With its neck in the tight noose of International Monetary Fund (IMF), Pakistan’s economy is left with few choices in the face of one of the most testing slowdowns in its history, which, along with giving businesses a run for their money, is making it almost impossible for the common person to keep the wolves from its doors.
Even top businessmen of the country raised their voices in the presence of Chief of Army Staff (COAS) General Qamar Javed Bajwa before the top guns of the economic team of ruling Pakistan Tehreek-e-Insaf (PTI) led regime last week in Rawalpindi in a seminar on economy that continued for around five hours.
Truly, the security of the country is directly linked with the economy and it happened so as financially weakened nations could not guarantee respect for their sovereignty.
In background discussions, one top official of economic team told this scribe the meeting arranged at Rawalpindi was basically aimed at ensuring boosting economic activities and what measures could be taken to fuel growth on sustained basis.
Such wish-list from business tycoons came to surface at a time when Pakistan is running under the tight scrutiny of an IMF bailout agreement. The stabilisation programme could be simply described as compression of demand side of the economy in order to slow down inflation through tightening of monetary and fiscal policies. When economy got slowed down then it stabilised. It’s a dilemma for the economic managers as they are still figuring how to strike a balance for ensuring stabilisation and avoiding severe contraction of economy at the same time.
It requires the economic team to employ the best of its skills to design an intervention that achieves both objectives simultaneously. It has now become far complicated.
When the business tycoons demanded the sky, the meeting ended on a lighter note reminding them that even if they made money more than Bill Gates, they won’t be happy.
The businesses can only grow when the country achieves modest growth under the IMF programme. The IMF has projected the gross domestic product (GDP) growth rate of 2.4 percent for the current fiscal year against 3.3 percent for the last fiscal year.
On the GDP growth, the PTI regime is mainly betting on improved agriculture sector growth as the macroeconomic framework shared by Ministry of Finance with the IMF estimates the cotton production would go up by around 13 million bales as the sowing area has increased by 14.7 percent in the current fiscal year. The rice production is also expected to jump from last year’s production of 7.2 million tons. The improved availability of irrigation water and good weather conditions have been proving as blessing for agriculture sector productivity. However, these projections are over-optimistic as the production of cotton bales could be hovering around 10.2 to 10.5 million bales at maximum as different lobbies from agriculture, Finance Ministries and textile sector were projecting different figures.
However, the government has projected the overall GDP growth might stand at 3.4 to 3.5 percent for the current fiscal year. The agriculture sector is targeted to grow by 3.5 percent on the basis of expected contributions of important crops (3.5 percent), other crops (3.1 percent), cotton ginned (2.5 percent), livestock (3.7 percent), fishery (4 percent), and forestry (2 percent). The production targets for important crops such as wheat and cotton are expected to be attained given the quality and quantity of agriculture inputs is ensured. This includes consistent availability of water, certified seeds, fertilisers, pesticides, and agriculture credit facilities.
Industrial sector is targeted to grow by 2.3 percent during 2019-20. Manufacturing sector is targeted to grow by 2.5 percent with large-scale manufacturing (LSM) growth rate of 1.3 percent, small-scale and household manufacturing 8.2 percent, and construction and electricity generation & gas distribution by 1.5 percent each. Mining and Quarrying sector is projected to grow by 2.0 percent.
Industry is expected to pick up pace in 2019-20 with the implementation of envisaged policy measures. The private sector investment in industrial sector is expected to rise in 2019-20. Private sector will be encouraged to take lead in spurring economic activity, while public sector provides the necessary policy and regulatory support. So far the LSM is witnessing negative growth of 3.6 percent and it is yet to be seen as to how what steps the government will take to revive the economy and put it on growth trajectory.
Similarly, construction in housing sector as envisaged in the government’s housing scheme and allied infrastructure projects is expected to reinvigorate production in cement, iron, and steel. Overall, it is expected that improved business conditions and consistent policies will contribute towards achieving the target of industrial sector growth for 2019-20.
Service sector is set to grow at 4.8 in 2019-20. Wholesale and retail trade along with transport, storage and communication, two biggest sub-sectors of the services, are seen growing at 3.9 and 3.5 percent respectively. Finance and insurance have potential to grow in 2019-20 by 6.5 percent. General government services, other private services, and housing services are expected to grow at 5.7 percent, 7.1 percent, and 4 percent respectively.
A spike in inflation is also feared because of dependence on imports of petroleum products and other commodities as any unpleasant development of the like of crippling attack on oil refineries in Saudi Arabia last month could send the oil prices through the sky.
The government has assessed the average inflation will be hovering around 11 percent, while the IMF insists it to be around 12 to 13 percent in the current fiscal year.
The government has also shared macroeconomic framework and projected that the real GDP growth would exceed the target of 2.4 percent and might touch 3.5 percent of GDP mainly because of improved agriculture sector. The government expects an improved production of major crops might help kick-start economic activities on account of the LSM in months ahead.
There are some possible perils attached to these growth projections and the worst of them is political turmoil, which, if it grows out of control, would make it impossible for the government to meet the macroeconomic targets owing to a shift of the focus.
There is also a risk of stagflation as low growth and a high inflationary pressures will result into increased incidence of poverty and unemployment. There will be social and political cost attached to this stagflation risk and people of Pakistan do not deserve thrown to the wolves of inflation in the clothing of the sheep of stability.
The writer is a staff member