Pakistan falls short of all economic targets as floods and politics weigh, reveals Economic Survey FY23

Finance Minister Ishaq Dar’s first budget for PDM govt will be eagle-eyed by analysts for any hints about populist dole-out

By Business Desk
June 08, 2023


Pakistan’s GDP growth rate came to a crawl in the ongoing fiscal year — one of the worst in terms of meeting annual macroeconomic targets — dragged down by agitational politics, cataclysmic floods, trade barriers, and a dangling International Monetary Fund (IMF) bailout on top of bare minimum foreign exchange reserves, Pakistan Economic Survey 2022-23 revealed Thursday.

Finance Minister Dar presented the pre-budget document at a press conference in Islamabad.

Dar’s first budget for this government’s complete fiscal year would be eagle-eyed by the analysts for any hints about populist dole-outs and they would also try to ascertain if the government was willing to pursue economic discipline required to enter another International Monetary Fund (IMF) programme.

At the start of the presser, Dar reminded the journalists of 2013 when Pakistan Muslim League-Nawaz (PML-N) government took charge. He explained that at the time the economy was in tatters, there was loadshedding of 18 hours, and terrorism was on the rise.

Key takeaways:

"We followed our 'three-e's' concept and Pakistan saw macroeconomic growth," recalled Dar, adding that now, we are focusing on five-es — exports, equity, empowerment, environment, and energy. These are our five driving areas.

“This is our roadmap for the next year," said the finance minister. He noted that the current year was "challenging" one and the "government did its best to handle the economic situation".

While talking about the outgoing fiscal year 2022-203, the finance minister said that this year the government has added information and technology to the economic survey as "stand-alone".

"This sector has the potential for growth in the coming days," said the minister. He added that the government's aim is to achieve macroeconomic stability along with inclusivity and resilience.

"We want it to be inclusive to avoid the maldistribution of resources," said the finance minister. He emphasised that if this is done that the investors' confidence can be restored.

Spiraling of economy stopped

Coming back to the outgoing year, the minister said that when the PML-N-led coalition government took charge in 2022, it "faced extreme challenges as fiscal space had shrunk, inflation was on the rise, the current account deficit was skyrocketing, and financing needs were increasing".

"It's obvious that when the policy rate increase, the financing needs also increase. I believe that if this government hadn't taken charge, then God knows what might have happened," Dar said.

Defending his claims, he said that in the "last third quarter", before Shehbaz Sharif's government took charge, there was a $6,400 million reduction in the foreign exchange reserves.

"We have survived five quarters. Had we been going at that pace, then I don't know what could have happened," said the finance minister. He assured that the spiraling of the economy was stopped and it was moving towards stability.

"When this government came in, then the GDP rate was 6%. But, remember, that the GDP rate before that was -1%. The base was very low. So, all of you understand, when the base falls, the next year and in the successive years, you have a new base line," he explained.

Pakistan's credibility — final nail in coffin

Comparing 2018 and 2022, the finance minister said that in 2018, the fiscal deficit stood at 5.8%, and when this government came in, it reached 7.9%.

"Please, I would like to remind you that our 5.8% deficit stood when we were running operations against terrorists. The trade deficit stood at $39.1 billion in 2022 from $30.9 billion in 2018. The current account deficit has reached 4.7% of the GDP at $17.5 billion. The foreign direct investment has slumped to $1.9 billion and the public policy rate has 13.75%," he said. He added that the public debt increased 10%.

The finance minister noted that even though tax collection had increased, a "major bulk of it is spent on debt servicing".

"But even with the increase, our mismanagement (increase in debt and policy rate) we have taken it to new highs and it is unsustainable. I think the final nail in the coffin was Pakistan's credibility and rate was shaken," said the finance minister. He added that if Pakistan makes a "sovereign commitment" then it should be treated as a "personal promise".

"When you felt that your government was going to be ousted, you backtracked on your commitments," said the minister.

‘Pakistan cannot remain isolated’

The finance czar of the country emphasised that since there is "economic turmoil across the globe" it has affected Pakistan as well — from trade to finances.

"Pakistan cannot remain isolated, it will have an impact. We also faced unprecedented floods. Our physical and economic losses crossed $30 billion. You must remember that several multilaterals calculated the amount," said the minister. He added that the pledges Pakistan "received from the donors conference were more than expected".

"Alhamdulillah, things are on their way. The planning minister and his ministry are doing their job," he added.

Coming to the IMF programme, the finance czar said that it should have been completed in 2022.

"We completed the only IMF programme between 2013-2016. All chiefs of multilaterals had come to this city and congratulated Pakistan on its achievement. We are trying to achieve that stability," said Dar.

Defending the government's economic performance, Dar said that they "left no stone unturned for economic stability and paid a huge price for it".

He added that when a government, is sworn-in for five years, it can pay that political cost, but when it comes in for 14 months, then it is a "huge challenge".

"But I believe it was worth it as Pakistan's credibility eroded. We took several steps to correct this path. I am hoping that when the IMF programme completes, we have two payments in the line — $450 million from World Bank and $250 million from AIIB," said the minister. He added that Pakistan paid all its debts on time.


In the document, the ministry mentioned that the real GDP posted a growth of 0.29% in the outgoing fiscal year as the economy faced tremendous challenges of macroeconomic imbalances, supply shocks, and international economic slowdown — which dampened the economic growth.

In the first quarter of FY23, floods engulfed a large part of agricultural land and disrupted the domestic supply.

Flood damages, GDP loss, and rehabilitation expenditures are Rs3.2 trillion ($14.9 billion), Rs3.3 trillion ($15.2 billion), and Rs3.5 trillion ($16.3 billion), respectively.

"The increase in international prices and currency depreciation which led to an increase in domestic commodity prices has reduced the aggregate demand in FY23," the document mentioned.

The GDP, at current market prices, stood, at Rs84,657.9 billion in FY23, showing a growth of 27.1% over last year (Rs66,623.6 billion).

The document mentioned that the investment-to-GDP ratio stood at 13.6% in FY23 compared to 15.6% in FY22 mainly due to a slowdown in global and domestic economic activity and contractionary macroeconomic policies.

Meanwhile, the per capita income stood at $1,568 compared to $ 1,765 last year on account of currency depreciation, lower GDP growth and rising population.

Dar’s first budget for the PDM government’s complete fiscal year would be eagle-eyed by the analysts for any hints about populist dole-outs and they would also try to ascertain if the government was willing to pursue the economic discipline required to enter another IMF programme.


During fiscal year 2022-23, the agriculture sector performance was hit hard by flash floods 2022, which negatively impacted Kharif crops, the document said, adding that the sector grew by 1.55% against last year's growth of 4.27%.

Amid commodity-wise output, cotton production declined by 41% to 4.91 million bales compared to 8.33 million bales last year.

Rice production declined to 7.32 million tonnes from 9.32 million tonnes and recorded a decline of 21.5% over last year. Sugarcane recorded production of 91.11 million tonnes over last year's production of 88.65 million tonnes showing an increase of 2.8%.

Maize production increased by 6.9% to 10.18 million tonnes against last year's production of 9.52 million tonnes. Wheat production recorded 27.63 million tonnes compared to 26.21 million tonnes last year, showing an increase of 5.4%.

During the first quarter of the fiscal year 2022-23, the monsoon season witnessed above-normal rainfall defying some historical high records stood at 387.8mm, showing a drastic increase of 175.3% against the normal average rainfall of 140.9mm.

Meanwhile, the post-monsoon season (October-December) 2022, rainfall was recorded at 21.5mm against the normal average rainfall of 26.4mm, showing a decrease of 18.6%.

However, during the winter season (January-March) 2023, rainfall remained below 63.8mm against the normal average rainfall of 74.1mm, revealing a decrease of 13.9%.

During July-March FY23, the agriculture lending financial institutions have disbursed Rs1,222 billion, which is 67.2% of the overall annual target and 27.5% higher than Rs958.3 billion disbursed during the same period last year.


Apart from external shocks, the document mentioned, Pakistan's economy had also confronted multiple domestic shocks.

The pre-budget document cited flood damages as major reason behind losses for the cotton industry, which constitutes half of the industry's required cotton input.

State Bank of Pakistan's (SBP) restrictive policies to correct the balance of payment crisis and control inflation, such as high-interest rates and import restrictions have created headwinds for business and consumer confidence, as well as investment, the document said.

The document revealed that large-scale manufacturing (LSM) growth during July-March FY23 declined by 8.11% compared to growth of 10.6% in the same period last year.

Meanwhile, furniture products recorded highest growth of 48.26% followed by wearing apparel 31.68%, other manufacturing (footballs) 34.82%, and leather products 2.47%.

The sectors which recorded negative growth during the period are:

The ministry mentioned that looking at the upside, once global shocks of the war in Ukraine, supply chain disruptions, and the resultant spike in commodity prices fade away, the road to global growth and trade prospects would be smoother.

"The government has implemented various initiatives to foster the growth of the industrial sector which includes ensuring reliable energy supply to export-oriented sectors, rationalizing tariff headings for industrial and manufacturing sectors, and granting sales tax exemptions for solar panel import and local supply."

Fiscal deficit

The pre-budget document showed that the fiscal deficit reduced to 4.6% of GDP (Rs3,929.3 billion) during July-April FY23 against 4.9% of GDP (Rs3,275.2 billion) in the same period of last year.

Similarly, the primary balance posted a surplus of Rs99.1 billion against a deficit of Rs890.2 billion during the period under review, reflecting a slowdown in the growth of non-markup expenditures.

The current account narrowed down by 76.1% and recorded a deficit of $3.3 billion during July-April FY23 against a deficit of $13.7 billion in the same period last year, on account of a decline in the merchandise trade deficit.


Headline CPI national inflation averaged 29.2% during Jul-May FY23 against 11.5% in the comparable period last year, the document mentioned.

The urban food inflation during July-May FY23 was recorded at 37.3% and non-food 20.3% as against 12.5% and 10.2% in the corresponding period last year.

Meanwhile, rural food inflation during July-May FY23 is recorded at 41.1% and non-food 24.9% as against 11.8% and 11.5% in the corresponding period last year.

Urban and rural core inflation during July-May FY23 stood at 16% and 20.1% respectively against 7.8% and 8.6% last year.

Wholesale price index (WPI) during July-May FY23 has recorded an increase of 33.9% against the 23.6% last year.

"The inflationary pressures are emanating from weaker exchange rate, supply disruptions created by flood damages, higher global food prices and broader tariff reforms for both electricity and fuels," the document read.

The government, the ministry said, is taking administrative actions, policy reforms and relief measures to control the prices of essential items.


According to the consolidated fiscal operations, total revenues increased by 18.1% to Rs6,938.2 billion (8.2% of GDP) in July-March FY23 against Rs5,874.2 billion (8.8% of GDP) last year. The document revealed that both tax and non-tax collection contributed to an increase in overall revenues.

Tax revenues (federal and provincial) grew by 16.5% on the back of a significant rise in FBR tax collection despite various economic challenges at the domestic and global levels.

Total tax collection increased to Rs.5,617.7 billion in July-March FY23 against Rs4,821.9 billion in the same period of last year.

It was learnt that non-tax revenues grew by 25.5% to Rs.1,320.5 billion during the first nine months of the outgoing fiscal year against Rs1,052.2 billion in the comparable period of last year.

FBR tax collection during July-May, FY23, increased by 16.1% to Rs6,210.1 billion against Rs5,348.2 billion last year.

Climate change

The document mentioned that the National Clean Air Policy (NCAP) was launched in March 2023 with the objective to improve air quality in the country by reducing pollution, .

The NCAP allows key institutions at national and provincial levels to understand the air quality status and identify, implement, and monitor mitigation actions to reduce air pollution, it said.

The pre-budget document showed that National Tree Plantation Campaign 2022 was launched on August 14, 2022 and 181.79 million trees have been planted.

Under Ten Billion Tree Tsunami Programme, an amount of Rs3,296.683 million (including both PSDP and ADP) has been utilised during July-March FY23 and 188.41 million plants were planted, regenerated, and distributed.

A total of 2,027.01 million plants have been planted, regenerated, distributed till March 2023, the document mentioned.