All targets missed yet Shaikh sees a silver lining

Despite missing all economic targets for the current fiscal year and dark clouds of energy crisis hovering above, Finance Minister Dr Abdul Hafeez Shaikh claimed to be seeing a silver lining on the horizon at the launch of the Economic Survey 2011-12 on Thursday, citing additional resource transfers to provinces under the NFC Award that made development in backward areas of the country possible.
Addressing a news conference flanked by the secretaries of finance, revenue, economic affairs, statistics and planning and development, the minister said the economic turn was around the corner, as the trend “has turned positive”.
His claim is based on the estimates of the Economic Survey, which says the growth in gross domestic product (GDP) will remain at 3.7 percent this fiscal year against the targeted growth of 4.2 percent and in comparison to three percent achieved during the last fiscal year.
As if providing a breather to the people on the government’s performance, Shaikh said things had “started to move in the right direction as obvious from the increase in growth rate, which is the highest in the four-year tenure of the government”.
Though it still needed to be jacked up to five to six percent in the medium term to address the economic turnaround, Shaikh suggested.
And Shaikh also listed numerous global and domestic issues to cover up his government’s efforts, saying the global financial crisis, high oil prices and regional insecurity had created a negative perception about investment in the country.
The survey says total investment declined to 12.5 percent of GDP this fiscal year from 13.1 percent last fiscal year. Fixed income declined to 10.9 percent of GDP in 2011-12 from 11.5 percent compared to the previous year.
Private investment contraction was 7.9 percent of the GDP, compared to 8.6 percent last fiscal year.
Avoiding commenting on the energy crisis that has crippled economic activity in the country, the minister took refuge under the NFC Award that allowed transfer of 57.5 percent earning in revenue directly to the provinces.
This, he said, left the centre with only 30 percent resources to meet the requirements of the federal government, defense, debt repayment and other expenditure.
Pressed that poor governance was responsible for the spiraling energy crisis, he said, the government had given Rs 1,200 billion in power subsidy, but accepted that the performance of the government to tackle the energy crisis should have been better.
Leaning back on the PPP mantra of rural-urban divide, he was quick to add that the additional resource transfer had started making turn around in least developed areas that was not being highlighted.
Shaikh claimed that inflation was slowing down as the consumer price index-based inflation was 10.8 percent during July-May period this fiscal, compared to 13.8 in the same period last year.
The minister still admitted that people were still under pressure from the inflation resulting from high petroleum prices.
He was hopeful that the Federal Board of Revenue (FBR) would manage to collection more than Rs 1,900 billion against the targeted Rs 1,952 billion, adding that the revenue generation had increased 25 percent to Rs 1,450 billion during July-April this fiscal year, compared to Rs 1,250 billion in the previous corresponding period.
Asked about the measures taken to add new tax payers, the minister said the process was underway and would be completed in three years time to add 700,000 new taxpayers.
Shaikh gave no figures of unemployment or poverty, only that employment would be improved with development expenditure and investment.
He said the government had managed to reduce its expenditure by 10 percent.
The economic survey says agriculture registered a growth of 3.1 percent and despite the energy shortage, the manufacturing sector registered a growth of 3.5 percent, while large-scale manufacturing also witnessed slight improvement with a growth of 1.05 percent.
The construction sector grew 6.4 percent, while the services sector registered a growth of 4.02 percent in 2011-12.
This performance, the survey says, is dominated by finance and insurance sectors.