Pakistan misses out on major growth targets

• Dar says govt missed GDP target largely due to poor performance in agricultural sector, which witnessed a decrease of 0.19 per cent, missing the growth target which was set at 3.9pc
• Says upcoming budget will be growth oriented and will focus on agriculture and manufacturing sectors
• Says govt has no plan to enter into another IMF programme after the current one ends

The Pakistan Muslim League-Nawaz (PML-N) government’s mantra of positive economic indicators suffered a blow on Thursday as Finance Minister Ishaq Dar had to acknowledge that the poor performance of the agriculture sector during the year had significantly impacted overall growth.

The blow was so severe that the finance minister had to announce reorienting the next year’s budget around improving the agriculture and manufacturing sectors.

Dar said that the government will provide incentives to revive the agriculture and manufacturing sectors in the next budget.

Launching the Economic Survey 2015-16, the flagship publication of the Ministry of Finance, Dar said that the GDP growth remained 4.7 per cent for the year, against the target of 5.5 per cent. He attributed the negative growth in agriculture as the main reason for the decline. The decline was somewhat compensated by the industrial sector as the construction and electricity sectors outperformed expectations, the minister told reporters at the press briefing.

The services sector grew at par with the set target, bolstered by an increase in salaries of government employees and defence servicing.

REALITY CHECK:

The agricultural sector witnessed negative growth at -0.19 per cent against a projection of 3.9 per cent.

The minister said the decline in agriculture forced the government to revise the GDP growth target to 5.7 per cent for the next fiscal year from the earlier projection of 6.2 per cent. He said the growth would have been better if the cotton crop did not decline by 28 per cent last year.

Dar insisted, however, that the setback had not derailed their overall plan for the economy. He said that at the start of their term their plan was that the first three financial years will be for stabilising the economy and, after consolidating the gains, the next two financial years will be aimed at economic growth.

“We will present a growth oriented budget and the agriculture sector will be given a package to revive growth.”

DONE WITH THE IMF, FOR NOW:

When asked whether this means the government will not seek another International Monetary Fund (IMF) programme, he said: “We have no intention of seeking a new IMF programme. If the agriculture production and exports increase, we don’t need the IMF’s help.”

He said the current IMF programme will be completed and it will be the first time in history that a government has completed the IMF programme. He said that without the leadership of Prime Minister Sharif, completing the programme and introducing structural reforms would not have been possible.

FBR IN TALKS WITH SWISS AUTHORITIES:

The minister said the Federal Board of Revenue (FBR) officials will hold talks with the Swiss officials this month in Bern to get details of the accounts held by Pakistanis in Swiss banks. He said that getting this information is not easy as it took even the US and the European countries many years to retrieve the details.

He said that Pakistan has also applied for the Organisation for Economic Co-operation and Development (OECD) membership, as this multilateral organisation can help in getting the information.

The finance minister said that the law and order situation has improved in the country resulting in growth in the services sector which attained the target of 5.7 per cent growth. He said the wholesale and retail sector growth had also improved due to successful Karachi operation.

POVERTY IS DOWN, AND INFLATION UNDER CONTROL BUT EXPORTS ARE DOWN TOO:

He said the CPI based inflation average at 2.8 per cent during July-April this year against 4.8 per cent during the same period of last year. During July-March FY16, exports reached $15.6 billion compared to $17.9 billion of exports during the same period of FY15. He said that the current account deficit has been curtailed due to fall in petroleum prices.

He said that the poverty figure worked out on the basis of need assessment shows that at present the poverty rate is 29.5 per cent as compared to 64.2 per cent in FY 2001-02. He said the positive news is that the poverty rate is declining.

DEBT AND DEFICIT:

He said the fiscal deficit will be reduced to 4.3 per cent of GDP during FY16 as compared to 8.2 per cent in FY13. He said during July-March FY16, tax revenues stood at Rs 2.48 trillion as compared to Rs 2.06 trillion during the same period of FY15, posting an increase of 20.2 per cent.

On public debt he said it was recorded at Rs 19.16 trillion at the end March FY16 registering an increase of Rs 1.78 trillion. The domestic debt increased by Rs 1.2 trillion while the government borrowing from domestic sources to finance fiscal deficit was Rs 786 billion.

Increase in external debt contributed Rs 588 billion to the public debt. Apart from fresh external inflows, revaluation loss due to depreciation of the Rupee against the US dollar contributed to this increase. During July-March FY16 public debt servicing was recorded at Rs 1.37 trillion against annual budgeted estimate of Rs 1.68 trillion. External debt and liabilities stock were recorded at $69.6 billion at end March 2016 out of which external public debt was $55.1 billion.

THE ECONOMIC SURVEY:

About unemployment figure he said that the survey shows it has declined from 6.2 per cent in FY13 to 6 per cent in FY14 and 5.9 per cent in FY15. The survey says the per capita income in dollar terms recorded a growth of 2.9 per cent in FY16 to reach $1,560 per capita.

The total investment recorded growth of 5.78 per cent in FY16. Investment to GDP ratio reached 15.2 per cent in FY16. Fixed investment clocked in at 13.6 per cent of GDP while private investment was recorded at 9.7 per cent of GDP.

The minister said the SBP has decreased the policy rate to historic low of 5.75 per cent with effect from May 21. Board Money (M2) increased to 6.93 per cent during July-May FY16 against expansion of 6.92 per cent during the same period last year.

The Economic Survey reveals that the government sector borrowing (net) reached Rs 567.5 billion during July-May FY16 as compared to Rs 539.4 billion during the same period last year. Net budgetary borrowing from the banking system was recorded at Rs 643 billion during July-May FY16 as compared to Rs 539.4 billion during the same period of FY15.

The government borrowed Rs 702.9 billion from the scheduled banks during July-May FY16 as compared to Rs 1.09 trillion during the same period of FY15. The government retired Rs 59.8 billion to SBP during July-May FY16 against the retirement of Rs 532.3 billion during the same period of FY15.

During July-May FY16, credit to private sector increased to Rs 311.7 billion against the expansion of Rs 171.2 billion in the comparable period last year. During July-April FY16, net foreign investment crossed $1 billion.

The large scale manufacturing during July-March FY16 recorded a growth of 4.7 per cent as compared to 2.8 per cent in during the same period last year. Auto sector grew by 23.4 per cent, fertilizer 15.9 per cent, leather by 12.1 per cent, rubber 11.6 per cent, non-metallic mineral products 10 per cent, chemicals 10 per cent while the pharmaceutical sector also grew by 7.2 per cent.