GDP growth target revised downwards to 2.6pc

ISLAMABAD: The government has revised downward the GDP growth target from 3.3 percent to 2.6 percent for the outgoing fiscal year 2019-20 keeping in view the outbreak of Coronavirus and poor performance of agriculture and manufacturing sectors.

According to the Budget Strategy Paper (BSP) approved by the federal cabinet under Chairmanship of Prime Minister Imran Khan said the government brought all GDP growth estimates in line with the IMF projections. The government envisaged that the GDP growth would touch 3 percent in Financial Year (FY) 2020-21, 4.5 percent in FY 2021-22 and 5.1 percent in FY 2022-23.

Former finance minister Dr Hafeez Pasha while talking to The News on Wednesday stated that the unemployment rate was expected to surge phenomenally as the unemployment rate might increase from 5.8 percent in accordance with Labor Force Survey (LFS) for 2017-18 to 8.1 percent by next fiscal year 2020-21. He said that the number of total unemployed might increase by 2.6 million as this number stood at 3 million in FY 2017-18 that could be increasedup to 5.6 million. “This is an alarming situation that is going to turn for worse,” Dr Pasha said.

The BSP for 2020-23 further revealed that the gross federal receipts envisaged an increase by Rs 1,397 billion in the next fiscal year 2020-21 as it estimated to stand at Rs 6,401 billion in outgoing fiscal year 2019-20 that was projected to go up to Rs 7,798 billion in FY 2020-21. With the approval of the cabinet, the government envisaged spending level of Public Sector Development Program (PSDP) between Rs 700 billion to Rs 900 billion over next three years. The Finance Ministry also decided that the government would make allocations of social safety nets such as “Ehsas” and Benazir Income Support Program (BISP) as part of overall development budget. Earlier, these allocations were not made part of the development budget and all governments in the past treated it as part of the current budget but now there would be major diversion from the past policy.

The macroeconomic framework for 2020-23 revealed that the size of economy in shape of Gross Domestic Product (GDP) stood at Rs 44,265 billion in the outgoing fiscal year 2019-20 and it would go up to Rs 49,533 billion in next fiscal year 2020-21. The government also brought changes in CPI based headline inflation as the target of inflation was brought down to 11.7 percent for the outgoing fiscal year. The inflation target envisaged for the next budget 2020-21 is projected at 8.4 percent, 6.3 percent in FY 2021-22 and 5.3 percent in FY 2022-23.

The Ministry of Finance envisaged overall budget deficit target at 7.1 percent of GDP for the outgoing fiscal year 2019-20 while it would be brought down to 5.8 percent of GDP in FY 2020-21, 4.3 percent of GDP in 2021-22 and 3 percent in FY 2022-23 The federal budget deficit was envisaged at 7.3 percent of GDP in FY 2019-20, 6.9 percent in FT 2020-21, 5.8 percent in FY 2021-22 and 4.9 percent of GDP in FY 2022-23. Under the IMF program, the primary balance envisaged for the outgoing fiscal year 2019-20 is estimated at -0.8 percent of GDP, plus 0.7 percent of GDP in FY 2020-21, plus 1.6 percent of GDP in FY 2021-22 and plus 2.4 percent of GDP for 2022-23. The Ministry of Finance stated that the primary balance stood at -3.5 percent of GDP in FY 2018-19 when Pakistan and IMF signed $6 billion under Extended Fund Facility (EFF).

The net federal receipts for the outgoing fiscal year is projected to fetch Rs 3,565 billion in FY 2019-20, Rs 4173 billion in FY 2020-21, Rs 4,821 billion in 2021-22 and Rs 5490 billion in FY 2022-23. The government envisaged total expenditures at Rs 7,600 billion in FY 2020-21, Rs 8,036 billion in FY 2021-22 and Rs 8,470 billion for FY 2022-23. The public debt as percentage of GDP was projected at 83 percent in FY 2019-20, 81 percent of GDP in FY 2020-21, 79 percent in FY 2021-22 and 77 percent of GDP in FY 2022-23.

The current account deficit (CAD) is projected at $5.1 billion for the outgoing fiscal year 2019-20 because of import compression, $4.6 billion in FY 2020-21, $4 billion in FY 2021-22 and $4.1 billion in FY 2022-23. The foreign currency reserves which piled by over $10 billion so far will be able to meet import requirements of 2.5 months in FY 2019-20, 3.3 months in FY 2020-21, 4.3 months for FY 2021-22 and 4.8 months imports for FY 2022-23.