ISLAMABAD: Exposing the government's dismal economic performance, Pakistan missed all the economic targets set for the ongoing financial year 2011-12, reveals the Economic Survey for 2011-12. The survey was released on Thursday by Finance Minister Dr Hafeez Shaikh.
The survey, mirroring the economic realities of the country, did not mention the adverse impact of the ongoing war against terrorism on the economy during this fiscal year. The exact poverty figures were missing as well.
The GDP growth remained at 3.7 percent against the target of 4.2 percent in the current financial year. The survey also unveiled the government’s ‘figures jugglery’ to magnify growth in the manufacturing sector, as the government has not yet shifted its accounts to the base year 2005-06 from the earlier 1999-2000, but gave its figures on the new base which is not necessarily the true picture. It clearly says, “Due to revision of the base year as well as new industries being added, it is not prudent to compare the performance of the LSM sector on the revised base against the official growth target of 2.0 percent.”
It further says, “The methodology to compute Quantum Index of Manufacturing (QIM) has been revised during the current fiscal year. This includes re-basing, addition of new industries and revision of weights.”
The dreary performance of the PPP government can be gauged by the fact that it has injected a whopping Rs1.2 trillion in the last four years to subsidise massive corruption, poor governance, electricity theft and stealing of the furnace oil used for power generation. It is ironic that the government injected Rs1.2 trillion in the power sector alone to overcome the power crisis, but the issue has only gotten worse.
The public debt of the country has surged by almost 100 percent to Rs12.024 trillion as of March 31, 2011-2012 from Rs6.055 trillion in 2007-2008. The trade deficit has increased by 14.5 percent and current account deficit has swelled by $3.39 billion despite the fact that the country received $10.8 billion in workers’ remittances in 10 months of the current financial.
During the first nine months of the ongoing fiscal year, the total public debt registered an increase of Rs1,315 billion, which includes Rs391 billion consolidated by the government into public debt against outstanding previous year’s subsidies related to food and energy sectors. Public debt as a percent of the GDP stood at 58.2 percent by end-March 2012.
During July-March 2012, $179 million was added to the EDL (external debt liabilities) stock. At the end of March 2012, servicing of public debt stood at Rs720.3 billion against the budget amount of Rs1.034.2 trillion.
Foreign Direct Investment (FDI) sharply dwindled by 48.3 percent to $667 million during the first 10 months of the current ongoing fiscal as against $1,293 million in the last fiscal with real investment declining from 13.1 percent of GDP to 12.5 percent of GDP in 2011-12. The Economic Survey highlights that capital flows were affected because of a global financial crunch and euro zone crisis. However, it did not mention how much investment got affected because of poor governance and corruption.
Dr Hafeez A Shaikh, however, acknowledged during the press briefing here on Thursday that his government had failed to cope with the electricity crisis. He also said that according to some experts, the power crisis is causing two percent of GDP loss annually.
The agriculture sector grew by 3.1 percent against the target of 3.4 percent; however, its performance was slightly better than last year when it grew by 2.4 percent. Growth was mainly due to expansion in major crops though the performance of minor crops was not up to the mark.
Dr Hafeez A Shaikh said that the world growth rate had also been affected because of the global economic contraction but in Pakistan the security situation was still a problem as a result of which foreign direct investment had not landed in Pakistan as much as the country deserved.
To a question about not mentioning the impact of the war against terrorism on the economy, the minister said that the government wants to show to the world a balanced picture for attracting investment. However, the joint committee of Foreign Office which deals with this issue has not so far revised the impact of the war on the economy, which is why it is not included in the survey. About the non-inclusion of a poverty chapter in the survey, he directly asked the Deputy Chairman Planning commission to expedite the process on the said issue and unfold the poverty incidence in the country.
Dr Shaikh said last year heavy rains and floods hit Balochistan and Sindh, owing to which 9.6 million people got affected and the crops sustained huge damage, causing $3.7 billion loss. Had there been no floods, the country would have achieved 4 percent GDP growth, he said.
The minister said the NFC Award had created financial constraints for the central government as 57.5 percent of the divisible pool goes to the provinces. Moreover, the amounts under the heads of GDS (Gas Development Surcharge) and net hydel profit also goes to the provincial governments. “Of the remaining amount, the central government provides resources to the AJK, Gilgit-Baltistan and Fata and only 30 percent resources are left with the federal government, which are consumed by debt servicing, defence and running the civil government,” he said.
About the GDP growth (3.7 percent), Dr Shaikh said it was an improvement compared with the previous years. The minister said the country needs at least 5-6 percent growth on medium-term basis to cope with the rising unemployment. He claimed that the government remained focused on maintaining macroeconomic stability, growth, mobilisation through domestic resources and increasing exports, balancing regional development and providing safety nets for the vulnerable groups.
He said tax measures enforced by the government in April 2011 had yielded dividend. The July-April 2012 growth in FBR tax revenues demonstrated a growth of 24 percent to achieve Rs1,445 billion in revenue compared to Rs1,250 billion collected last year. Efforts are under way to achieve the ambitious target of Rs1,952 billion. “Non-tax receipts have been less due to non-disbursement of anticipated Coalition Support Funds and delaying the expected auction of 3G licence.”
Following are the highlights of the Economic Survey:
Per capita real income grew at 2.3 percent in 2011-12 as compared to 1.3 percent growth last year. In dollar terms, it increased from $1,258 in 2010-11 to $1,372 in 2011-12.
Agriculture sector is a key sector of the economy and accounts for 21 percent of the GDP. The supportive policies of the government resulted in a growth of 3.1 percent against 2.4 percent last year.
Major crops registered an accelerating growth of 3.2 percent compared to a negative growth of 0.2 percent last year. The major crops including cotton, sugarcane and rice witnessed growth in production of 18.6 percent, 4.9 percent and 27.7 percent respectively. However, preliminary estimates of wheat production showed a negative growth due to late receding of floodwaters in lower Sindh, which hampered the timely cultivation of the wheat crop. Livestock has witnessed a marginally higher growth of 4.0 percent against the growth of 3.97 percent last year. The fisheries sector showed a growth of 1.8 percent. Forestry recorded a growth of 0.95 percent as compared to the contraction of 0.40 percent last year.
Manufacturing sector: The growth of the manufacturing sector is estimated at 3.6 percent compared to 3.1 percent last year. Small-scale manufacturing maintained its growth of last year at 7.5 percent. Large Scale Manufacturing (LSM) has shown a growth of 1.1 percent during July-March 2011-12 against 1.0 percent last year. The construction sector has shown 6.5 percent growth as compared to negative growth of 7.1 percent last year. Mining and quarrying sector recorded a positive growth of 4.4 percent during July-March of the fiscal year 2011-12 against negative growth of 1.3 percent last year. Electricity and gas distribution witnessed a negative growth of 1.6 percent against -7.3 percent last year.
Services sector: The services sector has registered 4 percent growth during July-March of the fiscal year 2011-12 against 4.4 percent last year. It is dominated by finance and insurance at 6.5 percent, social and community services 6.8 percent and wholesale and retail trade at 3.6 percent.
Consumption: Real private consumption grew at 11.6 percent in fiscal year 2011-12 as compared to 3.7 percent growth last year and real government consumption grew at 8.2 percent as compared to 5.2 percent last year. Private consumption expenditure has reached 75 percent of GDP whereas public consumption expenditures are 13 percent of GDP. Private consumption has increased on the back of sustained growth in remittances. Total consumption has reached 88.4 percent of GDP in fiscal year 2011-12 as compared to 83 percent last fiscal year. Furthermore, increase in rural income due to higher production of crops and sharp increase in commodity prices also supported the consumption demand.
The workers’ remittances witnessed a strong growth of 25.8 percent in 2011 over the previous year 2010. During July-April 2011-12, remittances grew by 20.2 percent at $10.9 billion.
The buoyancy in remittances is largely attributed to the government’s efforts to divert remittances from informal to formal channels. Data on remittances suggests that the monthly average for the period of July-April 2011-12 stood at $1.09 billion, compared to $0.90 billion during the corresponding period last year.
Inflation: Price stability remained the priority of the government. The government has constituted a national price monitoring committee headed by the finance secretary with representatives of federal ministries and provincial departments. The committee meets every month. In addition, the Cabinet and the Economic Committee of the Cabinet monitor the prices of essential items and take corrective measures to ensure that prices remain under check. These efforts have yielded results. Inflation has declined for the third consecutive year. CPI was 10.8 percent during July-April, 2012 from a high of 25 percent in October 2008. It was in single digit in December 2011.
This has been achieved despite a sharp increase in international oil prices, effect of upward adjustment in the administered prices of electricity and gas, supply disruptions due to the devastating floods of 2010 and heavy rains of 2011 and bank borrowings. Food and non-food inflation averaged 11.1 percent and 10.7 percent respectively against 18.8 percent and 10.8 percent in the same period last year.
Trade and payments: The government pursued vigorously to secure concessional duties package on 75 items from the European Union. The World Trade Organisation approved the package this year. It is expected that this will boost Pakistan’s exports to the EU, one of the major trading partners of Pakistan. Exports witnessed a strong performance last year attaining the highest level ever of $25 billion showing a growth of 30 percent. It reflected both the price and quantity effect. Despite euro zone crisis impacting the demand for Pakistani goods, Pakistan has successfully maintained its exports at last year’s level until April this year.
Exports during July-April 2012 were $20.5 million compared to $20.46 million last year. The Afghan Transit Trade Agreement (APTTA) has encouraged formal trade between Pakistan and Afghanistan and the volume has risen to around $2.5 billion annually. Efforts are underway to formalise free trade agreements and preferential trade agreements with many countries. It will help boost Pakistan’s exports. Efforts are also in hand to normalise trade relations with India.
Imports grew by 14.5 percent and stood at $33.1 billion during July-April 2012. The current account deficit stood at $3.4 billion in the same period. It was largely the result of high oil prices and import of fertilisers. Continued support from current transfers in the form of workers’ remittances helped in containing the current account balance.
Pakistan’s foreign exchange reserves reached $16.5 billion at the end-April 2012 compared to $17.0 billion at end-April 2011. The exchange rate averaged at Rs85.50/US$ during July-April 2010-11, whereas it averaged at Rs88.55/US$ during July-April 2011-12. Pak Rupee depreciated by 3.4 percent during July-April 2011-12 over the depreciation of 2.2 percent in July-April 2010-11 period.
ISLAMABAD: Minister for Finance Dr Abdul Hafeez Shaikh showing the Economic Survey 2011-12 report during a press conference here on Thursday.