As the PTI has assumed power in Pakistan, a lot has been said about our economy. And the constant noise is that somehow our economy is in the worst shape it has been in years. The fact, though, is that – while the country’s economy does face a few challenges – it is doing as well as it has done in at least a decade.
Let’s start with the two most important numbers that measure the health of the economy. Our GDP or national income, which is a measure that estimates the total income of all Pakistanis, last year (July 2017 to June 2018) registered a real increase of 5.79 percent, the highest increase in 10 years. This is the increase beyond the annual inflation rate. And of course, Pakistan’s inflation rate, at around five percent over the last five years, was one of its lowest in our history. More importantly, food inflation was only around two percent last year; so, poor people, who spend most of their income on food, were least affected by inflation.
Last year, Pakistan’s growth in industrial production was the highest in 10 years. We produced and consumed more units of electricity than ever before. Pakistan also consumed more natural gas (domestically produced and imported) and produced more cement and fertiliser than ever before. Three new car companies – Kia, Hyundai and Renault – are setting up car plants in Pakistan and the Japanese carmaker Nissan is returning to Pakistan after many years. This has all been possible in part due to the improving law and order condition in Pakistan and historically low interest rates for commercial and especially industrial borrowing.
Our services sector has also grown the fastest for a decade. More large shopping malls have opened up in the last five years than in the 30 previous years. New 3G and 4G licences were issued and mobile financial services were extended to far-flung areas. Encouragingly, Pakistani textile brands are finally opening their showrooms abroad.
Industry and services were not the only growth area under the PML-N government. Our agriculture output last year was the highest it has been in 13 years. We are now self-sufficient in wheat, rice, sugar cane, and many other crops. We passed a Plant Breeders Act through parliament that will allow international companies to invest in seed technologies in Pakistan and increase our agriculture yield. The PML-N government reduced sales tax on every kind of fertiliser to only two percent last year, and started a programme to subsidise the provision of gypsum to farmers to immediately increase farm yields.
The PML-N government was also able to sign the China-Pakistan Economic Corridor framework with China, a historic agreement that will continue to benefit our country for years to come. The first part of CPEC envisaged investments in Thar coal, imported coal and renewable energy projects across Pakistan and a much smaller loan portion to build motorways, highways, railways and develop the port city of Gwadar. This part is well underway, except the Railways portion, where for various financial and technical reasons both sides agreed to delay the project.
Besides the Chinese resources, a lot of Pakistan’s own resources from the PSDP were spent on CPEC, particularly to build the western part of the corridor. Each and every CPEC project is feasible and this was ensured both by Chinese and Pakistani experts. Hence every investment and every loan project will be able to pay for itself.
The second part of CPEC is the setting up of Special Economic Zones across Pakistan where Pakistani and Chinese investors will set up factories, especially export-based factories, which will provide employment opportunities to our people. This part has only just begun and it is the successful implementation of this phase that will determine Pakistan’s economic growth trajectory for years to come.
Our exports, which had stagnated for the previous three years, registered double-digit increase last year. What is particularly satisfying is that in the last four months of the fiscal year, Pakistan’s exports went up by much more over the same period last year. This suggests that exports are now on an upward trajectory and the old bugbear of our economy – the current account deficit – may finally be addressed. After the successful completion of ex-PM Nawaz Sharif’s incentive package for exporters, last year the government also approved a new export incentive package for the next three years, giving certainty to exporters so that they could invest in plant and equipment.
The current account deficit has been a challenging area for Pakistan. One reason for the rapid rise in it was the import of machinery, including power generation equipment, as well as imports from China under CPEC. In fact, our trade deficit with China alone accounts for 70 percent of our total current account deficit. But Pakistan was woefully short of power and infrastructure and these imports were necessary for future growth. The government’s ability to address these critical shortages was one reason why we were able to register a higher growth every year since 2013.
To be continued.
The writer has served as federal minister for finance, revenue and economic Affairs.