ISLAMABAD, June 5: Pakistan’s economy displayed broad-based positive trends during the outgoing fiscal 2002-3 achieving a 5.1 per cent GDP growth owing to a sharp pickup of manufacturing sector and robust recovery in the agriculture sector.
Finance Minister Shaukat Aziz, who launched the Economic Survey 2002-3 here on Thursday, claimed that a broad-based economic recovery, further strengthening of macroeconomic stability and a near elimination of external account vulnerability had been the major successes during the year despite an overall slowdown in the global economy, rising oil prices as a result of Iraq war and the outbreak of Sars in the Asian region.
He, however, said a lot more was needed to be done to achieve the goal of a better Pakistan and there was no room for complacency, the task was far from over and consistency and continuity of policies were absolutely essential for achieving the goal of making Pakistan stronger.
The minister counted three challenges ahead. First, to raising the level of investments — both public and private — to sustain growth rate. Second, to reduce poverty and improving social indicators by reducing the social gap. Third, to improving the health of the public sector entities, particularly power utilities, which posed serious risk to the budget.
The real GDP at factor cost grew by 5.1 per cent against the target of 4.5 per cent and last year’s achievement of 3.4 per cent. This was supported by all the three major components, agriculture by 4.2 per cent, manufacturing by 7.7 per cent and services by 5.3 per cent.
In terms of growth rate, Mr Aziz said Pakistan remained on top in the South Asia region and fifth in the entire Asia region after China (8 per cent), Korea (6.1 per cent), Iran (6 per cent) and Thailand (5.2 per cent).
He did not have an answer when asked how much was the impact of Sars on Pakistan exports and as to how much new jobs were created as a result of this positive economic performance, but said these figures would be compiled later.
The Economic Survey enumerated a long list of successes. These include a 17.4 per cent (from $419 to $492) growth in per capita income, 3.3 per cent inflation against a target of 4 per cent, highly conducive interest rates, tax collection remaining on track, fiscal deficit reduction, exports and imports registering impressive growth, workers’ remittances touching new heights, further increase in surplus in current account, more than $4 billion added to the country’s foreign exchange and rupee strengthening by almost 4 per cent.
There was also a sizable reduction in both domestic and external debt, substantial rise in foreign direct investment, stock market touching new heights and the improvement in credit rating in international capital market.
The real GNP at factor cost grew by 8.4 per cent in 2002-3 against 5.3 per cent last year, mainly on account of 472 per cent increase in net factors income from abroad.
AGRICULTURE: The agriculture sector registered a 4.2 per cent growth against a target of 2.5 per cent, with major crops growing at 5.8 per cent. Cotton crop, however, registered a decline of 3.8 per cent, from 10.613 million bales in 2001-02 to 10.211 million bales in 2002-03.
Wheat production is estimated at 19.235 million tons in 2002-3 against 18.227 million tons showing an increase of 5.5 per cent. Rice production is estimated at 4.478 million tons in 2002-3 as against 3.882 million tons of last year, showing an increase of 15.4 per cent.
Sugarcane production increased by 8.3 per cent in 2002-3, from 48 million tons last year to 52 million tons this year.
MANUFACTURING: The large-scale manufacturing grew by 8.7 per cent against a target of 6 per cent and last year’s growth of 4.9 per cent. This was because of 49.8 per cent growth in automobile sector, 8.5 per cent by food products, 5.2 per cent by textile and apparel group, 15.7 per cent in paper and board, 18.4 per cent in metal and machinery and 16.2 per cent in tyres and tubes.
Foreign direct investment had been around $700 million during the first 10 months of the current fiscal and is expected to be around $800 million by end of the year, about $200 million lower than $1 billion target often announced by the minister.
Without giving the poverty rate, the finance minister said the government would raise its pro-poor budgetary expenditure at least by over 0.2 per cent of the GDP per annum. “The government will be spending Rs161 billion as pro-poor expenditure during the current fiscal which are planned to be enhanced to Rs187.6 billion in 2003-4.”
STOCK MARKET: Mr Aziz said the stock market registered a phenomenal growth during the year with Karachi Stock Exchange (KSE) rising from 1,770 points in June 2002 to an all time high of 3,117 points on May 29, registering an increase of 76 per cent.
The aggregate market capitalisation of the KSE also surged 68.7 per cent from Rs407.6 billion to Rs687.8 billion during the same period. In dollar terms, the market capitalisation increased from $6.63 billion to $11.94 billion, showing a growth of 80 per cent.
REVENUE: The total consolidated revenue is estimated at Rs706.1 billion in 2002-3 as against Rs624.1 last year, registering an increase of 13.1 per cent.
Against this, total consolidated expenditure is estimated at Rs892.5 billion which is 8 per cent higher than last year. As such, the fiscal deficit during the year is estimated at 4.6 per cent of the GDP, compared with 5.2 per cent last year.
The revenue deficit (the difference between total revenue and total expenditure) has also been narrowed down from an average of 3 per cent to 1 per cent of the GDP in 2002-3. This is because of a decline in expenditure from 22.8 per cent last year to 22.2 per cent this year and an increase of CBR revenue by around 15 per cent.
As percentage of the GDP, debt payable in foreign exchange has declined from 54.7 per cent to 47.2 per cent, showing a reduction of 7.5 per cent. The exchange rate appreciation to the extent of 4 per cent has also reduced debt payable in foreign exchange by more than 59 billion. It stood at 1.9 trillion or 47.2 per cent of the GDP.
During the first nine months of the current fiscal, the SBP injected Rs257 billion against net purchases of $4.4 billion into the banking system but 70.4 per cent of that injection (Rs181 billion) has been sterilised primarily through auctioning of the government papers. This has helped in containing inflation at 3.3 per cent.
BALANCE OF PAYMENT: On the balance of payment front, exports during July-April grew by 20.8 per cent to $8.85 billion as against $7.32 billion of the same period last year, thereby, achieving the 85.5 per cent of the export target for the year.
Imports during this period grew by 22.5 per cent, rising to $10.1 billion from $8.25 billion during the same period last year. The increase in imports was attributed to additional imports spending on machinery by 35.6 per cent.
The trade balance deteriorated by $329 million due to the 20.6 per cent, or $457 million, rise in POL imports. However, excluding petroleum group, the trade deficit posted an improvement of 14 per cent, or $128.8 million.
The workers’ remittances during July-March stood at $3.230 billion compared to $1.627 billion of the same period last year, showing an increase of 98.6 per cent.
The current account surplus increased to $2.562 billion (3.7 per cent of GDP) in the first nine months of the current fiscal as against a surplus of $1.014 billion during the same period last year, showing an increase of 152 per cent. With official transfers, the surplus in current account jumps to $4.375 billion as against a surplus of $2.227 billion during the same period last year, showing an increase of 96.4 per cent.
RESERVES: The foreign exchange reserves were now at $10.5 billion which were sufficient to finance more than 11 months of imports, said Mr Aziz.
He said public debt had reduced from Rs3.695 trillion in June 2002 to Rs3.642 trillion, showing a reduction of around Rs53 billion.
External debt and foreign exchange liabilities since end June 2000 and until end March 2003 have been reduced to $35.58 billion or by $2.335 billion showing a decrease of 6.2 per cent.
Total external debt and foreign exchange liabilities when adjusted for SBP’s liquid reserves stand reduced by $10.43 billion, declining from $36.93 billion in June 2000 to $26.5 billion in March 2003, or by 28.2 per cent.
The minister said as a result of massive inflow of foreign exchange, the central bank had to intervene to contain sharp appreciation of the Pakistan rupee to support exports through sterilisation.
