The first economic survey post-IMF bailout package paints a mixed picture. Not much has changed in terms of economic targets, as most of them have been missed. The good news is that the economy has a growth rate of 5.28 percent — its highest in almost a decade — as compared to the expected 5.7 percent. Yet other economic indicators portray a dismal outlook. Inflation is up; forex reserves — although relatively stable — have declined to $21 billion, while remittances and foreign direct investment (FDI) stand at $15.6 billion and $1.17 billion, respectively.
All this means there are not many surprises to be had. The government has a habit of setting unachievable targets prompting most economic experts to rely on independent evaluations by international agencies. Moreover, the mincing of numbers to manufacture healthy economic outlook has continued this year as well. Last year, the reported 4.8 percent GDP growth rate was revised down to 4.5 percent after necessary adjustments. Similarly, the current survey doesn’t mention a number of tax exemptions granted in the outgoing fiscal year.
Current growth has been backed by mainly a spurt in services, and a partial rebound in agriculture courtesy of the cotton crop. Minus the services sector, the rest of the economy grew an estimated 1.9pc only. Exports have remained under stress as the country’s current account deficit crossed the $8-billion-mark due to the government’s rigid financial policies. Furthermore, despite the positive reviews from credit rating agencies and financial journals, investment rates have remained subdued.
But the main problem in the current survey has been the rise in tax exemptions in various sectors given under Statutory Regulatory Orders (SROs). The exemptions have risen to Rs415.8 billion following two successive years of reductions. The free trade agreements, mainly with China, have also added to the total cost of these. The government had started a three-year programme to phase out exemptions under SROs in the fiscal year 2013-14 as part of IMF directives. The government, nevertheless, followed the practice for two years before relaxing exemptions once again this year. If the government had eliminated SROs, the reduction would have been reflected in the FY17 economic survey. Moreover, the absence of records of certain tax exemptions — including capital gains exemptions worth Rs1.7b billion and independent power projects (IPPs) worth approximately Rs50 billion — add further ambiguity to the economic report.
Now with FY18 being an election year, an expected government-spending spree threatens additional complications. The centre must realise that it needs to address underlying problems including current account deficits and stagnant FDI in order to address long-term challenges. The international economic agencies have warned Pakistan against financial splurging for short-terms gains instead of investing in long-term projects. While a relatively significant portion of the Public Sector Development Programme (PSDP) is allocated to the China-Pakistan Economic Corridor (CPEC)-related early harvest projects, which are growth-enhancing for the most part, the bulk of development spending is on projects that have either tenuous or too marginal and diffused a positive effect on economic growth.
Highlights of PES 2016-17
1. Country’s overall economic growth rate recorded highest 5.28 percent in nine years, while last year it was 4.51 percent.
2. The agriculture sector accounts for 19.53 percent of GDP and 42.3 percent of employment.
3. Agricultural sector recorded a positive growth of 3.46 percent against the growth of 0.27 percent last year.
4. Cotton Ginning witnessed growth of 5.59 percent against the negative growth of 22.12 percent in previous year.
5. Livestock growth was recorded at 3.43 percent against 3.36 percent last year.
6. Growth of forestry sub-sector increased by 14.49 percent as compared to growth of 14.31 percent last year.
7. Fisheries sector registered a growth of 1.23 percent compared to growth of 3.25 percent.
8. Industrial sector growth recorded 5.05 percent in outgoing fiscal year as compared to 5.8 percent last year.
9. Growth of overall Manufacturing is registered at 5.27 percent compared to 3.66 percent last year.
10. Large Scale Manufacturing growth improved to 4.93 percent from 2.94 percent last year.
11. The construction sector has registered a growth of 9.05 percent against the growth of 14.6 percent last year.
12. Mining and quarrying sub-sector witnessed a growth of 1.34 percent against the growth of 6.86 percent last year.
13. Electricity generation and distribution and gas distribution registered growth of 3.4 percent against 8.43 percent last year.
14. Economic growth rate registered 5.28 percent against 4.51 percent which is the highest in 9 years.
15. The total volume of GDP has crossed $300 billion.
16. Agriculture sector growth improved to 3.46 percent against 0.27 percent last year.
17. Gross Public Debt Ratio improved to 59.3 percent to GDP from 60.2 percent to GDP last year.
18. Policy rate remained at 5.75 percent which is lowest rate in 45 years.
19. Pakistan Stock Exchange has been ranked the fifth best performing stock market in the world in 2016.
20. CPI based inflation rate averaged 4.1 percent
21. Manufacturing sector growth registered 5.27 percent compared to 5.8 percent last year.
22. FBR tax collection increased from Rs 2,590 billion in FY15 to Rs 3,112 billion in FY16.
23. Fiscal deficit narrowed to 4.6 percent in FY16 from 8.8 percent in FY13.
24. Per capita income increased to $1629 from $1333 last year.
25. Education enrolment estimated to reach 47.834 million by end 2016-17.
26. Currently there are 1,201 hospitals, 5,802 dispensaries and 5,518 basic health units as compared to 1,171 hospitals, 5,695 dispensary and 5,478 basic health units last year.
27. During July-March (2016-17), installed capacity increased to 25.1 million MW from 22.9 million MW during same period of last year.
28. Current expenditures during July-March (2016-17) stood at Rs 4,383.6 billion against Rs 3,971.3 billion during same period of last year.
29. Expenditures on pro-poor sectors increased to Rs 2,694.7 billion during 2015-16, which was 9.3 percent of GDP.
30. Services sector witnessed growth of 5.98 percent against 5.55 percent last year.
31. Total investment recorded growth of 11 percent.
32. Total investment increased to Rs 5,027 billion in FY17 from Rs 4,527 billion in FY16.
33. National Savings remained at 13.1 percent of GDP in FY17 against 14.3 percent in FY16.
34. FDI posted growth of 12.75 percent during July-Apr, in FY2017.
35. Wheat production increased to 25,750 thousand tons in 2016-17 as compared to 25,633 thousand tons in last year.
36. Rice production increased by 0.7 percent, sugarcane 12.4 percent and maize production 16.3 percent during FY 2016-17.