ISLAMABAD, June 8: A record wheat output of 23.5 million tons and a robust agriculture sector enabled the economy to post a growth rate of seven per cent during 2006-07, according to the Economic Survey launched here on Friday.

Shortfalls in manufacturing and cotton output targets, however, took some of the gloss off an otherwise encouraging performance, the survey said.

The Adviser to the Prime Minister on Finance, Dr Salman Shah, dwelt on the salient aspects of the Economic Survey at a press conference.

He said the economy achieved ‘history’s second largest sugarcane production’, ‘history’s biggest investment-to-GDP at 22 per cent’ and ‘history’s biggest foreign investment of six billion dollars’.

The adviser said the international community had expressed confidence in Pakistan’s economy by subscribing over three billion dollars as against $500 million sought at the recent Eurobond floatation.

Dr Salman said that instead of $500 million, the government decided to accept bids for $750 million at an interest rate of 6.875 per cent — only two per cent above the US treasury bonds interest rate.

The real gross domestic product (GDP) growth rate at 7.0 per cent — on budgeted target — shown in the Economic Survey and confirmed by the adviser is slightly lower than 7.02 per cent announced by the Prime Minister last week after a meeting of the National Accounts Committee. It was, however, better than last year’s 6.6 per cent growth rate. It is evident from the survey data that growth was based on domestic consumptions rather than export growth.

The survey conceded that despite impressive gains, there were areas “where results could not be achieved as planned”. Inflation at 7.9 per cent was much higher than 6.5 per cent target because of shortfalls in domestic production of pulses, rice, chillies, onion and tomatoes and fruits that led food inflation above 10 per cent against last year’s 7.0 per cent.

Growing at about 8.0 per cent — much better than target of 7.1 per cent — the services sector contributed almost 60 per cent (4.2 percentage points) to this year’s economic growth and covered up for sluggish industrial performance. It was, however, lower than last year’s impressive 9.6 per cent growth. All the components of services sector registered strong growth except in ownership of dwellings.

Manufacturing, having 19 per cent share in the GDP, grew at 8.4 per cent against 10 per cent last year and budgeted target of 11 per cent. Large-scale manufacturing, accounting for about 70 per cent of overall manufacturing, recorded 8.8 per cent growth rate against the target of 12.5 per cent and last year’s achievement of 10.7 per cent. The survey attributes this shortfall to lower capacity utilization, difficulties in textile sector, stagnant cotton production and lacklustre performance by vegetable ghee/cooking oil and automobile sectors.

On the external front, while import growth slowed to a normal level from 29 per cent average growth in last four years, “export growth witnessed abrupt and sharp deceleration to less than 4.0 per cent” after growing at 16 per cent last year. Therefore, the benefits of normal growth of imports could not be achieved in terms of improving trade and current account deficits. The economic survey also said that consumption inequality has marginally increased during the period 2001-05. Dr Shah said 2006-07 was another year of “strong growth performance” despite shortfalls in manufacturing and major inflationary shocks contributed by international prices on the back of higher use of cooking oil to bio-fuels and domestic supply problems.

The agriculture sector that made a modest recovery from the dismal performance of last year grew by five per cent. Wheat production at 23.5 million tonnes was highest in Pakistan’s history, up by 10.5 per cent besides strong recovery by major crops growing at 7.6 per cent against last year’s negative growth of 4.1 per cent. Cotton production at 13 million bales remained static at previous level.

Livestock that grew by 4.3 per cent was way behind last year’s strong growth of 7.5 per cent. Minor crops grew by only 1.1 per cent this year as against equally poor performance last year.

The survey once again confirmed that services sector growth was mainly boosted by growth in the banking and insurance sector by registering 18.2 per cent through a large gap between higher interest rates and low return on deposits but was lower than last year’s 33 per cent. Value-addition in the wholesale and retail trade sector increased by 7.1 per cent against 8.6 per cent last year. Value-addition in transport, storage and communication sector grew by 5.7 per cent, far less than 6.9 per cent last year.

PER CAPITA REAL GDP: Per capita income in dollar terms registered an increase of 11 per cent, rising from $833 to $925 but was short of $935 target and lower than last year’s 14.1 per cent growth.