 8.6 p.p. of GDP, which the paper says is “historically high”.
Although export earnings and workers’ remittances reach record- high levels during the nine-month period, import payments registered “significant growth on a broad basis”.
How result, current account deficit has increased significantly over last yearthe document says.
“This payment pressure is manifested on interbank exchange PKR-USD rate, which depreciated by 14.1 percent in July-March 2022 financial year. Foreign Exchange Reserves SBP also came under pressure from the second quarter, losing $5.9 billion during first nine month of fiscal year to $11.4 billion by the end of March 2022.
Thus, during this period current Account posted deficit of $13.8 billion, or 3.6% of GDP, against deficit of $0.5 billion last year. Major contribution to higher current account deficit increased by 55.5% in product trade deficit in July-March fiscal year 2022, the study paper said.
“Extension of in current account deficit together with a build-up in inflationary pressure in background of geopolitical situation (especially the Russian-Ukrainian conflict) has created significant challenges for sustainable economic growth.
“Besides, the recent emergence of internal conditions (including political instability) worsen business confidence. So everything in everything, inflationary pressure and pressure from the external sector have created macroeconomic disproportions in in economy”PES added.
year-on-year (YoY) inflation from July to April of outgoing fiscal year was measured at 11% over target of 8pcs
PES indicated an anomalous increase in global commodity prices, especially crude oil and edible oil, as reason for in rise in domestic prices.
” groupA wise breakdown shows that the main contributors to headline inflation are transportation, followed by furniture and household goods. equipment maintenance and housing, water, electricity and gas.”
Non-perishable products items are main concomitant factor in jack up food inflation, it further noted.
FBI tax collection
The survey noted that the FBR initiated various policy and administrative measures to help taxpayers mobilize domestic resources and generate sufficient income without hurting growth pulse in outgoing year. As a result, the FBR tax collection has witnessed significant growth of 28.5% in July-April FY 2022.
amount collected during this period amounted to Rs 4,855.8 billion compared to Rs 3,777.7 billion. last year.
However, the tax break measures affected revenue collection by around Rs 73 billion during the month. of April, PES said in a statement.
Despite significant rise in tax collection, higher current as well as development spending increased the budget deficit between July and March of fiscal year 22 to 3.8% of GDP compared to 3% over the same time last yearaccording to the survey.
“Due to additional costs for Covid-19 funds for procurement of vaccines, circular IPPs debt payment, social sector spending and higher development spending, the public sector remained under enormous pressure. All these factors, along with with in global economic challenges caused by the Russian-Ukrainian conflict, as well as the impact on international commodity and oil prices increased risk of fiscal arrears during current fiscal year.”
He noted that government initially froze oil prices to bail out, but due to rising fuel and energy tariffs in in international market“Aid provision acted like a double-edged sword, potentially widening the fiscal deficit and reducing space”.