FINANCE Minister Miftah Ismail on Thursday unveiled the Economic Survey of Pakistan 2021-22, a pre-budget document, showing growth reaching 6% against the 4.8% target for the outgoing fiscal year.
However, the country’s growth story – having rebounded from the pandemic (when the economy contracted in FY20) to post 5.74% growth last year and maintain a V-shaped recovery with GDP growth of 5.97% this year – has been held back in the face of glaring macro-economic imbalances, suggesting that this growth is unsustainable.
The 6% growth was truly impressive and a positive reflection of the PTI government’s overall growth strategy, prompting party chairman Imran Khan to say that the survey data clearly indicated that Pakistan was thriving on the economic front under his government.
He pointed out that the PTI government has put the country on the path of economic progress and prosperity over the past two years and that the country is heading towards a positive trajectory.
The higher growth is said to be mainly due to the rebasing of the national accounts and does not reflect the realities on the ground, but the PTI government has taken measures such as liberal incentives for the housing and construction sector which have exploded during his reign and helped stimulate overall growth in the national economy.
The overall growth is due to a growth of 4.40% in agriculture, 7.19% in industry and 6.19% in services, which means that the three main sectors exceeded their targets for 3.5%, 6.5% and 4.7%, respectively.
According to the survey, even though the country has exceeded overall growth expectations as well as sectoral growth targets, “underlying macroeconomic imbalances and associated domestic and international risks have dampened the celebrations.”
The current account deficit, budget deficit, investment and savings rate as a percentage of GDP missed the desired target for the outgoing fiscal year.
The size of the country’s economy reached $383 billion and the per capita income was $1798 in 2021-22.
One of the major problems in the economy is the widening trade deficit which is eating away at hard-earned resources.
Imports in 2021-22 increased by 48% compared to the last fiscal year, while exports also increased, but the trade deficit stood at an alarming $45 billion.
It should be of concern to our policy makers that in the past exports accounted for around half of imports, but the ratio is now 40:60 meaning Pakistan could only finance 40% of its imports by exports and for the rest it had to rely on remittances or loans.
It is not a viable approach to spend loaned foreign currency on the import of luxury items and therefore there is an urgent need to review the overall policy and ban the import of luxury items altogether.
The government should focus on exports and this in turn necessitates a surplus of production which cannot be expected in the current stifled environment where load shedding is hitting the economy again and increasing the selling prices of products POL and the electricity tariff drive up the cost of production higher, making our exports uncompetitive.
The new budget also contains reform measures in line with the requirements of the International Monetary Fund (IMF) and it remains to be seen how the economy would be stimulated while implementing tough and tough measures.
Undoubtedly, the reforms would allow the country to receive blocked funds from the IMF in addition to the extension of deposits from Saudi Arabia and China, but all this shows an increased dependence on foreign aid to manage even the normal daily affairs of the country.
This situation is unsustainable as the unbearable burden of foreign loans could push the country towards the specter of default and therefore all political parties should sit down together and chart an agreed economic framework aimed at mobilizing resources internal and get rid of external debt.
Miftah Ismail asserted that the government’s tough decisions have averted the default and the economy is now on the path to stability and will soon experience stable growth with no current account deficit or balance of payments problem.
It is hoped that these words will not turn out to be a rosy picture of the future, but practical steps will be taken to achieve this destination.