ISLAMABAD – Forecasting a regional gross domestic product (GDP) growth of 7.8 percent in 2011, the Asian Development Bank (ADB) has warned that Pakistan’s anticipated low GDP growth rate of 2.5 percent in the current fiscal year could significantly increase the number of poor in the country.
Addressing a briefing at the launch of ADB’s flagship annual economic publication, the Asian Development Outlook 2011 on Wednesday, ADB Country Director Rune Stroem said Pakistan needed at least a per annum GDP growth rate of 3 percent to accommodate the large number of youth joining the work force.
He said Pakistan made a modest recovery in 2010, while strong fiscal pressures continued due to the underachieved revenue target and significantly lower external financing inflows with higher expenditure overrun and subsidies and security related spending.
“The government should implement structural policy measures to support long-term growth by enhancing revenue generation, containing circular debt in energy and commodity sectors and reduce burden of losses from state owned enterprises.”
Calling the government’s anticipated fiscal deficit at 5.5 percent of the GDP during the current fiscal year as unrealistic, he said it would slide further, however, refusing to speculate by how much. He stressed that the government should increase the tax to GDP ration from 9 percent to at least a double digit. He said the ADB would provide budgetary support in line with the International Monetary Fund guidelines.
The ADB disbursed $799.1 million during 2010 to Pakistan. Stroem warned that the inflation pressure was still dominant and could cross 16 percent in the next few months. He said the malnourishment report in Sindh was “frightening and we are concerned over the relatively low spending in social sectors”. The government should address the inflationary pressures from the supply and demand side as global oil price increase higher inflation.
“Energy conservation can play an important tool to reduce the petroleum import bill,” he said. Expressing concern over the rise in the domestic debt stock, he said, that the government made an interest payment of Rs 4.5 trillion during 2010. “The domestic debt is higher than the foreign debt and it’s more costly than the foreign debt.”
