The new fiscal year has got off to a rather sluggish start. To the dismay of the Nawaz Sharif government, the economy isn’t responding to what a federal finance ministry official termed as ‘policy initiatives’, announced in the budget for the present year to trigger investment in manufacturing, for faster growth. Or at least the economy’s lacklustre performance in July, the first month of the year, seems to depict so.

The trade gap has widened by a whopping 18pc to $2.08bn from $1.76bn a year earlier, as the country’s exports are down by just under 7pc and imports are up by well above 6pc in spite of a depressed global oil market, official foreign trade numbers show.

Exports have been on a decline since 2013 and have already dropped by almost a fifth from $24.5bn to $20bn in three years.

“If the trends seen in July continue to hold going forward, the Nawaz government would miss its economic growth target by a wide margin,” — economist Shahid Zia

The overseas Pakistani workers’ remittances, that financed almost half of the nation’s increasing import bill, are down in July to slightly more than a fifth to $1.30bn year-on-year, says State Bank of Pakistan data On a month-on-month basis, workers’ remittances declined by almost 36pc as overseas Pakistanis had remitted over $2bn in June.

Manufacturing too got off to a slower start with large-scale industries — cement, textiles and automobiles — showing negative growth so far.

The other major commodity producing sector — agriculture — is also faced with strong headwinds as the cotton sowing target has been missed by 21pc compared with last season. (The massive drop in the cotton crop output triggered by sporadic pest attack and unfavourable weather conditions in south Punjab were blamed, by Finance Minister Ishaq Dar, to have cost the economy half a percentage point of GDP in his budget speech).

Ali Khizar, an economic analyst, argues that the slowdown in the manufacturing and construction sectors in July represent just “hiccups in an otherwise growing domestic consumption”.

To him, the chronic issue is the continued southward journey of exports. By ‘capping’ the value of the rupee, he argues, the government is discouraging exports and job creation.

“This coupled with the sharp decline in remittances can make the current account deficit uglier. The fall is partially explained by seasonal factors; but the party of double digit growth in remittances is surely over,” he insists.

Another economic analyst based in Lahore, Shahid Zia, echoes similar views. “If the trends seen in July continued to hold going forward, the Nawaz government would miss its economic growth target by a wide margin,” he asserted.

The government has targeted a 5.7pc GDP growth rate this year compared with 4.7pc achieved last year. A think tank has recently alleged that the official growth rate numbers for the last year are ‘exaggerated’. The economy is growing at a much slower pace than claimed by the government.

Though the sluggish economic performance during the first month of the fiscal isn’t enough to forecast results for the entire year, the chairman of a large business conglomerate in Lahore claims, this does reflect on the government’s failure to address real issues: holding back the economy and obstructing revival of growth and job creation.

“The government has focused more on slashing its deficit through a debt-driven policy instead of setting a strategic direction for the economy at the expense of private, local and foreign investment, growth and jobs,” he says.

Over the last few years foreign direct investment (FDI) has dropped significantly and foreign investors, including but not limited to foreign banks, exited the country.

Though Chinese capital flows have surged in the recent months as work on projects related to the China Pakistan Economic Corridor gets under way, policymakers are finding it harder to attract investors from the rest of the world.

Domestic businessmen also remain unimpressed with the policy measures announced in the budget this year owing to its failure to honour its past commitments and remove snags in the way of new investment in manufacturing. Even historically low interest rates and improved macroeconomic indicators have failed to compel them to make new investments.

Consequently, Pakistan’s economic growth rate remains one of the lowest in the region. “As long as we do not fix our tax system, integrate with the regional and global economy, remove energy shortages and improve security, we will not be able to catch up with our faster growing neighbours,” Zia argues.

Published in Dawn, Business & Finance weekly, August 15th, 2016