Govt need not celebrate 3.94pc GDP growth: experts

ISLAMABAD: The government need not celebrate the GDP growth of 3.94 percent as this number has appeared reasonable because of the lower base effect, says eminent economist of the country Dr Ashfaq H Khan, who is currently the Principal and Dean, School of Social Sciences & Humanities, NUST.

Other prominent economist and former adviser to the finance ministry Sakib Sherani termed the GDP growth of 3.95 percent as surprising, saying it is higher than expectations as the services sector and main cash crop of cotton remained subdued. Pakistan managed to get only 7 million cotton bales as against the 13.5 million bales target. Sherani said in the services sector, only the banking sector played well and other than it, transport and retail sectors and restaurant and hotel industry could not perform in the presence of Covid-19 pandemic, but surprisingly the government has come up with GDP growth at 3.94 percent, which is higher than expectations.

Dr Ashfaq H Khan, while talking to The News, said: “This is a provisional number which will be revised somewhere at 4.8-5% after the end of the current financial year. This figure has emerged because of the lower base effect.”

Khan said that in the last three years, the average growth rate stayed at 1.8 percent, which is even less that the population growth of 2.2 percent and that’s why the per capita income has reduced by half percent. He proposed that the government should target the growth rate at 4 percent next year, which will be difficult to achieve as the base effect will be at a higher side. He projected the GDP growth in the next financial year would be hovering at 2.5 percent.

He also highlighted the fact that the last two fiscal years of the incumbent regime witnessed the Covid-19 pandemic, which is why the average growth of two years stayed at 1.7 percent, which is again less than the population growth of 2.2 percent.

For the current financial year, the eminent economist said that he had worked out the GDP growth at 3 percent, but the government has finalized it at 3.94 percent. He said that Large Scale Manufacturing performed well and in the agriculture sector, the cash crops such as rice, wheat and maize also showed growth.

Dr Ashfaq said that the government must come up with a growth-oriented budget for the next financial year 2021-22, stressing the need that the State Bank of Pakistan should bring down the interest rate to 5 percent and this was the only tool to generate economic activities in the country.

He said that the main benefit of keeping the discount rate at the lower side will appear in the shape of reduction of interest payments against the loans that the government pays annually. The amount in the head of debt servicing, which the government pays per annum, has now increased to 3.1 trillion in the last three years, soaring to more than double from 1.5 trillion.