KARACHI: The country’s savings-to-GDP ratio, already the lowest in the region, missed the target set for the outgoing fiscal year and was even less than the preceding year’s number.

The budget document for 2017-18 reveals that the savings ratio remains a cause for concern as it declined to 13.1 per cent in FY17 compared to 14.3pc in FY16. The ratio is about 26pc in India.

There is a lot of talk for spending but no push is visible either from the government or from the private sector to encourage savings. Instead, spending has a much bigger role which translated Pakistan into a consumer-based economy where consumption constitutes about 89pc of the economy.

Despite falling savings-to-GDP ratio, the deposits of scheduled banks significantly increased by Rs910 billion during the first 10 months of this fiscal year.

Another concerning figure was the low investment-to-GDP ratio which impacts the economic growth. However, the economic growth rate was at 10-year high despite missing most of the key targets.

The budget document shows the investment-to-GDP ratio reached 15.78pc in FY17, an increase of just 57 basis points over the previous year.

The government, for the last four years has been claiming of presenting investment-friendly budgets, but neither foreign nor the domestic investment level touched any attractive level of up to 25pc.

The higher investment-to-GDP ratio could trigger economic growth.

The government also claimed the private sector credit off-take from the banking system increased substantially during the outgoing fiscal year, but most of the money was meant for working capital.

Bank credit to private sector expanded to Rs518bn in the first 11 months of 2016-17 compared to Rs286bn in the corresponding period last year.

The public investment by the government during the last four years could hardly increase by 76 basis points giving a weak picture of the investment-to-GDP ratio.

The budget document said the public investment as a percentage of GDP grew from 3.52pc in FY13 to 4.28pc in FY17.

The foreign investment trend was not different, though it has increased compared to the previous year but could hardly cross $2bn by the end of this fiscal year.

Compared to Pakistan, India attracted $62bn in the year 2016, the highest in the world, followed by China.

The Foreign Direct Investment (FDI) reached $1.73bn in the July-May period compared to $1.1bn in the same period of last year.

Country-wise data reveals the highest FDI inflows during the period under review were from China totalling $744.4 million in relation to the China-Pakistan Economic Corridor (CPEC) activities.

The FDI inflows from mergers and acquisitions were at the forefront with foreign investors eyeing companies in food, automobiles, power and pharma sectors.

The food sector received the highest FDI of $475m during the period from negative $46.3m in the corresponding period last year.

With a CPEC commissioned $2bn power plant project underway in Balochistan, the power sector received the second highest FDI of $422m.

Construction sector also witnessed heavy foreign investment reaching 356.2m year-on-year, showed the budget document.

Published in Dawn, May 28th, 2017